Can a Restoration Contractor File a Lien in Florida?
When you’re a restoration contractor or contractor of any type, one of your biggest concerns is often not getting paid. This might mean you aren’t paid by a general contractor managing a larger-scale project, or a homeowner doesn’t pay you as agreed. One option for contractors is to file a mechanics lien in Florida, but this might not be your best way to protect yourself as a contractor specifically doing restoration work.
What is a Mechanics Lien?
A mechanics lien can be a powerful tool available to you if you’re a contractor and want to ensure you can secure payment. The specific rules for a mechanics lien can vary depending on the state, but broadly these are payment guarantees for contractors that build structures or make repairs. Mechanics liens can also extend to materials suppliers and subcontractors.
When put in place, a mechanics lien can be in force until the project is finished and everyone involved in the work has been paid. These liens have a high priority compared to other types of debt, so if a home is repossessed or foreclosed on, the presence of a mechanics lien on the property will be high on the claim hierarchy.
If there’s a lien on a property, it can’t be sold, refinanced, or transferred. The lien is filed against the title property, and it’s noted in land records.
So how do they work?
A contractor might file this type of lien if someone who owns the property doesn’t pay some or all of the payment agreed upon for work done. Similarly, a subcontractor can file a mechanics lien if a primary contractor fails to pay them. The lien is against the property, so the owner has to get involved, no matter what.
This type of lien in Florida gives you a security interest in the property if you go unpaid. It’s also called a construction lien in Florida.
If you’re the general contractor, you don’t have to provide a preliminary notice in Florida to preserve your lien rights, but you are required to list all of your subcontractors and suppliers within ten days of requesting payment from a property owner. You have a deadline to file this type of lien in Florida—90 days from when you provided labor or materials on the project.
If you don’t have a direct contract with the property owner, you have to send a Notice to Owner or NTO in Florida. If you don’t send this within 45 days from the first time you provide labor, you give up your lien rights.
You have to serve a lien copy on the property owner within 15 days of filing.
In Florida, the following professionals have specific rights to file a mechanics lien under construction law:
- Direct contractors
- Suppliers of materials
- Lessors of equipment
- Design professionals, including architects, surveyors, and engineers
If the work you’re doing requires a license, you have to have that licensing to file a mechanics lien.
Remote Contractors in Florida
One of the biggest exceptions as to who can or cannot file a lien against a property in Florida is a remote contractor. A remote contractor is the 4th tier or a contractor three or more levels below an owner.
To put it simply, there’s the owner, then the general contractor directly below them. Under the general contractor would be a subcontractor. There may be a third-tier sub-subcontractor, and until you get to the next tier, there are no longer lien rights.
Restoration Contractors and the Assignment of Benefits
While restoration contractors can typically file a mechanics lien in Florida, it might not be the best way to ensure you get paid because of the unique type of work you do.
Instead, an assignment of benefits or AOB could benefit you and your business more.
If someone files an insurance claim for a restoration project, the owner will usually directly deal with the insurer. The homeowner might not have the money available to pay you out-of-pocket, so they need a check from the insurance company to cover the restoration work.
It’s often easier for a contractor to deal directly with the insurance company through an AOB. An AOB lets you file and then directly negotiate claims with the insurer; you don’t have to be involved with a property owner on this.
You can also get paid directly from the insurance company rather than having the money first go through the homeowner, which also creates the risk of not being paid.
Let’s say you’re working with a property owner who experienced roof damage from a storm. The owner contacts you for repairs of the damage. They can sign an AOB, effectively transferring their insurance rights to you as the contractor. You’re the assignee now and negotiating the claim directly with the insurance company. The insurance company writes a check directly to you as the restoration contractor.
In Florida, restrictive laws can prevent you from filing a lien if you are assigned benefits, so you do have to weigh that, but working directly with an insurer can often prove to be the more efficient and effective route of payment if you’re a restoration contractor. Plus, if you opt for a mechanics or construction lien, it can be more legally complicated, and you might have to work with an attorney.
If you’re a restoration contractor, we encourage you to learn more about the Restoration Association of Florida. We’re a non-profit restoration contractors association, and we work to advocate for professionals specializing in water, mold, and fire restoration. We preserve the rights of our members and ensure that our entire network is working toward that shared goal.