DO YOU HAVE A LIEN CLAIM BOND CLAIM OR BOTH
By Douglas J. Roberts, Esq.
Contractors working on construction projects must be proactive to protect their rights from the very beginning of the project. While a general contractor, subcontractor or material supplier will typically have a claim for breach of contract against their customer, the Construction Lien Law, Chapter 713, et seq., provides additional rights to prevent performance without payment.
It is important to determine what rights are available right away. The first place to look is the Notice of Commencement. Owners (not contractors) are required by law to record a Notice of Commencement for private projects prior to commencement of work. The Notice of Commencement is designed to provide prospective lienors (or bond claimants) with the necessary information to preserve lien and bond rights, including the identity of the owner, general contractor, property legal description, bonding company information and addresses for services of notices to owner and other documents that must be served under the Lien law to protect your rights.
As a first step, the non-privity claimant should file a Notice to Owner/Preliminary Notice of Intent to Look to the Payment Bond to preserve lien and bond rights before or within 45 days of commencing work. If the job is not bonded, the lienor will have taken the first step toward perfecting a construction lien in the event of non-payment. If the job is bonded, the lienor will have also covered itself by giving proper notice for an eventual bond claim.
Such issues can become complicated when the Owner chooses to employ a “Conditional Payment Bond” under section 713.245, Florida Statutes. While not often used on private projects, a conditional payment bond can be a trap for the unwary because it’s one of the situations where you may have both lien and bond rights. Section 713.245 conditional payments bonds were created by the Legislature as a type of “hybrid” payment bond with the intent that to the extent that the owner has made payment to the contractor, the lienor’s “lien rights” are transferred to the bond. To the extent payment has not been made, the lienor still has the right to seek lien enforcement against the owner. If you have obtained a copy of a payment bond, look for the tell-tale signs of a conditional payment bond. There will be a block of language on the front of the bond which states:
THIS BOND ONLY COVERS CLAIMS OF SUBCONTRACTORS, SUB-SUBCONTRACTORS, SUPPLIERS, AND LABORERS TO THE EXTENT THE CONTRACTOR HAS BEEN PAID FOR THE LABOR, SERVICES, OR MATERIALS PROVIDED BY SUCH PERSONS. THIS BOND DOESN NOT PRECLUDE YOU FROM SERVING A NOTICE TO OWNER OR FILING A CLAIM OF LIEN ON THIS PROJECT.
Read that last sentence again. A lienor is not precluded from recorded a claim of lien, even though it’s a bonded job. While there are other requirements for conditional payment bonds, the presence of the above language is certainly an indication that it may be one. The prudent contractor will assess theses issues before commencing work, serve the appropriate notices and place itself in a position of having preserved future lien and/or bond rights as a result.
About the Author: Douglas J. Roberts has been Board Certified in Construction Law since 2005, the first year the Florida Bar offered its members the opportunity to achieve such a designation. He served as a judicial intern to the Honorable Arthur Birken, Broward County Circuit Court Judge, a certified legal intern with the Broward County State Attorney’s Office, and has practiced in the area of Construction Law for over 15 years, during which he has represented the FDCI, Hewlett-Packard, a Panel Bankruptcy Trustee in the Southern District of Florida, as well as general contractors, subcontractors, suppliers, sureties and owners in South Florida. Mr. Roberts has been recognized by his peers as a “Florida Super Lawyer” and focuses his practice exclusively on construction law related representation.