I Recorded My Lien. How do I Get Paid? - Florida Webinar

This blog explores the key points from a recent webinar by Florida construction lien expert Alex Barthet. Let's break it down step-by-step.

What is a Lien?

A lien is an encumbrance on real property that ensures payment for labor or materials provided. It grants contractors, subcontractors, and suppliers a legal right to seek payment by attaching their claim to the property itself. In Florida, a lien is designed to protect those who provide permanent improvements to a property.

Encumbrance on the Real Property

A lien attaches to the real property as a legal right, allowing contractors to potentially sell the property to satisfy unpaid debts. It legally binds the property until the lien is resolved.

Creates a Cloud on the Title

A lien creates a legal "cloud" on the property’s title, making it difficult for the owner to sell, refinance, or mortgage the property without addressing the lien. This can cause significant financial and logistical challenges for the property owner.

Technical Default Under Most Mortgages

Most mortgage agreements consider the presence of a lien as a technical default. This default may prompt the lender to intervene, often requiring immediate resolution of the lien before any further disbursements are made.

May Constitute a Default Under a Prime Construction Contract

During construction, a lien can disrupt the flow of funds. For instance, if a supplier files a lien, it may prevent the owner or lender from releasing further payments to the contractor, causing delays in the project timeline.

Why Use a Lien?

Liens are powerful tools for subcontractors, suppliers, and contractors, ensuring they have leverage when payment is delayed or denied. They create a financial obstacle that motivates owners or contractors to settle disputes and clear the title.

Benefits of Filing a Lien:

• Ensures Payment Priority: Your lien ensures that your claim is taken seriously during property transactions. It establishes your legal right to be paid before others who may not have filed liens.

• Legal Leverage: The presence of a lien makes it more likely for disputes to be resolved quickly, as it directly impacts the property owner’s ability to utilize the property freely.

• Protection Against Nonpayment: Subcontractors and suppliers can use liens to secure payments from higher-tier parties in the construction chain, such as general contractors or property owners.

Basic NTO/Lien Rules

Understanding the fundamentals of lien law is crucial to preserve your rights. These steps outline how to maintain your claim:

Notice to Owner (NTO):

• Serve this document no later than 45 days after your first delivery of materials or work on-site. This step is mandatory for subcontractors and suppliers who do not have a direct contract with the property owner.

• The NTO alerts the property owner of your involvement in the project and preserves your right to file a lien if unpaid. Without serving the NTO within this timeframe, your lien rights may be forfeited.

Claim of Lien:

• Record the lien with the county clerk within 90 days of your last work or material delivery.

• The clock starts the day after your last contribution to the project, counting every calendar day, including weekends and holidays.

• Ensure that the recorded lien includes accurate information, such as the property address, legal description, and the amount owed.

Foreclosure Lawsuit:

• File a lawsuit within one year of recording your lien. Failure to do so will render your lien invalid, as liens cannot be re-recorded.

• Be prepared with proper documentation, including contracts, invoices, delivery receipts, and evidence of completed work. Strong documentation is critical for substantiating your claim in court.

• The deadlines for serving NTOs, filing liens, and initiating foreclosure lawsuits are strict. Missing them can result in the loss of your lien rights.

What Happens After I Record My Lien?

Recording a lien is only the first step in getting paid. On its own, a lien is passive—it does not automatically compel payment from the property owner or other parties.

Why a Lien Alone May Not Be Enough:

• No Immediate Action: Property owners, contractors, or lenders may ignore the lien if it doesn’t directly affect them or their financial interests.

• Legal Deadlines: If you do not take action within the one-year deadline, your lien will expire, and your claim will be invalidated.

Next Steps After Recording:

• Use the lien as leverage to negotiate payment with the property owner or contractor.

• Be proactive—reach out to stakeholders and emphasize the potential consequences of an unresolved lien, such as delays in refinancing or selling the property.

• Engage legal counsel if negotiations stall or disputes escalate.

How Do I Get Paid?

Securing payment often requires persistence and strategy. Alex Barthet recommends the “60-60 Rule”:

The 60-60 Rule:

Within 60 Days of Your Last Work:

• Begin the process of recording your lien to ensure compliance with the 90-day deadline.

• Avoid last-minute scrambling by preparing your documentation early and reviewing it for accuracy.

Within 60 Days of Recording Your Lien:

• Actively pursue payment by engaging in consistent follow-ups, phone calls, emails, and in-person visits.

• Consider negotiating partial payment offers to recover as much as possible before escalating to legal action.

Foreclosure as a Last Resort:

• If payment is not made within two months of recording your lien, consider initiating the foreclosure process.

• Waiting too long to act may lead to complications such as lost records, faded memories, or key witnesses leaving their roles, making it harder to substantiate your claim.

My Lien Was Bonded Off! Now What?

When someone bonds off your lien, it means the lien is replaced by a security instrument, such as a bond or cash, ensuring your claim is backed by money rather than the property itself.

Advantages of a Bonded Lien:

• Guaranteed Funds: Bonding off eliminates concerns about the property’s equity or value, ensuring you’re dealing with liquid assets.

• Simplifies the Process: The security is easier to access if you win your case, making the recovery process more straightforward.

Action Plan:

• If your lien is bonded off, treat it as a sign that the other party intends to fight your claim.

• Immediately involve a construction lawyer to begin the foreclosure process and ensure your claim remains valid.

What is a Notice of Contest of Lien?

A Notice of Contest of Lien is a document filed by the property owner to shorten your deadline for filing a foreclosure lawsuit from one year to 60 days. The 60-day clock begins the day the notice is recorded by the clerk, not the day you receive it.Retain legal counsel immediately to  file your lawsuit before the new deadline expires.

I Received a 20-Day Summons! Now What?

A 20-Day Summons is a court order requiring you to show cause for your lien within 20 days or risk losing your rights.

Key Points:

• Immediate Response Required: Unlike a Notice of Contest, this summons is served by a process server or sheriff and requires a direct response.

• File a Lawsuit: To preserve your lien, file a counterclaim or separate foreclosure action within the 20-day period.

Consequences of Inaction:

• Failing to respond appropriately can result in the court invalidating your lien, regardless of its legitimacy or the amount owed.

Key Takeaways

• Understand Deadlines: Familiarize yourself with the critical timeframes for NTOs, liens, and foreclosure lawsuits.

• Act Proactively: Use the 60-60 rule to streamline the process and reduce delays.

• Monitor Legal Notices: Treat notices of contest or summons with urgency to protect your lien rights.

• Seek Legal Advice: Engage a construction attorney to navigate complexities and improve your chances of recovery.

Common Questions Contractors Ask

Common Questions Contractors Ask

1. Can I include attorney fees in my lien?  

No, but you can include them when filing a foreclosure lawsuit if allowed by the lien statute (e.g., Florida Statute 713.29) or your contract.  

2. Can I re-record a lien if the original is about to expire?  

No, re-recording a lien is not permitted and could be considered fraudulent. Instead, file a foreclosure lawsuit before the original lien’s expiration.  

3. How does bonding off the lien affect my claim?  

Bonding off the lien secures your lien with cash or a surety bond, ensuring you can recover funds if you win your case. It does not weaken your legal position.

4. What happens if I miss a 60-day or 20-day deadline?  

Missing these deadlines results in losing your lien rights, regardless of the validity of your claim.  

5. How much does it cost to foreclose on a lien?  

Legal fees can vary widely based on the complexity of the case. Initial costs typically range from $2,000 to $3,000, with total expenses increasing if the case is contested.