Protecting (or Challenging) Lien Rights Under a Notice to Owner
A Notice to Owner (“NTO”) is a written notice governed by Florida Statute § 713.06 that places a property owner on notice that the sender, usually a subcontractor or supplier not dealing directly with the owner, is looking to the owner to ensure they are paid for materials or services rendered. As a prerequisite to securing the right to lien the property, the NTO must be served upon the owner not later than 45 days from the date of first labor, services, or materials delivered to the job site.
The NTO gives the owner the opportunity to verify that the sender is paid, usually by obtaining a “Release of Lien” from the sender when payments are made to the contractor, so that the owner can track downstream payments and is not later surprised by a lien against the property from someone with whom the owner does not have a contract.
Serving an NTO is considered a “best practice” that improves cash flow, establishes an open line of communication between the owner and those working on the property, and secures a potential lienor’s right to assert a lien against the owner’s property, if necessary. Actual or verbal notice to the owner does not substitute for a properly served written NTO.
Who Can Lien?
The following persons have lien rights for labor, services, or materials furnished in improving the real property. They are defined in Florida Statute § 713.01:
(a) Contractor - means a person other than a materialman or laborer who enters into a contract with the owner of real property for improving it, or who takes over from a contractor as so defined the entire remaining work under such contract.
(b) Subcontractor - means a person other than a materialman or laborer who enters into a contract with a contractor for the performance of any part of such contractor’s contract, including the removal of solid waste from the real property.
(c) Sub-subcontractor - a person other than a materialman or laborer who enters into a contract with a subcontractor for the performance of any part of such subcontractor’s contract, including the removal of solid waste from the real property.
(d) Materialman - any person who furnishes materials under contract to the owner, contractor, subcontractor, or sub-subcontractor on the site of the improvement or for direct delivery to the site of the improvement or, for specially fabricated materials, off the site of the improvement for the particular improvement, and who performs no labor in the installation thereof. Further, the materials must be delivered to the site or sold for direct delivery to the site.
(e) Laborer - a person furnishing their own labor only.
(f) Professional Lienors - Architects, Landscape Architects, Engineers, Surveyors and Mappers, and Interior Designers.
Who Should Serve a Notice to Owner?
Any potential lienor not dealing directly with the property owner must timely serve an NTO not later than 45 days from the date of first labor, services, or materials delivered to the job site as a preliminary step to asserting their lien rights. If this initial step is not taken, a potential lienor may waive their right to later assert a lien against the owner’s property even where no problem has yet arisen.
There are three potential lienor exceptions who are not required to serve an NTO to secure their lien rights: (1) a laborer, (2) a professional lienor, and (3) a person who is working only on subdivision improvements.
What Does "Served" Mean?
Florida Statute § 713.18 provides the following methods for serving a Notice to Owner:
(a) Actual Delivery: By actual delivery to the person to be served; if a partnership, to one of the partners; if a corporation, to an officer, director, managing agent, or business agent; or, if a limited liability company, to a member or manager.
(b) Certified or Registered Mail/Common Carrier: By common carrier delivery service or by registered, Global Express Guaranteed, or certified mail, with postage or shipping paid by the sender and with evidence of delivery, which may be in an electronic format.
(c) Posting at the Jobsite: Posting on the site of improvement if service as provided by paragraph (a) or paragraph (b) cannot be accomplished.
What Is a Claim of Lien?
As described in Florida Statute § 713.08, a claim of lien is a verified document affecting title to real estate (e.g. deeds, mortgages) that provides public notice of the lienor's claim against the property. The claim of lien must be recorded not later than 90 days from the last performance of work or delivery of materials at the site, excluding warranty work. A copy of the claim of lien must be served on the owner within 15 days of recording same.
How Long Does the Lien Last?
The lien remains in effect against the property for a period of one year. A lienor cannot simply file a renewal or extension of lien. The only way a lienor can extend the time period is by filing suit to enforce or foreclose the lien.
There are two ways to shorten the one-year period, aside from the party asserting the lien voluntarily releasing same. If a notice of contest of lien is recorded, the lien's effective time is shortened to 60 days from the date the clerk serves a notice of contest of lien on the lienor.
The second way to shorten the time period is through a summons to show cause. This can be filed by any interested party. When a lienor receives such a summons, he or she should consult legal counsel familiar with the construction lien law. Generally, the lienor must file a counterclaim within 20 days of service of the summons or the court will enter an order discharging the lien.
How is the Lien Enforced?
The lien is enforced by filing a lawsuit pursuant to Florida Statute Chapter 85 in which the lienor can seek a judgment recognizing the lien. The lienor can also seek the sale of the property free and clear of those interests and claims on the property that are inferior to lienor’s claim. The owner's interest in the property may be sold at judicial sale subject to prior liens and mortgages, but free and clear of inferior liens and mortgages if the inferior parties are joined in the suit. Attorneys’ fees are also recoverable by the prevailing party.
What Is Lienable?
The interest in the property of the owner who contracts for the improvements is lienable. Most often the landlord's interest is not lienable where the tenant contracts for the work unless the improvements are a significant undertaking in the lease. However, there are limited exceptions.
What is a Release of Lien?
Generally, a Release of Lien is a release of the lienor’s right to lien the property in accordance with the terms of the release. Potential lienors will be required to give releases on most, if not every job. Additionally, a release can be for a specific dollar amount, a specific period, or both.
Is There a Standard Release of Lien Form?
Yes, Florida Statute § 713.20 provides “standard” release forms. However, releases can contain wording that differ from the Florida statutory language. It is critical that you understand the language and terms recited in giving or obtaining a Release of Lien. If you are the party providing the Release of Lien be sure that you are not giving away more than intended. Similarly, if you are the party making payment in exchange for a Release of Lien, be sure that the release covers the full extent of the payment being made.
Who Must be Served with Copies of the Notice to Owner?
If there is a party between your customer and the owner, you must also serve that party with a copy of the NTO. For example, if you are a material supplier to a subcontractor then you must also serve a copy of the NTO on the prime contractor. If you are a material supplier to a sub-subcontractor, then you must serve a copy of the NTO on the contractor. If the material supplier to the sub-subcontractor knows who the subcontractor is, then a copy of the NTO must also be served on the subcontractor who is dealing with your customer. While not legally required, it is considered “best practice” to also provide your customer with a copy of the NTO.
Rick Duarte is the owner of The Duarte Firm, P.A., where he focuses his practice on business law. He received his law degree from the Emory University School of Law and has been named a “Rising Star” in Business Litigation by Florida Super Lawyers for 2016 – 2018. Rick also serves as outside general counsel to emerging and medium-sized businesses, guiding clients through corporate governance, risk management issues, and strategic decisions where business and law intersect.