In Florida, to perfect its right to lien a property, a subcontractor is required to submit a Notice to Owner (NTO) within 45 days of commencing its work. Among other requirements, the NTO must list the contractor’s name and be served upon the owner and any party designated for service by the owner within the time period described above. Generally, Florida courts have taken a lenient approach to compliance with the substantive requirements of the NTO under applicable law. However, errors or omissions in the NTO can be grounds for voiding a subcontractor’s lien.
In Trump Endeavor 12 LLC v. Fernich, Inc. (d/b/a The Paint Spot), a Florida District Court of Appeal recently addressed how using the incorrect name of the general contractor in an NTO affected a painting subcontractor’s lien rights on a resort renovation project. After a fact-intensive analysis, the court determined that the subcontractor had substantially complied with the requirements of Florida’s lien laws, and, that absent any adverse impact to the owner, substantial compliance was sufficient to preserve the subcontractor’s lien rights.
The court’s decision keyed in on the following facts: (1) The defect in the NTO resulted from the owner’s providing the subcontractor with a notice of commencement that listed the wrong general contractor; (2) the correct general contractor, designated by the owner for receipt of the NTO, received actual and timely notice that the subcontractor was supplying materials to the project; (3) the general contractor treated the subcontractor as a potential lienor during the performance of the work by having the subcontractor attend meetings and sign partial lien waivers in requesting payments; and, (4) the owner could not demonstrate any adverse impact caused by the error on the NTO. The court reached its conclusion despite the fact that the subcontractor had received notice of the defect in its NTO prior to commencing its work but failed to correct the deficiency.
The court awarded fees and costs to the subcontractor, and it’s likely that the award caused the final judgment to balloon substantially from the subcontractor’s original lien amount of $32,535.87. Further, the owner also faced the sunk costs of its own attorneys’ fees through the trial and appeal. Rather than relying on an uncertain and factually dependent interpretation of Florida lien law, the owner would have been better served by settling the lien amount directly with the subcontractor to avoid the substantial added costs of litigation—costs that may have ultimately dwarfed the original lien.
The Trump case demonstrates that Florida courts may go to great lengths to preserve a subcontractor’s lien rights. However, the court also noted that the timing requirements in Florida’s lien laws require strict compliance, so the lack of actual notice within the 45-day prescribed period on all required parties may void a subcontractor’s lien rights. Understanding the Florida courts’ approach to these lien law issues is important because reliance on an incorrect interpretation of compliance requirements may result in an unfavorable ruling and the assessment of attorneys’ fees and costs (Note: non-compliant lien claimants may also be exposed to slander of title damages).
This case also illustrates the importance of getting the lien requirements straight before one begins work in a given jurisdiction. Many jurisdictions provide for notice prior or shortly after beginning work. And, the case is a reminder that, if you are informed that your lien notice is somehow defective, consult a lawyer about whether and how to correct it.