KMB - AVVO LEGAL GUIDES
Construction Lien Law - Updated 20 December 2020
British, as well as other foreign buyers of Florida Homes, need to be made aware that there is no one official real estate purchase contract. Buyers of properties yet to be built on Florida developments or of homes to be built on a lot by builders are generally first provided a 20 or more page agreement drafted by the seller’s attorneys to sign which serves only to protect the seller’s interests. The buyer’s interests in these purchases cannot be protected unless the buyers are firms made aware of the possible problems with these agreements, and thereafter, prepared to negotiate a contract between the parties which will also seek to protect the buyer’s interests. To do this, the buyer must read the agreement carefully and discuss it with their own Florida lawyer.
One of the most important issues which may require the alteration of the seller’s agreement results from the buyer’s liability to construction liens. Basically, if the home being purchased is still under construction or has been completed recently, special care is required to make sure that all building costs have been paid by the sellers and that the buyer is fully protected as to the provisions of the Florida Construction Lien Law. This may be true also when repairs on a house have been made recently or building material recently delivered.
Florida law allows those people who work on your property or provide construction materials and are not paid to enforce their claim for payment against your property. This claim is known as a construction lien. This law may sound reasonable as you expect to pay for work done by others. However, if you pay your contractor and he then fails to pay his suppliers and subcontractors, it is possible under the Florida Construction Lien Law that you could end up paying twice, or even lose your house.
While in purchasing a Florida home, you will pay for a title search and owner’s title insurance which will cover you if there is a problem regarding legal ownership, the title search may not uncover unrecorded liens as lienors have 90 days after providing labor, services, or materials for the property within which to record their lien in the public records. You can see that one could easily pay the main contractor not realizing that a lien could still be filed. You will not be able to sell your property unless all outstanding liens are paid. If the lien is not voluntarily paid, your property could be sold against your will in a court proceeding. An owner who fails to pay a valid claim of lien could also be responsible for the lienor's legal fees, court costs, and interest.
There are, however, ways to protect yourself. Amendments should be made to have included in the contract, if this is not already there, that before your contractor receives any due payments, you get a sworn statement in writing that the contractor has paid all the bills for your property.
If you have received a "Notice to Owner" from anyone, your contractor should be required to get a sworn statement from each such person stating that they have been paid for all work done on your property. This should be done before making any payments to your contractor.
If you are borrowing money to complete the improvements and the lender pays the contractor directly, it should be arranged that the lender is getting these sworn statements before any payments are made to the contractor. If your lender then fails to follow the legal requirements, it may be responsible to you for any loss.
As construction liens can be unreported for up to 90 days and still be valid, before you make the last payment to your contractor, obtain an “Affidavit of No Liens" which will specify all unpaid parties who performed labor, services, or provided materials to your property. Make sure that your contractor obtains releases from these parties before you make the final payment. While this affidavit is customarily received by the buyer from the seller at the closing (completion), this should be spelled out in the negotiated contract as there is in fact no legal obligation on the part of the seller to provide the affidavit.
The Florida Construction Lien Law is complex and cannot be covered completely within these pages. We recommend that whenever a specific problem arises, you should consult a Florida attorney.