Construction Lien Releases in Florida
By Christopher M. Cobb January 8, 2020 Posted in Construction Law Share
Construction Lien Releases in Florida
“In Florida, it is well-established law that ‘execution of a valid release results in the termination of all rights covered by the agreement.’” See Beck-Ford Constr., LLC v. TCA Glob. Credit Master Fund, LP, 240 F. Supp. 3d 1256, 1279 (S.D. Fla. 2017) and Pettinelli v. Danzig, 722 F.2d 706, 708 (11th Cir. 1984) (holding that the release there “conclusively resolves all claims” covered by it). This blog will address some basic considerations regarding construction releases in Florida.
It is important to first identify the intended scope of the lien waiver you are drafting. The language necessary to protect your right to payment will vary depending on the scope of project. 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).
A partial lien release is a waiver statutorily required to be provided to a contractor or owner, 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 contractor or owner upon completion of a project, in which all payment obligations are satisfied at the time the release is executed. Though this “final” waiver will prohibit you from any to lien prior to the date of execution, the right to 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).
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.”
A conditional lien release should be provided to a contractor or owner 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). 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 lien for labor, services and/or materials performed during the time period identified within the release. This means that if a lienor provides a release to a contractor or owner payor upon receipt of a check, without modifying the language, the lienor has waived all of its lien rights if the check bounces. While there are still remedies at law for the outstanding payments (breach of contract or worthless check claim), the lienor has essentially deprived itself of its most powerful collection tool – the construction lien.
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. Under no circumstance is a prime contractor able to force its subcontractors 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).
The statute basically allows parties to agree contractually to the language in the release, allowing for modifications to be made that both parties will be bound to as a matter of contract. If 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 release must be made prior to signing. The act of signing the modified release signifies a party’s consent to the terms contained in the release.
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 wording within the release is of the utmost importance. Generally, any person may at any time waive, release, or satisfy any part of his or her lien under Chapter 713, either as to the amount due for labor, services, or materials furnished or for labor, services, or materials furnished through a certain date subject to exceptions specified at the time of release. See, Fla. Stat. §713.20.
Where a release is unambiguous, it is inappropriate to consider issues such as intent of the parties or mistake. See Hurt v. Leatherby Ins. Co., 380 So. 2d 432, 433 (Fla. 1980) (recognizing that “[a]s with contracts generally, the language used in the release is the best evidence of the parties’ intent. When the language is clear and unambiguous, the courts cannot indulge in construction or interpretation of its plain meaning.”). In Frank Maio Gen. Contractor v. Consol. Elec. Supply, the Fourth District Court of Appeal reversed judgment in favor of a material supplier against the general contractor because the unambiguous terms of the release at issue there barred any such claim. 452 So. 2d 1092, 1093 (Fla. 4th DCA 1984). Specifically, the Court reasoned that the:
unambiguous terms of a release may not be avoided on the basis of unilateral mistake (such as where the lienor intends it to apply only to indebtedness accrued between certain dates) . . .[f]urther, a court may not indulge in construction of a release that is clear on its face.
Id.; see also Spectrum Interiors, Inc. v. Exterior Walls, Inc., 2 So. 3d 1093, 1095 (Fla. 5th DCA 2009) (reversing final judgment in favor of a sub-subcontractor and finding that it lacked standing to maintain its action because it executed unambiguous waivers of lien and release of claim documents certifying under oath that it had been paid in full through a date certain). 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 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 and that the release of rights is conditioned only upon payment. Additionally, all lien releases must be signed and dated by the lienor.
While it is important to include the amount received in consideration of labor, services or material provided, the central 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. While this may seem a harsh result, such waivers might be overcome if the subcontractor can establish mistake, duress, or some form of post execution revision of the release – although the case law makes proof of such circumstances difficult.
Finally, 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). 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. 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. Do not be afraid to modify the terms of the release and write in exclusion as the project or circumstances dictate. Understanding the effect of a release is important to protecting your rights on any construction project.
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