If anyone other than the contractor with whom you have a signed contract is performing services or providing goods to your property, then you have financial exposure and could end up paying twice, unless you understand a few terms and make sure a few steps are followed. Florida’s construction lien law is both a blessing and a curse. Sadly, it seems that the only people that truly grasp its implications are contractors and lawyers. Simply put, if you pay the general contractor, but they fail to pay a subcontractor or supplier, then you could be responsible to pay them, even though you paid the general contractor, unless you protected yourself. To do so, first we’ll examine contractors, architects, landscape architects, interior designers, engineers, etc. when such individuals are in direct contract with the owner of the property, then we’ll examine suppliers (also known as “materialmen”) and subcontractors who are doing work on the property, but have no direct contractual relationship (“privity”) with the owner.
Pursuant to Chapter 713, Florida Statutes, any person or firm that performs services as an architect, landscape architect, interior designer, engineer, or surveyor who is performing their services pursuant to a contract with the owner, has a lien on the real property improved for any money that is due for his or her services. In addition, a supplier, laborer, or other contractor in “privity” with the owner, has a lien on the real property improved for labor, services, materials or other items required by or furnished in accordance with their contract.
Where it gets tricky, and where your liability to pay twice is created, is when a subcontractor or supplier performs work or services on your property and they are NOT in direct contract with you, the owner (meaning that there is no “privity” between the owner and the person providing the services or goods). It’s easy to protect yourself. To do so, you need to understand a few new terms, the “notice of commencement”, “notice to owner” and “partial and full payment affidavits”. So long as you sign the “notice of commencement” and ensure your general contractor records it, the subcontractors and suppliers with whom you have no privity, can record and send you their “notice to owner.” So long as you are certain to demand partial and full receipt, be sure you receive partial and final payment affidavits from the general contractor along the way, too.
For the suppliers and subcontractors to be in a position to record and send their “notice to owner”, you are responsible to make sure your general contractor records the “notice of commencement” that is duly executed by you, as the property owner. To record their “notice to owner”, the subcontractors and suppliers look to the “notice of commencement”. In fact, the cautious subcontractor won’t begin work if they are not in privity with the owner when the “notice of commencement” is not recorded.
The “notice to owner” is a publicly recorded document that is also sent to the property owner to alert him or her of all subcontractors and suppliers who are not in direct privity with the owner and are providing services or goods to the owner’s property. In order for the subcontractors and suppliers to perfect their lien rights, they must serve their “notice to owner” which sets forth the name and address of the person or entity providing the goods or services, a description of the real property being improved, and the nature of the services or materials furnished or to be furnished. If, after the “notice of commencement” is recorded, the supplier or subcontractor doesn’t complete the “notice to owner”, then, after a certain amount of time is passed, in the event you paid the general contractor who fails to pay the subcontractor or supplier, they will have a difficult time arguing that you, the property owner, are still responsible to pay them.
Prior to each payment, the property owner, at their sole option, can require the general contractor to first provide an affidavit which sets forth the names of each subcontractor and supplier who had not been paid in full, and the amounts due, or to come due, for labor, services or materials furnished. The owner has the right to rely on the contractor’s affidavit in making the partial and final payment meaning that any subcontractor or supplier who did not complete the “notice to owner” and where the owner of the property has no knowledge of the individual doing any work, then the lien rights of such subcontractor or supplier are not vested and do not attach to the property.
If you don’t follow these simple steps, then you’re at full risk for paying twice for the same work.