Extensive knowledge about lien releases in Florida is integral to proper protection of parties entering into a construction project. This is primarily evident for those involved in construction, whose life work consists of providing their expertise, labor, and construction materials, primarily at their own expense at the outset of each project. In order for those in the construction industry to best utilize the protections afforded to them by Florida law, the key component to the process is self-education. Each and every construction project is an investment; an investment of one’s education, time, expertise, and financial backing. The time it takes to delve into Florida law and the protection it provides is small in comparison to the abuse and loss of value one could experience without doing so.
In an effort to ease the burden of self-education of Florida law and maximize your potential earning time, reference to the below factors will aid in increasing your understanding of Florida lien releases, and the important areas to focus on when providing a release to a payor.
1. What Kind of Lien Release is Necessary?
It is essential to first identify the intended scope of the lien waiver you are drafting. The language necessary to protect your investment will vary depending on the scope of project completion you intend to waive rights to. Has only partial work on the overall project been completed and paid for? Has all of the work been completed and paid for with a check? As lien releases are generally enforceable in Florida, failing to distinguish the scope of release for work performed could render you unable to exercise the right to protect your services with a lien. In re Construction Contractors of Ocala, Inc., 196 B.R. 188 (Bankr. M.D. Fla. 1996).
2. What is the Difference Between Partial Lien Release and Final Lien Release?
A partial lien release is a waiver statutorily required to be provided to a payor, specifically identifying the extent to which payment claims have been waived. It is important to understand that in executing a partial lien release, the language within the release should only waive claim rights to the extent payment has been made. Climatrol Corp. v. Kent, 370 so.2d 394, 396 (Fla. 3d DCA 1979).
A final lien release is a waiver statutorily required to be provided to a payor upon completion of a project, in which all payment obligations are satisfied by said payor at the time the release is executed. Though this “final” waiver will prohibit you from any claim to lien prior to the date of execution, the right to claim lien on any work completed and payments required following the execution of the final lien release will not be waived. Stock Bldg. Supply of Florida, Inc., v. Soares Da Costa Const. Services, LLC 76 So. 3d 313,318 (Fla. 3d 2011).
Upon discerning the release necessary to be provided to the payor, based on the payment made in relation to the project completion, the focus of your attention should shift to whether or not your investment is completely protected, based on the form of payment the payor has provided.
3. Why Does the Payor’s Form of Payment Matter?
Due to the nature of the obligation by law to provide a payor with lien release upon receipt of payment, it is understandable how easily a lienor can unknowingly sign away the right to claim lien on work performed. It is vital for a lienor to ensure that the type of payment received will actually yield the monies identified. This is of particular importance upon payment by way of check.
Legally, a lienor is only required to utilize one of the two forms provided by Florida law when waiving their right to claim lien on work performed. Fla. Stat. § 713.20. However, the forms provided do not contain any language to the extent that will void an executed release in the event a check bounces. It is important when accepting payment that renders you vulnerable to the possibility of not receiving the funds owed, that you modify the statutory forms provided to incorporate a clause that will render the release null and void if payment fails to go through. Rather than providing an “unconditional” lien release, the lien release should be “conditional.”
4. Conditional Release vs. Unconditional Lease
A conditional lien release should be provided to a payor where payment has been made in a form that may still effectively leave the lienor vulnerable to non-payment. In order to protect the lienor’s interest, the form utilized should be modified to include language alerting the reader that payment has not yet in fact been received. Klein Dev. V. Ellis K. Phelps & Co., 761 So.2d 441, 443 (Fla. 2d DCA 2000). Statutorily, the addition of conditional language is not prohibited. On the contrary, Florida law specifically provides for modification of the statutory forms to include conditional language upon the receipt of check payment. Fla. Stat. § 713.20 (7). “A lienor who executes a lien waiver and release in exchange for a check may condition the waiver and release on payment of the check.” Id.
An unconditional lien release acts as an absolute bar on a lienor’s ability to claim right of lien on work performed during the time period identified within the release. This means that if a lienor provides a release to a payor upon receipt of a check, without modifying the language, the lienor has waived all lien rights if the check bounces. While there are still remedies at law for the outstanding payments (breach of contract), the lienor has essentially deprived himself or herself of the most effective protection of their investment.
Though the original statutory forms provided by Florida law are appropriate in certain circumstances, there are many times in which the forms should be modified to best protect the lienor’s interest.
5. Statutory Lien Release vs. Contractual Lien Releases
In no circumstance is a lienor able to force an individual to sign a non-statutory form. Section 713.20(5) provides that a lienor is required to execute a lien release that is “substantially similar” to the form provided by Florida law. Fla. Stat. § 713.20(5). Similarly, an individual is not able to require a lienor to provide a waiver that varies from one of the two statutory forms. Fla. Stat. § 713.20(6). However, the statute also provides, “[a] lien waiver or a lien release that is not substantially similar to the forms in subsections (4) and (5) is enforceable in accordance with the terms of the lien waiver or lien release.” Fla. Stat. § 713.20(8).
As confusing as the wording of the statute may seem, the statute essentially allows parties to agree contractually to waiving the necessity of the statutory form, allowing for modifications to be made that both parties will be bound to. Therefore, in any circumstance in which it is identified that the language of a statutory form will not sufficiently protect a lienor’s interest, a contractual agreement between the parties is necessary to allow variance. If, for any reason, after contractually agreeing to modifications of a lien release any party to the release has hesitation as to whether their interest is properly protected, objections to the document must be made prior to execution. The act of signing the modified release constitutes a party’s consent to the terms contained within and intent to be bound by the release.
6. Why is the Wording of the Release so Important?
In identifying that the scope of a release may be either partial or final, of conditional or unconditional nature, and require either a statutory lien release or contractual lien release, the importance of wording within the release is of the utmost importance. If specific attention is not paid to including the necessary language within each lien release, you will quickly realize the gravity of the inherent disservice you are doing to yourself. Additionally, any ambiguity identified within the lien release will be resolved against the lienor. First Atlantic Bldg. Corp. v. Neubauer Const. Co., 352 So. 2d 103, 103 (Fla. 4th DCA 1977).
- Each partial lien release should include: (1) whether lien release is partial waiver or a waiver upon progress payment; (2) the amount given for the lien waiver; (3) the effective date of the lien waiver; (4) the name of lienor giving the waiver; (5) the lienor’s customer’s name; (6) the payor’s name; (7) the description of the project; (8) the statement of lienor’s waiver and release of right to claim lien for labor, services, or materials provided through the effective date; and (9) a statement identifying the amount left unpaid. § 713.20(4).
- Each final lien release should mirror the language required for a partial lien release with the exception of an effective date of the lien waiver. This is because the final lien is “final,” in that all work completed in the time period specified on the waiver is completed and paid for.
- Each conditional lien release must contain language, in addition to the statutory language provided, that will render the release null and void in the event that payment is not received.
In the event that a statutory lien release or unconditional lien release is appropriate, the language in the forms provided by Florida will suffice. Additionally, all lien releases must be signed and dated by the lienor.
7. Pay Close Attention to the Effective Date Listed on the Release
A commonality within the construction industry in the drafting and execution of a lien release is an unnecessary focus on the inclusion of the monetary amount received. While it is important to include the amount received in consideration of services provided, the integral focus on a lien release should be on the effective date. Larry R. Leiby, When is a “Final Construction Lien Release” Really Final, 86 FLA. B.J. 1, 18 (January 2012). If ever challenged, the court will place very little significance on the money a lienor received or failed to receive. Id. The date listed through which a lienor has waived lien rights will be the court’s primary focus. If a dispute arises as to the non-payment of labor, services, or materials provided prior to the effective date of the lien release, the court will effectively find that lien rights are waived. Id.
8. Executing a Release Prior to Performance is Ineffective
There is nothing effective about executing a lien release in anticipation of performing work or providing project materials. “A right to claim a lien may not be waived in advance. A lien right may be waived only to the extent of labor, services, or materials furnished. Any waiver of a right to claim a lien that is made in advance is unenforceable.” § 713.20(2). To deliver a premature lien release is in actuality delivering nothing. Any contract language that provides a waiver of lien rights prior to any actual performance on part of the lienor is void and unenforceable. Id.
In addition to self-education, it is vital to be extremely vigilant when executing a lien release, and waiving your right to claim lien on the services provided to a payor. Err on the side of caution when drafting a release, as opposed to feeling it necessary to ever go out on a limb for a payor. Always double-check the language within each release prior to executing, and never forget to confirm that the effective date within each release is accurate. When in doubt, engage legal counsel to review the release and the terms of the transaction.