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Summary – Florida Statute 713.06

Required Notices

Subcontractors who provide timely notice have the right to a lien for improvements provided in accordance with their subcontract and the prime contract.
The total amount of all liens covered by a prime contract must not exceed the amount fixed by the prime contract, with few exceptions.
Subcontractors must serve a notice on the owner (“NTO”) in order to be able to claim a lien. Sub-subcontractors must also serve a notice to contractor (“NTC”).
NTOs and NTCs must be served not later than 45 days after commencing work or deliveries. They must always be served before the date of the owner’s final payment following the contractor providing a final payment affidavit (“CFPA”).
The failure to serve a required NTO on time is a complete defense to a lien.
Persons designated in the owner’s notice of commencement (“NOC”) must also be provided with a copy of the NTO. However, failure to do so does not necessarily bar a lien.
Florida Statute 713.06 provides a form for NTOs and NTCs which must be used. A NTO can be combined with a NTC in one form.
Lenders designated in a NOC must also be given a copy of the NTO by subcontractors.
Lenders who are served with an NTO and who pay a contractor on behalf of an owner must make “proper payments” as provided by statute.
If the owner does not provide a NOC, lienors can rely on the information contained in the building permit application for purposes of their NTOs/NTCs.
Lienors who generally comply with the NTO/NTC requirements may be able to enforce their lien, despite errors, against a person who has not been prejudiced by the errors. However, lienors must strictly comply with the NTO/NTC timing requirements.

Proper Payments

A lender who fails to make proper payments is liable to the owner for damages caused by this failure. However, only the owner is given a claim against a lender for this type of failure.
Alternatively, a lender is always allowed to disburse construction funds directly to the owner, relieving the lender of the obligation to make “proper payments” to contractors.
If the description of the property in the NOC is incorrect and the error prejudices a lienor, payments made under the prime contract are improperly paid to that lienor. This does not apply to clerical errors if the listed description covers the improved property.
The owner can pay laborers directly for amounts due to them for labor and services performed under the prime contract and can deduct these amounts from the balance due the contractor.
When a non-final payment is due to the contractor under the prime contract, the owner must ensure timely payment of amounts due to every lienor who has given an NTO as of the time of payment.
The owner is under no obligation to lienors, except for laborers, who have failed to provide a NTO by the time the owner makes the payment.
Before the contractor can require payment to himself from the owner directly, the owner can demand the contractor provide a CFPA relating to any past or future payment under the prime contract.
The receipt of a CFPA does not excuse the owner of his responsibility to ensure all lienors who have provided NTOs are paid.
When the amount currently due under the prime contract will not cover the bills of all lienors, the owner must prorate the amount then due under the prime contract, paying lienors pro rata as provided using the Proration Method below. Lienors must execute partial lien releases to the extent they are paid in this manner.
When a CFPA discloses outstanding bills to subcontractors, the owner can pay the subcontractors directly as long as the balance then due on the prime contract is sufficient to pay these bills. The owner must deduct the amount paid from the balance then due to the contractor.
A person who provided improvements, but who did not timely provide a required NTO/NTC, should not be paid by the owner merely because he is listed in a CFPA by the prime contractor.

Final Payment

When the final payment is due to the contractor under the prime contract, or when the prime contract is terminated before completion, the contractor must provide the owner with a CFPA.
The CFPA must state that that: (a) all lienors under his or her prime contract who timely served a NTO/NTC been paid in full, or (b) showing each lienor who has not been paid in full and the amount due or to become due. The affidavit must comply with the statutory form.
The contractor has no lien or right of action against the owner while in default for failing to give the owner the CFPA.
The contractor must deliver a CFPA to the owner at least 5 days before filing a lawsuit to enforce his or her lien (even if final payment is not due because the contract was terminated).
A negligent error in the CFPA which has not prejudiced the owner does not bar an otherwise valid lien.
If a CFPA states any outstanding bills, following 10 days notice to the contractor, the owner can pay subcontractors directly as long as the balance due on a prime contract at the time the CFPA is given is sufficient to pay the bills and lienors giving notice. The owner must deduct the amounts so paid from the balance due the contractor.
Lienors listed in the CFPA who have not given an NTO, and whose 45-day notice time has not expired, must be paid in full or pro rata, as appropriate, from any balance then remaining due the contractor. A lienor whose notice time has expired should not be paid by the owner or any other person except for the person who hired that lienor.
If the balance due under the prime contract is not sufficient to pay all lienors listed in the CFPA who are entitled to payment from the owner (as well as other lienors giving notice), the owner must pay no one until the contractor pays the owner the difference.
If the contractor fails to provide the difference within 10 days from delivery of CFPA or the owner’s request for the CFPA, the owner must determine the amount due to each lienor and then disburse the amount due under the prime contract in the manner provided by statute.
An owner is entitled to rely on a CFPA in making the final payment unless there are lienors who have provided an NTO who are not listed in the affidavit. Lienors not listed in the CFPA can be paid by the owner directly (along with other persons listed in the CFPA that are entitled to payment from the owner). Upon making these payment, the owner is relieved of responsibility under the prime contract except for balances owed to the prime contractor.
The owner must retain the final payment due under the prime contract until the prime contractor provides its CFPA. If the owner fails to make such withholding, when final payment becomes due, the improved property is subject to all valid liens of which the owner had notice of as of the time of receiving the CFPA.
If a project is abandoned before completion, the owner must determine the amount due to each lienor who has given an NTO and pay the same in full or prorate in the manner provided in the Proration Method.
A prime contractor does not have the right to require the owner to pay any money to him if that money cannot be properly paid in accordance with the procedures in F.S. 713.06.
Before paying any money directly to a lienor other than the prime contractor or a laborer, the owner must give the contractor 10 days’ written notice of his intention to do so, including the amount to be paid. This requirement can be waived with the prime contractor’s written consent.
If the owner has retained all amounts required under F.S. 713.06, but has otherwise made improper payments, the owner’s property is subject to liens of subcontractors who have given notice but only for the amount of the retentions and the improper payments.
Money paid by the owner under a prime contract, which does not cause a detriment to a lienor is treated as though properly paid for that lienor. If any money is found to not be properly paid as in relation to other lienors, the benefit of this finding goes to those other lienors.

Proration Method

In determining the amount that lienors under a prime contract should be paid (within the total amount fixed by the prime contract), the owner shall pay such liens in the following order:
- Priority Class 1: liens of all laborers.
- Priority Class 2: liens of all persons other than the contractor.
- Priority Class 3: the lien of the contractor.
If the total amount of all liens under the prime contract is more than the amount allowable under the prime contract, all liens in a Priority Class shall be allowed in their full amounts before any liens shall be allowed in any lower Priority Class.
If the amount applicable to a Priority Class is insufficient to permit all liens within that class to be allowed for their full amounts, each lien shall be allowed for its pro rata share of the total amount applicable to liens of that class.
If the same improvements are covered by liens of more than one Priority Class, those improvements are allowed only in the highest Priority Class covering them.
If the same improvements are covered by liens of two or more lienors of the same class, the improvements are allowed only in the lien of the lienor farthest removed from the prime contractor.
This section does not affect the priority of liens derived under separate prime contracts.

DISCLAIMER: The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.

How Can a Business Lawyer Help?

Running a small business is in Orlando is challenging. Many of Florida’s entrepreneurs excel at their trade or craft, but sometimes lack experience in the complexities of legally running a business, which can result in pitfalls. A business lawyer can be an invaluable asset, helping small business owners avoid common mistakes and safeguard their business from unnecessary risks.

1. Structuring the Business

Choosing the right legal structure—whether it’s a partnership, corporation, or LLC—is crucial. Many business owners turn to services like LegalZoom to quickly set up an entity, but they may overlook the necessary formalities and regulatory obligations. An Orlando business lawyer can help ensure you follow the correct procedures, file the right paperwork, and understand the ongoing obligations of running a formal business entity. They also help you avoid getting into risky arrangements, such as those where one person provides capital while another provides “sweat equity.” Without clear, legally binding agreements, these arrangements can become problematic.

2. Preventing Employment Issues

Small business owners often misunderstand the employer-employee relationship. Employees are not simply “there to help” or “people to joke around with”—they are legally protected individuals with rights. A lawyer can help create and maintain appropriate employment contracts, advise on wage and hour laws, and ensure that tax withholdings and benefits (such as workers’ compensation and unemployment insurance) are properly handled. Employment disputes are costly, but they can often be avoided with solid legal advice upfront.

3. Contracts and Legal Agreements

One of the most common ways businesses fail is by entering deals without proper legal review. Many deals seem “simple” on the surface but can hide complexities that expose the business to significant liabilities. Whether you’re hiring employees, renting a commercial space, or entering into a partnership, a lawyer can draft or review contracts to protect your interests. Relying on handshake agreements or boilerplate contracts found online is a recipe for disaster—especially when disputes arise.

4. Avoiding Financial Pitfalls

Many small business owners also fall into financial traps. From undercapitalization to an excessive burn rate, many don’t appreciate the importance of maintaining cash flow or saving for a rainy day. A lawyer can advise on managing finances and bookkeeping practices—especially if there are multiple owners. Improper financial management, such as writing off personal vehicles as business expenses, can lead to significant legal trouble. Business lawyers can help you understand the difference between personal and business finances, ensuring compliance with tax laws.

5. Succession Planning

Many small business owners neglect to consider what happens when they are no longer able to run their business—either due to retirement, illness, or other unforeseen circumstances. A lawyer can guide business owners through the process of succession planning, ensuring that their business is passed on smoothly or sold without legal issues. Without a proper plan, the business may face operational or legal complications when ownership changes hands.

6. Firefighting Legal Problems

Of course, even the best-laid plans sometimes fail. Business lawyers are often called upon to “put out fires”—resolving legal problems that arise after mistakes have already been made. From fixing bookkeeping issues to handling disputes between owners, or helping to address regulatory fines, a lawyer can help get a small business out of trouble. In the long run, however, it’s often less expensive to avoid these problems in the first place by getting legal advice upfront.

Q&A: What can I lien for in Florida?

What Items can generally be included in a Florida construction lien?

Labor, services, materials, and professional services for improvement of real property can be included in a lien as long as they are within the scope of the prime agreement.

Can a landscaper file a Florida construction lien for maintenance services?

Maintenance landscaping services (e.g. lawn mowing) are not included in a lien. These services do not permanently improve the property.

Can a Florida construction lien include overhead and profit?

Overhead and profit, when separate items, and not within the reasonable value of what was furnished, are not included in a lien.

Can a contractor file a Florida construction lien for work an owner did not order?

Work outside of the scope of the agreement with the owner are not included in a lien.

Can a supplier file a Florida construction lien?

Materials incorporated into the property, including waste, can be included in a lien. Generally, materials must be delivered to the property to be included in the lien.

Can a waste contractor file a Florida construction lien?

Solid-waste collection or disposal at the property is included in the definition of “Improve,” so as to be included in the lien.

Can a company file a Florida construction lien for rental equipment?

The value of rental equipment is included in a lien provided the charges are reasonable and the equipment is actually used.

Can a company file a Florida construction lien for materials never delivered?

Specially fabricated materials can be included in a lien, even though they are not delivered to the site as long as they have already been manufactured, and so long as the owner is responsible for the materials not being used.

Can an architect or engineer file a Florida construction lien for services?

Professionals (ex: architects) can lien for all services rendered in improvement of the property.

What items cannot be included in a Florida construction lien?

Lost profit, home office overhead, carrying charges, restocking charges, and attorney fees are not included in the unpaid amount stated in the claim of lien.

Can a Florida construction lien include interest or late payment penalties?

Unpaid finance charges can be included in a lien. “Finance charge” means a contractually specified additional amount to be paid by the obligor on any balance that remains unpaid by the due date set forth in the credit agreement or other contract.

Can a lien include breach damages, like lost profits, or consequential damages?

Not all damages available under a breach of contract theory (ex: expectation damages) are includable in a claim of lien.

Can a general contractor file a Florida construction lien for subcontractors’ work?

Sums owed for labor, services and materials of subcontractors for which a contractor is liable can be included in a lien by the prime contractor. However, if the owner has already paid these amounts to the subcontractors, the contractor’s lien should be proportionally reduced.

About the Author: Ready Legal is a business law firm located in Orlando, Florida. Ready Legal primarily assists clients with civil litigation matters, such as construction lien and bond claims, business litigation, and real estate litigation. Ready Legal also helps Orange County businesses with evictions, contract negotiations, and a variety of commercial matters. If you are in need of a construction or business attorney in Orlando, Florida, contact Ready Legal at (407) 258-2002.

Accountants Cannot Incorporate Florida Businesses or Engage in Legal Services

In a landmark decision dated April 21, 1965, the Supreme Court of Florida addressed the unauthorized practice of law by non-attorneys in the case involving The Florida Bar and respondent Albert P. Town. The court’s ruling underscored that certain legal activities, including the incorporation of businesses, must be performed by licensed attorneys.

The Background

Albert P. Town, an accountant, was charged by The Florida Bar with unauthorized practice of law. The charges stemmed from newspaper advertisements in which Town presented himself as a specialist in incorporating businesses and offered to handle all related details. Despite prior warnings from the Office of the Secretary of State, Town proceeded to assist in the formation of a corporation for a client, preparing the corporate charter and related documents.

The Legal Issue

The central issue was whether Town’s actions—preparing corporate charters and related documents, and advising on the incorporation process—constituted the practice of law. The Florida Bar argued that such activities indeed fell within the realm of legal practice, which requires a professional license.

Court’s Analysis and Decision

The Supreme Court of Florida examined whether the preparation of corporate documents and advising clients on such matters required legal expertise. The court referenced the case State ex rel. Florida Bar v. Sperry, where it was established that:

“The practice of law includes the giving of legal advice and counsel to others as to their rights and obligations under the law and the preparation of legal instruments, including contracts, by which legal rights are either obtained, secured, or given away.”

The court noted that a corporate charter is a significant contractual document involving important legal obligations. The complexities and legal implications of forming a corporation necessitate the expertise of trained legal professionals to ensure proper protection of the rights and interests involved.

Implications of the Ruling

The court concluded that the preparation of charters, bylaws, and other incorporation documents constitutes the practice of law. It determined that non-lawyers, such as Town, lack the necessary legal skill and knowledge required for such tasks. Consequently, the court permanently enjoined Town from engaging in the formation of corporations and providing related legal advice.

Exceptions and Clarifications

While the injunction barred Town from performing specific legal activities, the court clarified that his rights to advise on fiscal and accounting matters, as an accountant, were not impaired. This distinction emphasized the boundary between legal and non-legal professional services.

Closing

The Supreme Court of Florida’s decision in this case serves as a crucial reminder that the incorporation of businesses and related legal tasks must be handled by licensed attorneys. This ruling protects the public by ensuring that individuals involved in the formation of corporations receive competent legal advice, thereby safeguarding their rights and interests.

Supreme Court Overrules Chevron Doctrine in Landmark Decision

In today’s monumental decision, the Supreme Court of the United States overturned the Chevron doctrine, a longstanding principle that required courts to defer to agency interpretations of ambiguous statutes. This decision marks a significant shift towards empowering businesses and challenging regulatory overreach.

The Court’s ruling in Loper Bright Enterprises v. Raimondo questions the validity of the Chevron doctrine, which mandated deference to agency interpretations of ambiguous laws, even when courts had a different or better interpretation of the laws. The Court highlighted the flaws of this doctrine, emphasizing its arbitrary nature and the confusion it created in legal interpretation. The Court’s decision signals a departure from U.S. courts’ blind deference to agencies, reinforcing the separation of government powers, and prioritizing judicial review over agency power.

For regulated businesses, this decision brings a ray of hope in navigating regulatory challenges. By limiting the deference given to agency interpretations, the Court has paved the way for more successful legal outcomes. This shift is particularly beneficial for businesses facing regulatory hurdles, such as OSHA fines and citations, as it allows for a fairer assessment of statutory compliance without undue agency influence.

Furthermore, the decision underscores the importance of judicial oversight in upholding the rule of law. By reining in the unchecked power of agencies, the Court has sent a strong message that businesses deserve a level playing field in court and fair treatment when challenging agency actions.

Explaining the Court’s rationale, Chief Justice Roberts stated:

Chevron’s presumption is misguided because agencies have no special competence in resolving statutory ambiguities. Courts do. The Framers, as noted, anticipated that courts would often confront statutory ambiguities and expected that courts would resolve them by exercising independent legal judgment.

Loper Bright Enterprises v. Raimondo marks a significant victory for business interests, signaling a shift towards a more balanced and fair regulatory landscape. By doing away with the Chevron doctrine and promoting judicial oversight, the Court has taken a crucial step towards empowering businesses and upholding the separation of powers.