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Work with experienced attorney to navigate issues surrounding construction liens, P.2

Last time, we began looking at the topic of construction liens, and a recent example of a major construction project which is now facing foreclosure under liens filed after the project experienced complications and stalled out.

As we noted last time, any party that performs work or provides materials for a construction project has the ability to file a lien to collect payments for work performed or materials provided. One tool property owners often use to protect themselves from lien actions, though, is the release of lien, which is a waiver of the right to file a lien if the contractor ends up not paying them. 

Making wise use of release of lien agreements can help protect a property owner from payment failures that are outside the property owner’s control. Release of lien agreements can apply to work which has already been performed, or to work only partially performed. Property owners can and should require the general contractor to provide final release agreements from all parties before the final payment is made to the general contractor.

The idea with release of lien agreements is to make it the contractor’s responsibility to get these other parties paid, so that they cannot file liens against the property if the contractor doesn’t pay them. To make sure this happens, the property owner can required the contractor to agree to provide all releases of lien by a certain date or before certain events, like final payment. In the absence of such an agreement, it is up to the property owner to obtain the releases. In cases where the property owner’s lender pays the contractor without obtaining releases, the lender may end up being held responsible to the property owner for any losses resulting from liens that are filed.

We’ll continue looking at this topic in our next post.

Sources:

Florida Department of Business & Professional Regulation, Florida’s Construction Lien Law

Florida Statutes, Title XL, Chapter 713

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