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Notice of Commencement

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STEPHAN

Senior Member
Florida

I am quite familiar with construction lien law and NTOs.

However, there is a little bit that I do not understand on a Notice of Commencement (NOC).

I read that any payment that I do after the expiration of a NOC (normally a year, can be shorter) is at risk. I don't understand why. The NOC is not a lien. How would the NOC protect ME?

Is anybody familiar with this?

Thanks!
 


Taxing Matters

Overtaxed Member
Florida

I am quite familiar with construction lien law and NTOs.

However, there is a little bit that I do not understand on a Notice of Commencement (NOC).

I read that any payment that I do after the expiration of a NOC (normally a year, can be shorter) is at risk. I don't understand why. The NOC is not a lien. How would the NOC protect ME?

Is anybody familiar with this?

Thanks!
This is a unique feature of Florida law. The statute for the notice of commencement is FS § 713.13. Under that statute, the owner must file a notice of commencement (NoC) prior to the start of construction work on his/her property. The statute specifies certain information that must be provided in the notice. The NoC is not a lien, but it does put the public on notice of the project and it allows for a priority of certain construction liens on the property over other liens that might be filed after the NOC. So for the contractor, the NoC can help ensure that his/her lien on the property to be improved doesn't get bumped down by some other unrelated lien against the owner that gets filed during the period of construction. The statute also provides that payments the owner makes either before or after the effective period of the NoC (1 year, or more if a longer period is specified in the NoC) is an "improper payment." That can result in the owner paying twice for the improvements.
 

STEPHAN

Senior Member
Thanks!

The last bit I don't get. If the contractor finishes his job and I have 30 day terms and now the NOC expires, how can that be an improper payment?

What would I do to remedy that?

(I am aware of the construction lien law, not talking about that.)
 

quincy

Senior Member
Thanks!

The last bit I don't get. If the contractor finishes his job and I have 30 day terms and now the NOC expires, how can that be an improper payment?

What would I do to remedy that?

(I am aware of the construction lien law, not talking about that.)
Are you contractor or property owner?
 

Taxing Matters

Overtaxed Member
The last bit I don't get. If the contractor finishes his job and I have 30 day terms and now the NOC expires, how can that be an improper payment?
This is all part of Florida's prompt payment act, which is meant to encourage owners to pay contractors promptly and for contractors to pay their subcontractors promptly. With respect to the NOC, the risk to the homeowner is that if the payment is not made to the general contractor prior to the expiration of the NoC and thereafter pays the contractor the homeowner may also end up having to pay a subcontractor who was not timely paid by the contractor even though the contractor was already paid. In short, an improper payment doesn't help shield you from claims by the subs on a defense that you paid the contractor. The whole idea here is to get the homeowner to pay promptly and then set off the cascading responsibilities for payment down the chain.

What would I do to remedy that?
Pay close attention to your responsibilities under the Act and ensure that the subs are getting paid, especially if you are paying the contractor what the law would define as an improper payment. As long as the subs get paid, you'll not have a problem of double paying for anything.
 

quincy

Senior Member
Property owner
You should obtain lien waivers from everyone (general contractor, subcontractors, suppliers, etc) before making payments. A payment is considered improper if lien releases are not collected.

In other words, you shouldn’t trust that the general contractor will pay those who need to be paid, which can open you up to having a lien placed on your property.
 

STEPHAN

Senior Member
Ah okay, we anyhow always request a lien waiver from the subs first before any payment and an affidavit of completion by the contractor before the final payment.

"All work to be performed under the contract has been fully completed, and all lienors under the direct contract have been paid in full."
 

quincy

Senior Member
You should be okay then. The lien waivers are most important, including waivers from the suppliers. Anyone involved in the construction project potentially could file a lien if not paid.
 

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