You finally get to build your dream home in Florida! Or perhaps you are an independent contractor who was just hired to build a home for a client. No matter which side of this equation you are on, it is important to understand construction lien laws in Miami, FL. Here is an overview of construction liens and their role in home building.
A “lien” is an encumbrance against a piece of property. It is recorded in the assessor’s office along with mortgages, taxes and anything else that counts against the property value. Depending on its nature, it may prevent a sale or transfer of the home or result in foreclosure (the forced sale of your home).
Contractors file the lien as protection in case they are not paid for their work. Not only does a primary contractor benefit from a lien, but so do subcontractors, material suppliers and workers. The owner does not have to contract directly with these individuals to ensure they can pursue remedies from a lien.
To be enforceable, liens require three primary documents. The Notice of Commencement must be signed by the owner, not the contractor. It contains project information, legal descriptions, names and addresses of contractors and owners and any names and addresses of lenders. Once signed, construction must begin within 90 days of the notice being recorded, or it expires.
The Notice to Owner is sent to the owner by any subcontractor who did not contact the owner directly. It includes a warning to restrict payments to the contractor until the party serving the notice receives a signed waiver or release. It is mailed through certified mail, and should not be ignored. When it arrives, discuss the matter with your attorney or lender immediately.
Finally, the Claim of Lien is filed in public records and actually creates the lien on your property. The lien remains effective for one year unless your attorney is able to shorten that time.
Protection from liens
If neglected, liens can affect marketable title or even lead to a foreclosure. Owners should require contractors to obtain a lien waiver or release from every person or company working on the project or providing materials. That is why it is never a good idea to assume that Notice to Owner merely goes away—without the waiver or release, it remains on the property title.
It is especially important to monitor liens when contractors require partial payments or deposits. These are limited only by the building contract. However, a deposit should not exceed 10 percent of the contract price. All draws and amounts paid should bear a resemblance to the quality and percentage of work completed.
As payments are made, owners should require a partial waiver or release of the lien and include the liens from subcontractors and suppliers. This provision must be the construction contract. When work is nearly complete, the owner should receive a final payment affidavit before making that payment. This affidavit sets forth the amount due to the contractor and any balances owed to subcontractors. Once received, the owner can make the payment, and that will release liens.
Ruben J. Padron, PA practices real estate law in Miami, FL. If you require guidance on Florida construction lien laws, contact us today for a consultation.
Categorised in: Real Estate Attorney