Matthew J. Meyer | Ansa Assuncao
Under Florida lien law, a Notice of Commencement is a form document the property owner is generally required to sign and record in the public record before commencing any improvements to real property. One of the purposes of the Notice is to provide potential lienors with information they will need to file a lien if they are not timely paid. The statute governing the Notice states that “the owner must sign the [Notice] and no one else may be permitted to sign in his or her stead.” Fla. Stat. § 713.13(1)(g). However, despite this statutory language, a Florida appellate court recently held that a Notice signed by a contractor—not by the owner—was effective. See Edwin Taylor Corp. v. Mortgage Electronic Registration Service, Inc., Case No. 2D19-1531 (Fla. 2d DCA June 17, 2020).
This issue of first impression arose because of a disagreement between a lender and a subcontractor regarding the date the subcontractor’s lien was deemed filed. In general, the effective date of a lien relates back to the date of the Notice of Commencement. The appellate court explained the issue as follows: “The issue before us is one of first impression in this court—whether the failure of the owner to sign the notice of commencement renders the notice invalid so that a lienor who strictly complies with the construction lien laws and properly perfects a claim of lien is precluded from having its lien relate back to the date of the recording of the notice of commencement under section 713.07.”
The general factual circumstances leading up to the dispute were described by the appellate court:
On January 7, 2014, the general contractor, Griffin Contracting, Inc., executed and recorded a notice of commencement. For all purposes the general contractor’s notice of commencement was complete and accurate, with the exception that it was not signed by the owner of the property. Notwithstanding, the owner was aware of the general contractor’s notice of commencement and made no objection to the same, nor did the owner terminate the general contractor’s January 7, 2014, notice of commencement. No lender was listed on the January 7, 2014, general contractor’s notice of commencement. The following day, January 8, 2014, BB&T recorded a mortgage against the subject property and recorded its own notice of commencement, listing BB&T as the lender. BB&T’s notice of commencement was signed by the owner of the property.
Edwin Taylor, who subcontracted with the general contractor to perform construction improvements on the property, served a notice to owner pursuant to section 713.06(2)(a) and eventually recorded a construction claim of lien against the property on September 25, 2014, for work performed. When efforts to collect the monies due under the lien failed, Edwin Taylor filed suit to foreclose its lien free and clear from all other claims—including BB&T’s claim.
Id. at *1. Thus, the facts of the case presented a clear question of whether the Notice of Commencement was valid. If the Notice was not valid, then the subcontractor’s claim of lien was junior to the bank’s mortgage lien.
In deciding that the Notice was valid, even though the owner did not sign the Notice as required by the governing statute, the appellate court relied primarily upon case law that requires merely substantial, rather than strict, compliance with the relevant statutory provisions. The appellate court also relied upon a general concept of fairness in this context, meaning that a subcontractor who follows the rules should not be punished by the owner’s failure to do the same. The court explained its holding:
Accordingly, we hold that a notice of commencement not signed by the owner, but instead signed by the general contractor with the owner’s authority, is not a nullity, per se, in a lien foreclosure action brought by a subcontractor where the subcontractor has strictly complied with chapter 713 and relies upon the defective notice of commencement, which is otherwise in substantial compliance with section 713.07. In other words, the lender may not use the deficient notice of commencement as a sword against a subcontractor who bears no duty to ensure the validity and accuracy of the notice of commencement. Therefore, the trial court’s entry of summary judgment in favor of the lender on this basis was error. Because there remain genuine, disputed issues of material fact, we reverse and remand for further proceedings.
Id. at *5.
The motto of this story: any subcontractor who performs work on a project should review the Notice of Commencement to determine whether the owner signed it. If the owner did not sign the Notice, the subcontractor should address the issue before performing any work. The alternative is to potentially litigate the issue later and hope for a fortunate result like the subcontractor was able to obtain in this appellate decision.