Consumer Pamphlet: Building A Home

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The Florida Bar
651 E. Jefferson Street =
Tallahassee,=20 FL 32399-2300
(850) 561-5600

E-mail this = page

Public Information

Consumer Information

Building or = Remodeling A Home=20 in Florida

Prepared=20 by
Construction Law=20 Committee
Real Property, Probate = & Trust=20 Law Section
The Florida=20 Bar

Table of=20 Contents
<= FONT=20 face=3DVerdana size=3D1>Introduction
Selecting Your Contractor
Construction Contracts
Construction Liens
Lien Documents

Notice Of Commencement
Notice To Owner=20
Claim Of Lien=20

Payments To Contractor
Conclusion

Introduction

For many, acquiring a home is a major financial commitment, = whether=20 purchasing an existing home or building or remodeling one on land owned = by the=20 contractor or the owner. The information in this pamphlet is designed to = assist=20 the owner who is having a home constructed or remodeled in Florida on = land owned=20 by the owner. However, extreme caution should be exercised to minimize = legal=20 problems that can arise. This pamphlet generally covers:=20

Selecting your contractor=20
Construction contracts=20
Construction liens=20
Lien documents=20
Payments to=20 contractors

Selecting=20 Your Contractor

Florida law=20 requires that every contractor be properly licensed in this state before = contracting to build or remodel a home. A contractor who is "certified" = is=20 licensed by the state and may operate in any city or county in this = state; a=20 contractor who is "registered" is licensed by a particular city or = county and=20 may operate only in the city or county of registration. However, ALL = licensed=20 contractors are regulated by the Florida Department of Business and = Professional=20 Regulation ("DBPR"), which can be contacted at: 1940 N. Monroe Street,=20 Tallahassee, Florida 32399-1027, and whose phone number and Web site are = listed=20 below.

While using a = properly licensed=20 contractor is no guarantee of a successful project, it provides the = owner with=20 additional remedies in the event problems arise. In order to check on a=20 contractor's current "active" status BEFORE YOU SIGN a contract, obtain = the=20 contractor's individual license number, which every licensed contractor = is=20 required to have, as well as any company's "qualified business" ("QB") = number,=20 and check it on DBPR's Web site at: https://www.myfloridalicense.c= om/; click on "Search for a License" under the = "Public=20 Services" section.

Licensed = contractors=20 are only authorized to construct the types of improvements included = within the=20 "scope" of their license. For example, if your home will be more than = two=20 habitable floors, make sure the contractor has a "general" or "building" = contractor license.

Accordingly, you can=20 also contact DBPR to ensure that the contractor you are selecting has = the proper=20 type of license for the construction of your home.

License verification can be obtained by calling = the Customer=20 Contact Center at (850) 487-1395.

Construction=20 Contracts

There are = many forms=20 of contracts used by contractors. Most of them have = been written=20 primarily for the protection of the contractor, and not the owner. = Therefore, in=20 addition to carefully reading the contract BEFORE YOU SIGN, you should = address=20 any of your questions to the contractor and add any clarifications to = the=20 contract in order to avoid a subsequent misunderstanding. If your = questions are=20 not answered to your satisfaction, you should consult an attorney, or = find=20 another contractor.

Construction=20 contracts are required to contain several specific items, such as the = licensee's=20 number (see Selecting Your Contractor), energy information and = insulation=20 ratings for various components.=20 Every contract should also = include basic=20 provisions, including, but not limited to:

Legal description of the = land.=20
Description of the plans and = specifications by=20 date (or revision), name of preparer and number of pages.=20
Total contract price, and the = stages and=20 amounts to be paid as construction progresses.
Time of commencement and time of = completion.=20
Amounts of allowances or credits = for the=20 owner's selection of such things as cabinets, countertops, = electrical and=20 plumbing fixtures, appliances, floor covering, roofing material, = landscaping=20 or decorating.
Lien releases (see Construction = Liens).=20
Warranties, if any.=20
Appropriate property insurance = coverages=20 during construction, including commercial general liability, = workers'=20 compensation, and builder's risk. If the land is owned by the = contractor=20 until completion of construction, provisions should also be included = for=20 transfer of title, the type of deed to be used to convey title, date = and=20 time of closing, title insurance and other closing=20 costs.

Construction Liens

Under Florida law, many of those who provide labor or materials = to make=20 improvements to your property, such as for the construction or = remodeling of a=20 home, are granted "lien" rights for items that are unpaid. =

A "lien" is an encumbrance or charge against the = property,=20 similar to that created by a recorded mortgage, that may prevent a sale = of the=20 property without payment or transfer of the lien to a bond with the = clerk of=20 court. Unpaid liens may also be foreclosed, which can result in the = forced sale=20 of your home by court order.

These lien=20 rights are not limited to your contractor, but also extend to most=20 subcontractors, material suppliers and laborers with whom the owner has = NOT=20 contracted directly (these are called "non-privity" lienors). As a = result, you,=20 as an owner MAY be liable to pay for labor or materials, even though you have already paid your = contractor for the=20 same work. In other words, you = many end up=20 paying twice for the same thing!

In=20 order to protect yourself from these liens, you should require your = contractor=20 to obtain a lien waiver or release from every person or company working = or=20 providing materials during the construction or remodeling of your home = to the=20 extent of each payment that you make to the contractor. If you receive a = "Notice=20 to Owner" (See Lien Documents below), you have an obligation to obtain a = signed=20 lien release or waiver from each person sending that notice to you each = and=20 every time you make further payments to your contactor. DO NOT MAKE ANY = FURTHER=20 PAYMENTS TO YOUR CONTRACTOR UNTIL EACH LIENOR SENDING YOU THAT NOTICE = PROVIDES=20 YOU WITH A SIGNED RELEASE OR WAIVER OF LIEN RIGHTS UP TO THE DATE OF = EACH=20 SUBSEQUENT PAYMENT TO THE CONTRACTOR.

You have the right to request a list of the names and addresses = of all=20 subcontractors and suppliers with whom the contractor has contracted, = but there=20 may be other subcontractors and suppliers unknown even to the = contractor. In=20 addition, you should closely follow the instructions below when making = payments=20 to your contractor (see Payments to Contractor).

Lien=20 Documents

There are = a number of=20 documents that are vital to the operation of the lien law, the forms for = which=20 have been specified by law, including:

Notice of Commencement =E2=80=93 this form MUST be signed by the owner (not by the = contractor or by=20 anyone else on the owner's behalf). It is required to be recorded in the = public=20 records and posted on the job site before the first inspection can be = approved=20 by the building department. This notice contains information about the = project=20 (such as "single-family dwelling"), legal description of the property, = owner's=20 name and address, contractor's name and address, and lender's name and = address=20 (if any). All lien notices required to be sent to the owner can be = addressed as=20 shown on this document. It is VITAL that the address where the owner can = actually receive mail DURING CONSTRUCTION be correct; otherwise, the = owner may=20 be unable to take certain steps necessary to protect the property from = liens=20 (see Notice to Owner). Likewise, the lender's name and address should be = correctly included because receipt of lien notices may give rise to = certain=20 legal responsibilities the lender may have to the owner to help protect = the=20 property from liens.

You = can obtain=20 this form from your local building department, your contractor, an = office supply=20 store or the Florida Statutes.=20 However, if you need financing = to build or=20 remodel your home, consult your lender regarding this document (because = the=20 lender will also want its name and address included on this form). DO = NOT RECORD=20 A NOTICE OF COMMENCEMENT BEFORE THE CLOSING OF A CONSTRUCTION LOAN, = because both=20 the construction and the financing may be delayed as a=20 result.

If you are requiring = a "payment=20 bond" from your contractor in order to keep liens off of your property, = a copy=20 of that bond MUST BE ATTACHED to the Notice of Commencement at the time = it is=20 recorded.

Construction MUST = BEGIN within=20 90 days after the Notice of Commencement is recorded, or it will expire = and be=20 void. If this occurs, another Notice of Commencement should be recorded=20 immediately.

Notice to Owner =E2=80=93=20 this form MUST be sent to the owner by any subcontractor or supplier who = did not=20 contract directly with you and later files a lien on your property. It = must=20 include a WARNING to the owner to restrict all future payments to the = contractor=20 until the person or company sending this notice has been satisfied with = a signed=20 waiver or release (at least partially as to all = labor, services=20 or materials to the date of a non-final payment, or completely in case of = a final=20 payment). Such a notice is normally sent by registered or certified = mail, and is=20 usually signed for by anyone actually receiving it. THIS DOCUMENT SHOULD = NOT BE=20 IGNORED, and should be discussed with your lender and attorney = IMMEDIATELY upon=20 receipt. Also, this notice may be "deemed=20 served" on you if properly = addressed and=20 mailed to you, but not actually received due to your actions. DO NOT = FAIL OR=20 REFUSE TO CLAIM your mail, especially during and immediately following = the=20 construction period, because undisclosed liens may arise as a=20 result.

Claim of Lien =E2=80=93=20 this document, when recorded in the public records, actually creates a = lien on=20 your property. This lien continues to be effective for one year from the = date of=20 recording, unless you take certain steps to shorten that = time. Those = steps should be=20 undertaken only with the advice of an attorney. A construction lien may = be=20 enforced by legal proceedings to FORECLOSE against your property, which = can=20 result in a court-ordered sale of your property on the steps of the = local=20 courthouse to the highest bidder, and payment of the lien made from the = proceeds=20 of that sale. YOU SHOULD SEEK ADVICE OF AN ATTORNEY IMMEDIATELY UPON = receipt or=20 knowledge of a lien, because there may be steps available to remove the = lien or=20 to create a valid defense to its enforcement.

Payments to=20 Contractor

There is = no limit on=20 the amount of the initial deposit or progress payments a contractor may = require,=20 except as provided in the construction contract with the owner. However, = a=20 pre-construction deposit or initial payment to the contractor should = only cover=20 the costs the contractor is likely to incur before the first = post-construction=20 payments (which are referred to as "progress draw payments"). Any = deposit in=20 excess of 10 percent of the contract price imposes additional legal = obligations=20 on the contractor for obtaining the building permit and commencing the = actual=20 construction. In fact, the draws or amounts paid to the contractor = should=20 always=20 bear a close relationship to the value or percentage of the work = completed to=20 the date of each payment. This can be accomplished by a "payments = schedule" set=20 forth in the contract based on stages of completion (such as: floor = poured, roof=20 dry-in, etc.) or based on a percentage of completion for each set period = (such=20 as bi-weekly or monthly). Many construction problems are associated with = the=20 quality of the work performed or the amount of the work performed = compared to=20 the amount of monies paid. = Accordingly, if payment is made for work not yet = completed=20 and the contractor encounters financial problems, the owner may have to = pay=20 twice for the same "work." In addition, a substantial final payment, = payable=20 only after the "certificate of occupancy" has been issued and all "punch = list"=20 corrective work has been completed, will encourage the contractor to = complete=20 the project to the owner's satisfaction.

When each progress payment is made to the contractor, the owner = should=20 require a "partial" waiver or release to the date of payment of all lien = rights=20 from the contractor and from all the subcontractors and suppliers who = have been=20 hired by the contractor to provide labor, services or materials for the=20 construction or remodeling. This requirement should be included in the=20 construction contract, and even though it may place an additional burden = on the=20 parties, it is one of the best protections from liens an owner can = obtain. In=20 every situation, however, the owner MUST REQUIRE from the contractor a = waiver or=20 release of lien from EVERY LIENOR WHO HAS SERVED A NOTICE TO OWNER each = and=20 every time any subsequent payment is made to the contractor after such = notice is=20 received. Failure to do so exposes the owner's property to a lien for = the amount=20 that may ultimately be owed to each such lienor.

Both partial and final = lien release=20 or waiver forms are set forth in the Florida Statutes, Chapter 713.20. = These=20 forms can be downloaded online by visiting http://www.leg.state.fl.us/s= tatutes and pulling up the corresponding Web page.=20

In addition to progress=20 payments, and whether the owner receives any Notice to Owners from = lienors, the=20 OWNER MUST OBTAIN A FINAL PAYMENT AFFIDAVIT from the contractor BEFORE = FINAL=20 PAYMENT IS MADE. Otherwise, the owner's property may be exposed to liens = for=20 unpaid amounts that may be due to any lienor who sent a Notice to Owner. = This=20 affidavit must set forth the amount due to the contractor, if any, AND = the=20 amounts due to any subcontractors or suppliers named in this affidavit. = IF there=20 are amounts due to subcontractors or suppliers, the owner should seek = legal=20 advice to determine the best way to make certain such amounts are = properly paid,=20 such as by joint checks, or direct payments, to the unpaid = subcontractors and=20 suppliers PRIOR to the owner making any further payment to the = contractor (even=20 for agreed upon "extras").

Conclusion

Thousands of homes are built in Florida each month, and most = are=20 completed without liens being filed or other problems arising. However, = the=20 large number of residential projects and contractors and suppliers = increases the=20 chances that one or more of them may fail to perform as agreed, and that = liens=20 on an owner's property may result. Following the basic suggestions in = this=20 publication, together with competent legal advice, can decrease the = risks that=20 confront owners building homes and improve their chances of having = successful=20 experiences remodeling their homes.

For=20 further information about contractor licensing, consumer complaints and = the=20 Consumer Construction Recovery Fund, contact the Florida Department of = Business=20 and Professional Regulation at 1940 N. Monroe Street, Tallahassee, = Florida=20 32399-1027, telephone: (850) 487-1395.

IF YOU NEED A LAWYER

If you=20 need a lawyer and don't know how to find one, many areas in Florida have = lawyer=20 referral services listed under "attorneys" or "attorney referral = service" in the=20 yellow pages of the telephone book. This service will give you an = appointment=20 with a lawyer for a nominal fee.

If=20 there is no lawyer referral service in your city, the statewide Florida = Bar=20 service can locate a lawyer for you. You can call toll-free at = 1-800-342-8011.=20 The statewide service, which operates only in cities where there is no = local=20 program, will refer you to an attorney for an initial one-half hour = consultation=20 for $25.

The material in this pamphlet represents general legal advice. = Since the=20 law is continually changing, some provisions in this pamphlet may be out = of=20 date. It is always best to consult an attorney about your legal rights = and=20 responsibilities regarding your particular case.

[Revised: 06/24/2007 ]

=C2=A9 2005 The Florida Bar | Disclaimer = | Top = of page | 3D"Download