Florida Statutes Section 713.13 provides that an owner shall record a Notice of Commencement prior to commencing to improve real property, or recommencing completion of any improvements after default or abandonment of the construction. Without going into all of the details and nuances of Florida’s Construction Lien Statute, Chapter 713 is designed, overall, to protect owners from double paying contractors and subcontractors and to give those who work on or supply materials to a job site, protection that they will be paid. As long as owners and contractors follow the provisions of the statute, each side has protections. Owners know who is working on their property and are assured that the workers are getting paid and liens will be released. Contractors and suppliers have lien protection, evidenced by and relating back to the Notice of Commencement (NOC), no matter when they begin working on the project, so that the owner can’t foreclose out subcontractors and suppliers by taking out a junior mortgage.

But that is not what I want to talk about today. So much is written about Florida construction lien law and the perils associated with not following proper procedure. Instead, I want to focus on the end of construction and the termination of the NOC. When selling or refinancing a property, it is common to find outstanding Notices of Commencement in the title search. These affect the status of title because all contractors, subs and materialmen who worked on the job and who provided notices to owner have lien rights that relate back to the date of the NOC which will have priority over any newly recorded deed or mortgage. Therefore, in order to insure a new owner or mortgage, the NOC must be terminated. But, months later, this could be complicated.

The first thing to do is to check the date of the NOC. Has it expired? Notices of Commencement expire and automatically terminate 1 year after the date of recording (unless an earlier date is set forth in the NOC). If the NOC has expired, let the title company know and it will be deleted from the commitment as it is no longer an issue.

Second, if the NOC has not expired, before closing, you’ll need to obtain and record a Notice of Termination from the owner as well as a final contractor’s affidavit from the general contractor.   The contractor’s affidavit is prescribed by statute, yet many small contractors pretend not to know what they are required to do. The contractor must attest that all work has been completed and all subs and suppliers have been paid and the contractor must satisfy and release its lien. The affidavit should be recorded with the notice of termination. The contractor should also provide waivers of liens from all subs who have provided notices to owner.

Why wouldn’t an owner terminate a NOC when the work is done? Many times, for ordinary home repairs, such as the installation of a new AC unit or a new roof, the home owner doesn’t know to record a termination and the contractor doesn’t tell the owner to do so. That is why this is a common problem. In my own case, I installed a new roof on my house last year. I know that I needed a Notice of Termination and just never got around to it or asked for the contractor’s affidavit. And then, we decided to sell our house. I have had to get the contractor’s affidavit quickly. It wasn’t hard for me because I knew exactly what to do and what to ask for. But a typical homeowner might have had more difficulty.

Third, if construction is on-going and the contractor can’t say the work is complete, closings can still occur, but there are strict rules to follow. When a client is purchasing a condominium, for example, the association might be renovating common areas. In this case there might be multiple NOCs which affect title to all units. While each unit is specially assessed for the renovations, the association is responsible for payment of the work. Therefore, title to an individual unit or a unit mortgage can be insured if you obtain an affidavit from the association stating that the association has sufficient funds available and set aside to complete the work.

Sometimes developers will begin construction work on a site before obtaining construction financing. Therefore, a NOC is already recorded before a mortgage would be recorded. This would make the liens of the contractor and all subs and suppliers superior to the mortgage. Obviously, no lender would close on this bases. To remedy, the NOC has to be terminated, the mortgage recorded and the NOC re-recorded.

But it isn’t that simple. The owner has to pay the contractor for all work completed to that point, including retainage and the contactor must assure that all subs and materialmen are paid to date. That way, the contractor can provide a “final” contractor’s affidavit and release of lien and all subs and suppliers can provide lien waivers. They are final because all subs and suppliers will have been paid for all work rendered. In addition, work on the site must stop for at least 24 hours. Taken together, going forward, the new work is treated as a new contract and a new NOC for the work that will be done after the mortgage is recorded. However, owners don’t like to shut down a job site. To comply with the statute and guard against lost time, we try to close on Fridays so that the shutdown period can occur over the weekend when work isn’t generally scheduled, or only light work would have been scheduled.

With the exception of this final case where a termination and new NOC are required, I would say that most of the time, owners don’t record notices of termination and rely on the 1 year expiration period as they don’t intend on selling or refinancing for more than a year. In commercial practice, this is probably ok because construction loans are usually disbursed on a draw basis following title updates and upon receipt of proper documentation from the contractor and all subs, including upon the final draw. They will have the proper documentation on hand if necessary. However, if you are a homeowner doing a major renovation, it is not a good idea to wait to get the notice of termination, contractors affidavit and lien waivers (my own stupidity notwithstanding). You never know if there is a subcontractor out there who has a dispute with the contractor who will come back and cause you problems. Don’t make that last payment until the contractor can provide the affidavit and lien waivers and you can sign and record a Notice of Termination properly.

Paul Newman uttered that famous line as Cool Hand Luke at the end of the 1967 classic, mocking the prison warden just before he is killed after his escape from jail. I often think about this quote when I am working out disagreements between parties. How often are these disagreements between contracting parties caused by a simple lack of communication? More often than the clients would like to admit, for sure.

We have been working on a problem for a tenant client with his commercial lease. He has been experiencing roof leaks for almost the entire time he has been in the building. Many of the air conditioning units have failed and the property manager has been non-responsive. There have been other smaller issues that have become bigger issues because of the lack of attention to the on-going roof and HVAC issues.

After numerous complaints following major afternoon thunderstorms, a roof contractor was finally dispatched. Some patch work was done, but the problem has never been totally resolved. Some of the HVAC units have been replaced while others have continued to deteriorate and ultimately failed. And, it appears, that the way the units are mounted on the roof have caused many of the leaks. The AC contractor and the roof contractor agree on this, yet the property manager has not authorized either to fix the problem.

Getting no satisfaction from the property manager, we made demand on the Landlord. Landlord made its own demands due to the smaller lease issues. It became apparent through this exchange of demands and subsequent conversations with Landlord’s attorney that Landlord was missing key information and, perhaps, so was Tenant. Landlord was not aware of the number of times Tenant had complained about the leaky roof or that the AC and roof contractors had agreed that the installation of the HVAC units were causing some of the leaks. Nor was Landlord aware that Tenant was fulfilling its own obligations under the lease to keep the HVAC units in good repair up to a maximum dollar limit. Tenant was unaware of the efforts Landlord was taking to resolve other issues Tenant had raised. Neither party was communicating with the other directly. Nor was either party giving the other complete information of the various issues and resolutions. Part of the problem was that the property manager, the go between, was withholding information. We aren’t exactly sure why. Perhaps property manager was protecting itself and its contract. Or maybe the property manager is just not competent. Regardless, the lack of communication has caused Tenant and Landlord to posture to the point of dueling demand letters with threats of litigation seeking damages and potential injunctive relief.

This is not the result either party wants. But, when it’s raining in your offices and you don’t feel as if you are getting the attention you require, I suppose it is hard to keep a level head. We are hopeful that the lines of communication are being restored and repairs will begin promptly. After all, it didn’t end well for Cool Hand Luke.

The intersection between intellectual property and construction contracts is quite unique. Intellectual property law practice involves the registration of patents, trademarks and copyrights, as well as litigation defending these same rights from infringement. Construction contract law mainly concerns agreements between property owners and architects, contractors, engineers and other construction related professionals or agreements by and among construction related professionals. More often than not, these seemingly unrelated fields of law intersect in ways that can be unexpected.

For instance, our firm recently represented an architect who prepared a conceptual set of plans for a magnificent high rise tower to be built on the New River in downtown Ft. Lauderdale for an upscale assisted care living facility. The project developer made a partial payment of the agreed upon amount for the initial set of plans and also made a promise in his contract with the architect to pay an additional fee if the design concept plans were given  to another architect to use in the development of the more detailed construction plans for the high rise project. As things turned out, the developer failed to fully pay the agreed upon fee for the initial set of plans and, when the initial set of plans were given to another architect to use as the basis for the more detailed construction plans, our architect client was not paid the additional fee that was due for the use of his conceptual plans in the subsequent, more detailed plans for this project.

Because the architect had neither been fully paid for the initial set of drawings or their later use by the architect who used our client’s design to create the construction drawings for the developer’s project, our client still owned his initial set of plans. Accordingly, the first thing our firm did when our architect client came to us for help was to copyright the architect’s design concept set of plans for the project. Only after first receiving federal copyright protection for these plans, was suit was filed against the developer to collect the amounts due the architect. However, because the developer and the subsequent architect who was using our client’s design in the later design phases of the project were violating the architect’s copyright protections created under federal law by registering the architect’s plans, suit was filed against the developer and the subsequent architect in Federal Court for damages arising from copyright infringement and for the amounts which remained unpaid under the architect’s contract.

The copyright infringement suit was field in the Federal District Court located in Miami, Florida at the very beginning of November, 2016. No sooner than all the defendants were served with the lawsuit did the settlement negotiations begin. In fact, by December 15, 2016 settlement funds and releases were exchanged. Also, because architects and other professionals who perform services in connection with the improvement of real estate have special protections under Florida’s construction lien law even if they have not dealt directly with the owner of the real estate to be improved with their services, our firm filed a claim of lien on behalf of the architect against the property the developer was under contract to purchase. The claim of lien in combination with the copyright infringement suit filed in Federal District Court proved to be just the right combination of remedies needed for a prompt resolution and prompt payment of the amounts owed to our client by his former client, the developer.

Now we are looking for other situations where we can give the same kind of assistance to architects or other construction industry professionals who may have a problem with a developer, contractor, building owner or property management company that has not paid them for the use of the professionals work product. If you are someone who fits this description or know of someone who who can benefit from having their intellectual property rights protected through registration and enforcement, please contact us.

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    Welcome to Assouline & Berlowe’s Florida Real Estate Law and Investment Blog with news, insights, and commentary for investors, developers, and their advisors.


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