New Court Decision Confirms That Contractors' Liens Are (Generally) Valid Even if the Notice of Commencement is Defective

As a contractor in Florida, you absolutely have heard of a notice of commencement. If you typically deal directly with property owners as a general contractor or a trade contractor, then you probably have had property owners sign countless notices of commencement for you to record with the county and submit to the building department. If you are typically a subcontractor then you may have referred to a notice of commencement to find a property owner’s information to use on a notice to owner. Notices of commencement are critical documents because they indicate a critical starting point in construction and provide contractors with the information needed to comply with Florida’s construction lien laws.

Today, Florida’s Second District Court of Appeal confirmed the importance of notices of commencement in a decision that clarified the impact of a defective notice of commencement on a contractor’s lien. In Edwin Taylor Corporation v. Mortgage Electronic Registration Systems, a general contractor (not Edwin Taylor) recorded a notice of commencement. This notice of commencement was complete and accurate, but was not signed by the property owner. The owner was aware of the notice of commencement and did not object to it. The next day, the owner’s lender recorded its mortgage against the property and its own notice of commencement. This second notice of commencement was signed by the property owner.

Edwin Taylor was a subcontractor on the property and served a notice to owner pursuant to section 713.06(2)(a), Florida Statutes. When Edwin Taylor ultimately remained unpaid, it recorded a lien and filed a lawsuit to foreclose the lien. As part of the lawsuit, Edwin Taylor claimed its lien was superior to the construction lender’s mortgage because it related back to the notice of commencement recorded by the general contractor, not the one recorded by the lender. The lender eventually sought and obtained a summary judgment declaring that Edwin Taylor’s lien was subject to the lender’s mortgage because the first notice of commencement was invalid because it was not signed by the property owner.

In reversing this judgment, the Second District Court of Appeal first confirmed that one of the purposes of Florida’s construction lien laws is to “protect those whose materials, labor, and skills improve the land of others by providing a plan by which such persons or firms may receive their fair share of the moneys payable by the owner to the general contractor.” The court then noted that notices of commencement play an important role in this scheme by protecting the property owner by providing a timeline within which proper payments can be made and by which improvements must being. The notice of commencement also provides information necessary to subcontractors for complying with Florida’s construction lien laws, specifically the notice to owner requirements.

The Court then continued, noting that section 713.13(1)(g), Florida Statutes, requires notices of commencement to be signed by a property owner and by no one else. This ensures that the “risk of any errors in the notice of commencement fall squarely on the shoulders of the owners.” While the lender attempted to shift this burden to Edwin Taylor, the court found that Florida’s laws actually confirm that a lienor—like Edwin Taylor in this case—bears “no burden to warrant against errors in the notice of commencement.”

Ultimately, the court concluded that Edwin Taylor’s lien was valid any related back to the notice of commencement. Specifically, the court stated that

[W]e 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.

This allowed Edwin Taylor to continue with its foreclosure lawsuit and, if successful, take the property without the burden of the lender’s mortgage.

There are several critical takeaways from this decision. First, notices of commencement are important, and you should be recording them on every job where they are necessary and recording them early on those jobs. Your lien (and any subcontractor liens) will relate back to the notice of commencement, putting them ahead of any other encumbrances that are recorded after the notice of commencement, but before the lien. Second, while you should try to ensure that your notice of commencement is accurate, if there is a minor mistake, it may not be fatal to the priority of your lien claim. Finally, it is critical to ensure that you fully comply with Florida’s construction lien laws. The Second District Court of Appeal made clear that there were no deficiencies in Edwin Taylor’s notice to owner or lien. If there had been, the result of this decision might have been different.

As always, feel free to reach out if you have any questions. Here is a link to the full opinion of the court if you want to read it for all the information.