The Smart Board & Property Manager Legal Guide: Is Your Community Association Undertaking A Repair?
Alan Tannenbaum, Esq.:
I'm Alan Tannenbaum with the firm of Tannenbaum, Lemole and Hill. We are a full-service community association firm, but we have a subspecialty in construction issues. I'm personally board certified in construction law by the Florida bar, so we spend a lot of time supporting our groups in all their general counsel work, but we also assist groups around the state on construction related issues, and the subject of construction leads is near and dear to me because we are dealing with several workouts right now on behalf of groups, a lot of which have been heightened by restoration work and restoration contracts that are going on.For today's session, you're just going to hear from me. I've excused the rest of our attorneys for today and I'm going to cover the issues with you. It's a CEU credit for managers, so make sure that Michelle has your information. Put your questions in chat and I'll do my best to respond to them. So this is what we're going to cover today in the agenda, I'm going to describe generally what a construction lead is and its effect. Who's entitled to record a construction lien. What about unlicensed contractors and subcontractors? What are their lien rights or lack of lien rights? We'll talk about what to do about it if an unlicensed contractor happens to file a lien against your property.
Very important document that often gets overlooked is the notice of commencement, something that you need to be very careful with at the outset of a project. We'll talk about that, how to make sure that it is completed correctly and recorded. Notice to owner really need to pay attention when those come in because that ends up establishing a contractor or supplier's lien rights. So if you ever are in a project and something's mailed to you, it says, "Notice to owner," don't ignore it, it's important. We'll talk about the notice to owner. There's a vast confusion in Florida for both condos and HOAs as to what property is actually subject to a lien. Florida legislature doesn't appear to have accommodated for it correctly. We'll talk about that. Contractors certainly don't understand it, so when we have liens coming in, there's all kinds of variations on the theme of what is actually being la, what property is actually being burdened. It's even more confusing with homeowner associations that have duplexes and attached townhomes or attached properties. Again, neither the legislature has figured that one out and contractors certainly are confused, which has caused a lot of title issues. We'll talk about that. We'll talk about what to do if, in fact, your property gets liened, and hopefully we'll have time for some questions and answers.
So if you would go to the next slide please.
All right, what is a construction lien? A construction lien is a, there's a statutory form. If you go to Chapter 7-13, it's a form that shows either a subcontractor or a supplier or your prime contractor, the form that they need to use and complete in order to have a valid lien. If you ever get hit with a lien, you can go to Chapter 7-13 and one of the first questions is it in the form that's required by statute under Chapter seven 13? Once it's notarized, the contractor or subcontractor or material supplier records it in the public record of the county in which the property sits. And at that point, depending, again, what the legal description that's been laid is now a burden on the property. If an owner either at HOA or a condo goes to sell their unit or refinance, title search is done. If again, the lien was properly recorded, the lien can pop up in the title search and at that time, block the sale or the refinance.
The lien's valid for a year from the time of recording. We'll talk later about a procedure that you can reduce that time by contesting the lien, but if you don't contest it, that lien sits on the property for a year and the impact of the lien, the of, besides during that year period, potentially blocking a sale or a refinance, if it's not dealt with, the contractor can foreclose on that or the supplier can foreclose on the lien, which is a lawsuit that's filed. Unlike other states, in Florida, it's not a quick process. There's no summary procedure for it. So it's actually a lawsuit has to be filed by the contractor or the supplier. You have an opportunity to answer that complaint. You can challenge the lien. It could be somewhat of a lengthy process a year to a year and a half. But the end result of it, if it's not dealt with and the court recognizes the lien is valid, is the contractor supplier can put the property up for sale in order to satisfy their lien. A little bit complicated for condos and HOAs, but that's the eventual risk of having the lien on your property, construction lien.
Next slide please.
So the who. Who can record a construction lien? Certainly your prime contractor, the party that you have the contract with, they have lien rights, their subcontractors have lien rights, even the sub-subcontractors. So if you hire a contractor and they bring in a plumbing subcontractor and that plumbing subcontractor subcontracts part of their contract to another at all three levels, those contractors have the ability to record a construction lien, somebody who's a laborer on your site. So if your contractor goes to local labor force and brings in laborers for the day, they have the right as a laborer to lien your property. That's interestingly, one of the unlicensed parties that can lien your property would be a laborer. You will see later that the otherwise is required but not for a laborer. Now, most laborers would not have the means to figure out how to file a construction lien, but it does happen.
Material suppliers. So you're starting a major re-roofing project, 60 or 70% of the cost can be in materials, and most material suppliers who are supplying a significant amount of materials to a job will have the sophistication to perfect their lien rights and at least set up a lien on your property, which can end up causing major issues if they're not paid. So they do have lien rights. Manufacturer doesn't necessarily have lien rights, but the supplier, the party that actually delivers the material used on your job to the contractor does have the potential for lien rights.
And then your design professionals, they have have lien rights. They're not required to go through some of the processes, so you have to be aware of them and make sure that in the end, they're taken care of to avoid a lien by any of your design professionals.
And then your design professionals, they have have lien rights. They're not required to go through some of the processes, so you have to be aware of them and make sure that in the end, they're taken care of to avoid a lien by any of your design professionals.
So if you go to the next slide, please.
So other than the exception I made for laborers, unlicensed contractors and subcontractors do not have lien rights. So again, if their specialty does require a license, so one of the things that you need to check whenever a lien is filed against your property, and if it's a general contractor party, you have the contract with or plumbing contractor or roofing contractor or a mechanical contractor, all of which require licensing, if those parties in fact don't have valid licenses with the state, they don't have a lien rights. Now, they could still file a lien, but you have a basis of challenging that lien to have it removed from your property so you still need to go through a procedure to get it done. It doesn't invalidate the lien until you have it removed, but because they don't have lien rights, you have the ability to have it removed.
So if you have a lien filed against your property, one of the first things that should be done, and it is pretty easy, just Google or whatever search engine you have, Florida License Lookup, it will take you to the Department of Business and Professional Regulation website. And if you have the name of the contractor or their, well, the name of the company or the name of the individual, you can do a search on their website and it will tell you whether in fact that contractor holds a license or not. So unlicensed contractors and subcontractors where their specialty requires a construction license, they don't have lien rights.
So if you have a lien filed against your property, one of the first things that should be done, and it is pretty easy, just Google or whatever search engine you have, Florida License Lookup, it will take you to the Department of Business and Professional Regulation website. And if you have the name of the contractor or their, well, the name of the company or the name of the individual, you can do a search on their website and it will tell you whether in fact that contractor holds a license or not. So unlicensed contractors and subcontractors where their specialty requires a construction license, they don't have lien rights.
Next slide, please.
Notice of Commencement. This is the document that, at the outset of a project, has to be recorded by the owner before the work commences. In fact, most building departments in effect statutorily a building department should reject a building permit unless there's been a Notice of Commencement filed and actually recorded by the owner. And the purpose of a Notice of Commencement, it's to provide notification to potential lien orders who are not in privity, you have no contract with. So it's subcontractors, sub subcontractors and suppliers. It tells them where they need to deliver their notices to owner, which allows them to then perfect their lien rights. One of the things that we've seen is contractors know that this Notice of Commencement is necessary in order for them to get their permit, so they fill it out and hand it to your president to sign. And let me put a warning flag on that. Contractors normally don't fill it out properly.
So what are the potential problems? Number one, they may not get the owner right, that's an issue, but the address is really important. So let's say they given a proper address for the association. There's case law that says that a potential liener has a right to rely upon the address that's in the notice of commencement. So if it's a faulty address and they send the notice to owner by certified mail and it gets returned, they've met their obligation under the statute for perfecting their lien rights. So, the owner's going along the association is going along, paying the contractor thinking that, well, we didn't get any notices to owner, so we're really good paying this contractor. And then all of a sudden, a lien shows up from a material supplier or a subcontractor that the association had no notice of, says, "Wait, we never got that notice to owner," and the contractor, material supplier says, "Yes, we sent it to the address that was in the notice of commencement and it got returned, but that qualifies as due notice."
So what are the potential problems? Number one, they may not get the owner right, that's an issue, but the address is really important. So let's say they given a proper address for the association. There's case law that says that a potential liener has a right to rely upon the address that's in the notice of commencement. So if it's a faulty address and they send the notice to owner by certified mail and it gets returned, they've met their obligation under the statute for perfecting their lien rights. So, the owner's going along the association is going along, paying the contractor thinking that, well, we didn't get any notices to owner, so we're really good paying this contractor. And then all of a sudden, a lien shows up from a material supplier or a subcontractor that the association had no notice of, says, "Wait, we never got that notice to owner," and the contractor, material supplier says, "Yes, we sent it to the address that was in the notice of commencement and it got returned, but that qualifies as due notice."
Now where that occurred with one of our groups, and it was a very substantial supplier, it was a $300,000 roofing contract, re-roofing contract. The second $100,000 that was paid by the association was a material draw. So the materials were delivered to the site, the roofing contractor made their material draw, Association paid the second $100,000, never received the notice to owner from the material supplier. Material supplier was never paid and the lien shows up. What the contractor had done was they put the address of one of the buildings of the condo and without any unit number, without any office number, post office shows up, goes to the address, there's nowhere to deliver it to. There's no office there, there's no units to deliver it to, and the certified mail gets refused, sent back, but the material supplier sent it to the address that was in that notice of commencement. So you need to look at those very carefully to make sure that the Notice of Commencement is accurate.
Now, one of the problems with the of commencement is it has this line for who the owner is. Well, that's problematic for a condo because the condo association is not the owner of anything. The parties that own the common elements of a condominium are the parcel owners, the unit owners. So how that ownership is described is important and just barely putting the name of the association may end up causing some issues down the road. Homeowners associations are create a lot of confusion because, and I'm talking about where you have connected townhomes or duplexes, and a contractor may be working on only a few of the buildings and they don't know who the owner is or how to lien it. In a connected townhome situation or a duplex situation where it's a homeowners association, the homeowners association does not own the duplex. The homeowners association does not own the connected townhome. They're owned by the particular parcel owners in the duplex or the connected townhome, which again, causes all kinds of problems, as we'll get into a little bit later, but just understand that the legislature has not dealt appropriately with lien rights relative to connected townhomes and duplexes that are under a homeowners association regime, which has caused a lot of problems. So get that Notice of Commencement right, make sure that the owner's listed appropriately, and the address is really important, and make sure, obviously, that it's recorded.
Now, one of the problems with the of commencement is it has this line for who the owner is. Well, that's problematic for a condo because the condo association is not the owner of anything. The parties that own the common elements of a condominium are the parcel owners, the unit owners. So how that ownership is described is important and just barely putting the name of the association may end up causing some issues down the road. Homeowners associations are create a lot of confusion because, and I'm talking about where you have connected townhomes or duplexes, and a contractor may be working on only a few of the buildings and they don't know who the owner is or how to lien it. In a connected townhome situation or a duplex situation where it's a homeowners association, the homeowners association does not own the duplex. The homeowners association does not own the connected townhome. They're owned by the particular parcel owners in the duplex or the connected townhome, which again, causes all kinds of problems, as we'll get into a little bit later, but just understand that the legislature has not dealt appropriately with lien rights relative to connected townhomes and duplexes that are under a homeowners association regime, which has caused a lot of problems. So get that Notice of Commencement right, make sure that the owner's listed appropriately, and the address is really important, and make sure, obviously, that it's recorded.
Next slide please.
The all important notice to owner, not an important document relative to the prime contractor. Prime contractor does not need to provide you with a notice to owner. So the party that you're contracting with, it could be a general contractor, it could be a roofing contractor. The party who has a direct contract, they're not required to provide a notice to owner. Notice to owner applies to subcontractors, sub-subcontractors, and material suppliers. They're required to provide the owner, if they want to perfect their lien rights, with this document called Notice to Owner. Again, under Chapter 7-13, there's a particular form that they need to fill out to meet the conditions of the statute. Design professionals and laborers are not required to do a notice to owner.
Timing is really important. So this Notice to Owner must be served within 45 days of the subcontractor, sub-subcontractor, or the material supplier either initiating their work at the project or supplying the materials so that if you actually get a lien from one of these parties, one of the things to check is the lien's got to tell you when they serve this Notice to Owner, and we see liens by subcontractors, material suppliers, we're right on the face of the lien, they show that they didn't serve their notice to owner within 45 days of initiating their work. So in the lien, they have to say when the Notice to Owner was served when they initiated work on the project. And if you calculate those two and it's greater than 45 days, that's a basis of challenging that lien. So that's when you get a lien subcontractor, sub-subcontractor, or material supplier, something that needs to be checked is whether they've met that 45 day obligation.
Now, if they have delivered that Notice to Owner to you in a timely fashion, that act on their part is what perfects their lien rights. So you're in the middle of a project or at the beginning of a project and you start getting these notices to owner, that's a notice to you that this subcontractor, sub-subcontractor, material supplier has lien rights and they're letting you know about them. Now, I've always taken the position for owners and it's a matter of the politeness that my mother taught me when I was a child that when somebody sends me a letter, I acknowledge that I've received it. It's only common courtesy. So I recommend to owners and associations that when you are serving this Notice to Owner, contact them, say, "We've received your Notice to Owner and it's really important to us that you get paid so that you don't file a lien against our property. So we would like you to notify us if you have any payment problems on this job so that we can make sure that it doesn't evolve to the point of you filing or recording a lien against our property."
And I've seen contractors, the private contractor say, "How dare you contact my subcontractor or my material supplier?" And I've told contractors or their lawyers that, "Well, they contacted us first by giving us this Notice to Owner, and we want to be sure that that there's no detrimental impact on our property. So I definitely recommend, as a matter of course, that you be proactive and have a conversation with them throughout the project to make sure that it's not evolving to the point of a lien.
So if you would go to the next slide, please.
All right, this is where there's fast confusion in Florida as to what is actually being liened. And as I mentioned before, with a condominium association, condominium association typically does not own any real estate. It administers real estate, it manages real estate, but it's not the title owner typically of any of the property at the condo. All the condo association, most of them end up owning is the furniture and equipment, maintenance equipment, pool equipment, but not the property itself. In a condo association, the real estate is owned by the condominium owners, the parcel owners in a proportionate share, that's who the ownership is.
So there's a statue that is specifically created for lean situations, and it's 718.121. So the what's actually liened are all of the parcels of the condominium and the lien should read that. The lien should actually say when it talks about what property is burdened, it's the parcels of the condominium. According to the Declaration of Condominium, there should be the recording information for the declaration right in the lien, and that establishes that there's a lien against all of the parcels of the condominium. And contractors don't get this. So we see all kinds of variations on the theme where they list the property being leased as the Lake Bank Condominium as the property being liened. Well, you can't lien the entirety of the condominium property, so that's not a valid legal description. Now, will a court excuse that there's language in the statute that it might get excused if it's not causing confusion, but most contractors don't understand the need to properly name the ownership, so there's a particular statute for that. The end result in a condominium is if the property is appropriately liened, then you face a foreclosure of all the parcels.
So let's say you have a five building condominium, you have a roofing contractor who's only reroofing one building and they properly lien the condominium parcels. If that ended up going to foreclosure, what would actually go to foreclosure are all of the parcels of the condominium. So if you're in building number one and building number five's roof is being replaced in a condominium and the contractor properly liens all of the parcels and that lien is not satisfied, in theory, what will happen is you go to the courthouse steps and all of the parcels of the entire condominium would be subject to that foreclosure. So there's no separation just because the lien or the work is only done on one portion of the common element, the entirety of the common element would be subject to that lien, which is quite problematic and the condo really raises the necessity of dealing with that lien because it does burden all the parcels, even if the work was limited to only a portion of the condo.
Next slide please.
It was really good of the legislature to have a special section of the Condominium act dealing with the appropriate way to lien a for work performed at a Florida condominium. But as is true for a lot of issues relative to homeowners associations, there's no statutory guidance. Pretty basic, when let's say you have a homeowners association that governs only single family homes, each of the lots, the home lots will typically be owned by the lot owner and all of the common area will actually be titled in the name of the homeowners association or the master association. So let's say there's work done at a clubhouse in that's governed by a homeowners association. What the contractor would lien would be the association owned property. The clubhouse is not separately titled they would lien the entirety of the association owned property. None of the lots would be affected, none of the homes would be affected. The foreclosure would be on association owned property, which would include that clubhouse. That's pretty straightforward.
The problem comes with, again, with duplexes and connected townhomes because although the association signs the contract to replace the roof on a connected townhome or do siting work if it has maintenance and repair responsibility, the duplexes and townhomes are owned by the owners in that particular building. So there's great confusion, and understandable confusion, for contractors, subcontractors, material suppliers who perform work on connected town homes or duplexes governed by a homeowners association as to who the heck do they or against what property do they lien? So what happens is they're working on one building that has five connected townhomes and they try to file a lien only against that building. Well, that won't work, nor will it work to file a lien against any of those individual parcels, but there is no guidance. So we see these leads coming through, they're challengeable, and if they ever went to court where foreclosed upon, I have no idea what would be sold. In theory, the individual parcels would be subject to foreclosure, but they weren't provided with a notice to owner.
So we'll call this a state of total confusion when it comes to connected townhomes or duplexes contractors performing work, they haven't figured out who to lien. I don't know what a judge would do about foreclosing on the property if it came to that. And there's absolutely no statutory guidance. So someday the legislature may act, but it really is a state of total confusion if you happen to have be in a homeowners association that has that type of property. And it really goes back to the nineties when certain developers got tired of putting connected town homes and duplexes under the condominium regime and came up with the idea of, well, let's put them under a homeowner association regime. It didn't make sense from many instances. And one of the problems is how to apply the construction lien law when you develop the property that has that type of product within a homeowners association. So we'll take time for all that to be figured out.
So we'll call this a state of total confusion when it comes to connected townhomes or duplexes contractors performing work, they haven't figured out who to lien. I don't know what a judge would do about foreclosing on the property if it came to that. And there's absolutely no statutory guidance. So someday the legislature may act, but it really is a state of total confusion if you happen to have be in a homeowners association that has that type of property. And it really goes back to the nineties when certain developers got tired of putting connected town homes and duplexes under the condominium regime and came up with the idea of, well, let's put them under a homeowner association regime. It didn't make sense from many instances. And one of the problems is how to apply the construction lien law when you develop the property that has that type of product within a homeowners association. So we'll take time for all that to be figured out.
Next slide please.
All right, this is the remedy section. What to do if your property is liened. Number one, I talked about check the lien itself was a notice to owner timely served if it's a subcontractor, sub-subcontractor, or material supplier, is the property described correctly, what is being liened? So there may be challenges based upon that. Now, I said before that a lien is good for a year. If proper lien has been filed against your property and you want to challenge it, there's a procedure. It's called the Notice of Contest of Lien. You record that with the county clerk. Again, it's got to be in an appropriate form, and once that's served, it's actually served by the county on the lean or the time period for them. Taking action on that lien is then reduced to 60 days instead of a year. So from a tactical standpoint, it can be a helpful task to perform.
Now the problem with it is the contractor or the material supplier or the subcontractor, they then go to their lawyer and say, "What do I do about this?" And the lawyer says, "Well, if you can't resolve the lien, now we have to file a lawsuit within 60 days." So one of the outcomes of doing a Notice of Contest of Lien is that you may get that lawsuit filed earlier than it would've been, but you have the ability to challenge that.
There's also a methodology for transferring that lien off of the property, either through a surety or a cash bond. A lot of sureties don't want to deal with lien transfers on even certainly in tens of thousands of dollars, sometimes even in hundreds of thousands of dollars, it's tough to get a surety bond, but a charity bond will transfer that lien from the property and now the surety and the bond is what the contractor goes after rather than the property. But you're usually going to pay at least 10% fee for the purchase of that bond. So if there's a $200,000 lien and you bond it off, you're basically paying that surety $20,000 for that transfer and to be responsible for that bond if it's not, if the owner doesn't pay for it and cash bond, you can go to the circuit court and post a cash bond, which, again, will remove the lien from the property. But usually the amount of the cash bond is about 125% of the amount of the lien. So if you get lien for $500,000 and you say, "Well, we're going to bond it off through a cash bond," be prepared to have $625,000 of cash that you deposit with the circuit court in order to have that lien removed. So it's an expensive proposition, but it does remove lien from the property.
There's also a methodology for transferring that lien off of the property, either through a surety or a cash bond. A lot of sureties don't want to deal with lien transfers on even certainly in tens of thousands of dollars, sometimes even in hundreds of thousands of dollars, it's tough to get a surety bond, but a charity bond will transfer that lien from the property and now the surety and the bond is what the contractor goes after rather than the property. But you're usually going to pay at least 10% fee for the purchase of that bond. So if there's a $200,000 lien and you bond it off, you're basically paying that surety $20,000 for that transfer and to be responsible for that bond if it's not, if the owner doesn't pay for it and cash bond, you can go to the circuit court and post a cash bond, which, again, will remove the lien from the property. But usually the amount of the cash bond is about 125% of the amount of the lien. So if you get lien for $500,000 and you say, "Well, we're going to bond it off through a cash bond," be prepared to have $625,000 of cash that you deposit with the circuit court in order to have that lien removed. So it's an expensive proposition, but it does remove lien from the property.
Now for condos, there's a procedure. Let's say the condominium parcels get lien, an owner calls you up and says, "Look, I have a sale next week and this lien just popped up and the title agent is indicating to me, "Well, the lien's got to be cleared in order for the sale to go through or a refinance." There's a procedure under Chapter 718 when there's a lien against two or more condominium parcels. That owner can pay their proportionate share of the lien and the contractors obliged to do a release of lien from that particular parcel. They're obliged to do it.
So let's say there's a hundred units in a condominium and the contractor files a $300,000 lien. If my math is correct, then that owner could pay the contractor $3,000, I think my math is correct, and have that lien removed from their parcel. So there's a procedure. So if you have owners complaining that an condominium that the lien's been recorded against the parcels, there is recourse for that owner to have that lien removed. Again, I go back to the fact that homeowners association are the stepchild of, under the Florida statutory scheme, because that procedure under 718.121(3) for condos, there's no applicable procedure in Chapter 720 for an individual parcel owner, let's say, of a duplex or a connected townhome under an HOA regime to have that lien removed from their parcel. So again, no relief from the legislature on that.
Now, very important, right, which you need to be really paying attention to is under Chapter 713. So you have a contract where you're paying the prime contractor and all of a sudden you get hit with subcontractor liens and/or material supplier liens. We have one where it's, it was a post hurricane restoration project, millions of dollars are at risk, and a subcontractor for the restoration company has filed liens against the condominium property exceeding $3 million. And the prime contractor comes to the association and says, "Well, we're going to do a draw and you need to pay us the next draw. The draw is a million dollars. So there's $3 million of subcontractor liens. The contractor wants a payment of a million dollars.
So let's say there's a hundred units in a condominium and the contractor files a $300,000 lien. If my math is correct, then that owner could pay the contractor $3,000, I think my math is correct, and have that lien removed from their parcel. So there's a procedure. So if you have owners complaining that an condominium that the lien's been recorded against the parcels, there is recourse for that owner to have that lien removed. Again, I go back to the fact that homeowners association are the stepchild of, under the Florida statutory scheme, because that procedure under 718.121(3) for condos, there's no applicable procedure in Chapter 720 for an individual parcel owner, let's say, of a duplex or a connected townhome under an HOA regime to have that lien removed from their parcel. So again, no relief from the legislature on that.
Now, very important, right, which you need to be really paying attention to is under Chapter 713. So you have a contract where you're paying the prime contractor and all of a sudden you get hit with subcontractor liens and/or material supplier liens. We have one where it's, it was a post hurricane restoration project, millions of dollars are at risk, and a subcontractor for the restoration company has filed liens against the condominium property exceeding $3 million. And the prime contractor comes to the association and says, "Well, we're going to do a draw and you need to pay us the next draw. The draw is a million dollars. So there's $3 million of subcontractor liens. The contractor wants a payment of a million dollars.
So there's a procedure under 713.06 to cover that. And what is required is you go back to the prime contractor, you say "You have to provide me with an affidavit indicating at this juncture for these folks who have leaned our property, how much they're actually owed." And let's say that contractor says, "Well, they're owed more than a million dollars. Under 713.06 with the proper notice, you could pay that subcontractor that money. The subcontractor then has to do a partial satisfaction of lien to reduce their lien amount by the amount that they've been paid. So if during the progress of payment of the general contractor, any liens show up, you have relief under 713.06 for any interim payments being made to the contractor. Certainly at final payment, when the contractor makes their, you're prepared to make the final payment, you need to get from the contractor what's called the contractor's final affidavit.
Contractor's final affidavit, is that a statement that an owner can rely on as to what's currently due? Any subcontractor or material supplier who has liened the property. And you can rely on that either by making direct payment to that party, or if the contractor says they're not owed any money, you can rely on that information. So the contractor's final affidavit really an important document and the statute allows you to make direct payment with proper notice to subcontractors and material suppliers who have liened your property. So really important in the payment process to pay close attention or get advice on what to do about payment in order to best resolve the liens filed against your property on 713.06. Now the other things that 713 has, you can ask for records of any payment. The contractor of course can ask you questions, the sub can ask you questions, they have to be carefully responded to so you don't waive your position. But there are other rights under 713.06.
And I'm going to look at some questions.
All right. There's a question from Dana. I always thought liens were filed after work is performed, completed. Our condo association has just started reconstruction after the hurricanes, and I have simultaneous filed liens. Is that appropriate?
Well, if it's a material supplier and they've already provided the materials that are going to be used on their job, first they got to do the Notice to Owner, and after they've done that and if they haven't been paid for that material, they could pretty quickly file their liens. A subcontractor on the other hand, would actually have to perform some physical work and the value of their lien would be based upon the amount of work completed. So that sounds pretty unusual.
Well, if it's a material supplier and they've already provided the materials that are going to be used on their job, first they got to do the Notice to Owner, and after they've done that and if they haven't been paid for that material, they could pretty quickly file their liens. A subcontractor on the other hand, would actually have to perform some physical work and the value of their lien would be based upon the amount of work completed. So that sounds pretty unusual.
Is there a deadline to record a notice of contested lien?
No, there is no deadline. Anytime during the period the lien's in effect, you can contest it. Obviously if the lien's been on your property already for 10 months and it's coming fairly close to the deadline, there's really no need to do the Notice of Contested Lien because it would reduce the time period of lien. It wouldn't reduce the time period of lien because it would only have two months left anyway, but if a lien's been filed against your property and it's been sitting there for six months, contesting the lien would reduce the time the lien's on your property to eight months. So there could be a benefit for that.
As far as the particular impact of hurricanes, it's really problematic because restoration contractors come in with these contracts. It gives them the ability and most of the contracts to bring in subcontractors to actually do the work. So you have restoration contractors who actually do very little of the work on multimillion dollar jobs. They bring in subcontractors. They may supply the materials or they may have their subcontractors supply materials. So actually, the people that you need to be concerned with are parties that you don't even know. And a lot of times, the contracts are open-ended, even this amount of value.
So there's a foreclosure going on in, I believe, Charlotte County right now. It's in excess of $6 million for a hurricane restoration project that was subject to liens. And so it makes the subject of liens even more problematic. So you start seeing subcontractors that you never heard of them who are sending you Notice to Owner, you need to get on top of the process and contact them and say, "Nice meet you and I need to be aware of what your charges are going to be. I need to make sure that you get paid so we don't get hit with major liens."
So we have a condo project where they're already five or six subcontractor material liens on a restoration job and the liens exceed three to one what the contractor has even asked for payment so far. So they went way ahead with the work beyond what the payment obligation was to the contractor, which causes a really difficult problem.
So we have a condo project where they're already five or six subcontractor material liens on a restoration job and the liens exceed three to one what the contractor has even asked for payment so far. So they went way ahead with the work beyond what the payment obligation was to the contractor, which causes a really difficult problem.
Yes. The question is, can a lien or release lien on specific condos for sale? They're actually required to do that. If payment is made for that proportionate share of what that parcel owner would owe under the lien, the lien owner is required to release that lien from the lien. Saying they're obligated to do it and them doing it is another question. But you might actually have to go to court to force them. But the statute does obligate them to do that.
May individual condo owners contest the lien for reconstruction of the entire condominium post hurricane? It's usually the association that would file a Notice of Contest of Lien. I would say that that probably wouldn't work.
Okay, good question from Les. We filed to contest our lien, hopefully it was recorded. Contractor did not foreclose on the lien within 60 days. How do we get the lien released? With a proper Contest of Lien being recorded after the 60 days expires, the lien is void. So in essence, if there was a title search done and the lien showed up in the title search, but the title examiner also then found a valid Notice of Contest of Lien in the public record and then looked further to see if there was what's called a Notice of List Pendants that would show whether the foreclosure action had been filed. If there's no foreclosure action that was filed, the title agent should disregard the lien. The lien's void because the Notice of Contest of Lien was filed in 60 days past. There's nothing that the association, in theory, would need to do. The lien is statutorily released of record at that point.
Okay, good question from Les. We filed to contest our lien, hopefully it was recorded. Contractor did not foreclose on the lien within 60 days. How do we get the lien released? With a proper Contest of Lien being recorded after the 60 days expires, the lien is void. So in essence, if there was a title search done and the lien showed up in the title search, but the title examiner also then found a valid Notice of Contest of Lien in the public record and then looked further to see if there was what's called a Notice of List Pendants that would show whether the foreclosure action had been filed. If there's no foreclosure action that was filed, the title agent should disregard the lien. The lien's void because the Notice of Contest of Lien was filed in 60 days past. There's nothing that the association, in theory, would need to do. The lien is statutorily released of record at that point.
Let's see. Contest of lien. Okay, good question from Monday, can they lien for more than they are owed?
They can do that and then they would face a challenge for a fraudulent lien, which would have the impact of invalidating the entire lien if you proved it was fraudulent. What the lien is for is for the value or work or material supply. So if a contractor only completed half the job, wasn't paid for half the job and then they lien for the entire contract price, that Lee would be challengeable as a fraudulent lien because it's based upon not anticipated profit, it's based upon the value of the work that was actually performed, not the contractual right to additional payment. So that could be challenged as a fraudulent lien.
So we are about to hit the hour looking for any other questions.
When are links typically recorded?
Well, they're typically recorded when contractor or subcontractor hasn't gotten paid on time or a material material supplier hasn't gotten paid on time, and some of them have a practice of filing them or recording them pretty early. Some will wait. The lien itself has to be filed within 90 days of their last performing workers supplied materials to the site. So they do have a deadline of actually when the lien has to be filed, but it could be filed earlier than the 90 days. So they can't do work on their property, get done with their work or supply the materials and a year later, come back and lien your property even with a valid Notice to Owner once they supply the materials or end up supplying the materials or perform work. That's why you see a lot of times when the material supplier liens will show up first because they have a clock running of 90 days from the time they supplied the last materials to the job of getting their lien filed. If you have a contractor, obviously they could wait until the end of the job, but they're still performing work all the way through to record a lien for the entirety of the work that they performed.
Well, I hope you know a little bit more about construction liens than you did before. Could send us along some additional questions if you'd like. We obviously do advise since it's a complicated area, that it's a good opportunity to seek legal advice if you have questions, and we're certainly available for that purpose. So thank you very much. We will see you next month. Managers get your materials to Michelle for your CEU credit and we will see you next month. Thank you very much.
Shawn Mahoney:
Thank you, Alan.
Chip Fosth:
Thank you, Alan.
Well, I hope you know a little bit more about construction liens than you did before. Could send us along some additional questions if you'd like. We obviously do advise since it's a complicated area, that it's a good opportunity to seek legal advice if you have questions, and we're certainly available for that purpose. So thank you very much. We will see you next month. Managers get your materials to Michelle for your CEU credit and we will see you next month. Thank you very much.
Shawn Mahoney:
Thank you, Alan.
Chip Fosth:
Thank you, Alan.
