Landlord Considerations in Leasing Commercial Property

By: Kyle Jensen, Esq.
Clark, Campbell, Lancaster & Munson, P.A

A commercial lease agreement is an agreement between an owner of commercial real property, known as the landlord, and a third-party desiring to rent such commercial property, known as the tenant. The lease agreement provides the tenant with the right to use the property, sets forth the terms and conditions of such use, and imposes certain rights and obligations on both the landlord and the tenant. Accordingly, it is in the best interest of the landlord to ensure the lease agreement accurately and unambiguously sets forth the terms, conditions, rights and obligations the landlord desires to impose and properly protects the rights and interests of the landlord.

When preparing a lease agreement, a landlord should confirm its lease agreement complies with all legal requirements established by Florida law to ensure the lease agreement is enforceable. For example, any lease agreement in excess of one year must be in writing and must be signed before 2 subscribing witnesses.

A lease agreement should clearly define the beginning and end of the lease term and provide the landlord with sufficient remedies if the tenant refuses to vacate the leased premises once the lease term is over. The lease agreement should also set forth the base rent obligations a tenant must pay to occupy the premises and include any additional rent obligations the landlord desires to impose upon the tenant, such as payment for (i) the utilities the tenant consumes, (ii) a portion or all of the property taxes assessed against the landlord’s property, (iii) a portion of the costs to maintain the common areas (areas used by all tenants) of the landlord’s property, and (iv) janitorial and waste collection services for the premises. It is also important that the rent provisions of the lease agreement impose upon the Tenant the obligation to pay all sales tax that may be due on the rent paid under the lease agreement.

Maintenance obligations are another important item a landlord must consider. Generally, but not always, a landlord will maintain the exterior, foundation, and roof of the building the tenant is occupying. The landlord will want to impose most, if not all, other maintenance obligations on the tenant. A landlord may also want to require the tenant enter into a maintenance agreement for maintenance of certain items in the premises, such as the HVAC unit, to ensure the tenant is properly fulfilling its maintenance obligations.

Lastly, a landlord should ensure the lease agreement clearly and broadly defines what actions, or failure to act, will cause a breach of the lease agreement, such as failure to pay rent, and provides the landlord with sufficient remedies upon such breach. For example, unless otherwise provided in the lease agreement, a landlord is only entitled to collect rent as such rent becomes due. Accordingly, a landlord will want the lease agreement to provide that if the tenant breaches the lease agreement, then the landlord can accelerate and collect all future rent due under the lease agreement. Such a provision allows the landlord to, upon the tenant’s breach, immediately collect all future rent due under the lease agreement, subject to present value calculations and reimbursement obligations if the premises is re-let, without waiting each month for such rent to become due.

The above items are only a few of the numerous matters a landlord should consider when preparing a lease agreement. Furthermore, the content of the lease agreement will depend on, among other things, the use, condition, and location of the commercial property and the long-term goals of the landlord. Therefore, a landlord should seek the services of an experienced commercial real estate attorney to assist with the preparation of the lease agreement.

Kyle Jensen is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

Distinguishing Variances and Special Exceptions

By: Zachary H. Brown
Clark, Campbell, Lancaster & Munson, P.A.

There are many avenues that property owners could travel to get around certain restrictions that local governments impose upon property throughout their jurisdiction.  Sometimes local governments will restrict, for example, how high buildings can be built, or how property can be used.  Such restrictions play an important role in how local governments plan and zone our communities.  The most common tools that allow property owners to get around these restrictions are variances and special exceptions.

The primary difference between a variance and a special exception is that a variance grants a property owner the ability to use his or her property in a manner that is completely against local regulations, while a special exception is a circumstance that local governments specifically recognize before drafting a law, and will make provisions that recognize exceptions in the regulation itself.  Each tool comes with its own benefits and drawbacks, but after a brief explanation they may be slightly easier to understand for property owners seeking to develop their property.

A variance is granted only when a property owner shows an undue hardship created by unique circumstances that the property owner did not create.  The law is very clear that if the hardship is created by the property owner, a variance should not be granted.   For example, is a hardship self-created if you buy a piece of property expecting to put a gas station on it, but local zoning laws prohibit gas stations in that zone?  Florida courts have held in that situation, the hardship was self-created because that person knew of the zoning laws before buying the property, and thus created the hardship for himself.  In essence, ignorance of local laws does not create undue hardships for property owners.

Typically, variances can fall into two categories – use variances and area variances.  Use variances allow for property owners to use their property in a way not allowed by law, such as using your property in a zoning district that prohibits certain uses.  An area variance allows property to be developed in a way that violates some dimensional requirement imposed by local regulations.  This is most commonly found in height restrictions or setback requirements in local land development codes, where those restrictions limit development in such a way that development of the property is considered impossible.

Special exceptions are used by local governments when a particular use of the land is potentially problematic, but can be allowed if subjected to heightened development standards.  These are also frequently referred to as special use permits or conditional use permits.  Common examples of special exceptions are adding religious buildings or schools to local neighborhoods where residential property is the primary use.  Local governments will grant these requests, but likely only by requiring certain “conditions” be met prior to approval of the use.  There are a number of different conditions local governments can impose, but a few of them include landscaping features, parking upgrades, or right-of-way conveyances.

These are just a few common tools that are available for those property owners seeking to develop their property.  As always, the best course of action is to retain a local attorney to assist with this process.

Zach Brown is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

The Basics of Medicaid Financial Eligibility for Nursing Home Residents

By: Kevin R. Albaum
Clark, Campbell, Lancaster & Munson, P.A.

A person’s transition to a skilled nursing facility (a/k/a “Nursing Home”) is often a very difficult time for a family. Not only is the person’s physical or mental health often declining but the person and/or their family is often burdened with figuring out how to pay for the facility. Health insurance coverage often will pay for the first few days or months at the Nursing Home but that eventually stops and the cost of a Nursing Home once health insurance is no longer paying often gets exorbitant even for the middle-upper class (the monthly cost for a private pay resident at many Nursing Homes can often exceed $10,000.00 per month). This results in residents no longer being able to afford the Nursing Home and having only two (2) options to pay for their care: (1) qualify for Medicaid Nursing Home coverage or (2) pay the private pay rate any way possible by selling off all assets, impoverishing the spouse at home (the “Community Spouse”) or getting financial help from their children. Many decide to pursue the first option.

In order to qualify for Medicaid Nursing Home coverage in Florida, an applicant must pass a three (3) part test that looks at a person’s assets, income, and health at the time they file the Medicaid application. The scope of this article is just to discuss the basics of the asset and income eligibility tests for Medicaid Nursing Home coverage in Florida in 2019.

Income: Effective January 1, 2019, an individual can have a maximum of $2,313.00 per month in income (before deductions) in order to be eligible for Medicaid Nursing Home coverage. However, if an individual’s income is above that figure, then proper legal planning to create a qualified income trust will be often utilized in order able to make the individual eligible. However, timing is very important because if the income trust is not set up properly and funded properly, an individual will still not be eligible for Medicaid. There is a common misconception that a Community Spouse’s income being too high will limit the applicant spouse from obtaining Medicaid eligibility, however, a Community Spouse’s income can be unlimited and it does not impact a Medicaid applicant’s eligibility for Medicaid benefits.

Assets: Effective January 1, 2019, an individual can have a maximum $2,000.00 of countable assets and be eligible for Medicaid Nursing Home coverage. However, if an individual’s countable assets are above that threshold there are often a multitude of legal planning options available in order for the individual to become eligible for Medicaid Nursing Home coverage. There are two (2) types of asset classes to consider when applying for Medicaid Nursing Home coverage: Countable Assets (assets that impact Medicaid asset eligibility) and “Non-Countable Assets” (assets that are not calculated into Medicaid asset eligibility). Some Non-Countable Assets are as follows: homestead property up to $585,000.00 in value; one automobile of unlimited value; a prepaid burial contract with a nursing home (in most circumstances) and term life insurance without a cash value. Most other items such as bank accounts, investment accounts, life insurance with a cash value, CDs, annuities, etc. are considered Countable Assets. There is also a common misconception that a Community Spouse must also not have any assets in order for their spouse in the Nursing Home to be eligible for Medicaid benefits. Effective January 1, 2019, a Community Spouse can have a maximum of $126,420.00 of countable assets without impacting their spouse’s Medicaid eligibility.

Obtaining Medicaid eligibility and understanding the income and asset tests can be incredibly complex to those who are new to the subject, therefore, it is highly recommended that a qualified elder law attorney assists you in obtaining Medicaid financial eligibility before you file a Medicaid application.

Kevin Albaum is an attorney in the Elder Law Practice of the law firm Clark, Campbell, Lancaster & Munson, P.A. Questions can be submitted online to thelaw@cclmlaw.com.

Tips on Tips: How Business Owners Can Handle Employee Tips

By: Zachary H. Brown, Esq.
Clark, Campbell, Lancaster & Munson, P.A.

Tipping is a clear process that most of us consider second nature at this point. However, the law behind the tip, and how employees and employers utilize the tip, is less clear. Does that tip always go to the employee? Can an employer pay an employee less than the legally required minimum wage based on an employee’s tips? The following are certain legal points that will help business owners navigate the world of tip law.

The basics of tip law are rooted in labor law. Business owners must pay employees a minimum wage based on federal and state law. This wage, at the federal level, is $7.25 an hour, but Florida law requires that employees are paid at least $8.25 an hour. If an employee is a “tipped employee,” then under the Fair Labor Standards Act (FLSA) employers can use a portion of the employee’s tips as a “tip credit,” which means they may reduce the minimum wage owed to an employee up to a certain extent based on the employee’s tips. In Florida, the law allows employers to reduce the minimum wage with a tip credit of up to $3.02 an hour.

However, an issue still arises as to when an employee is technically considered a “tipped employee” or whether he or she is a normal employee for the purposes of minimum wage. For example, an employee who works at a restaurant both as a server and as a host/hostess, but the employee is only tipped for the server job. This makes it imperative for a business owner to keep track of when an employee is receiving tips, so that the tip credit is only applied to the wages the employee earns while that employee is being tipped.

Business owners should also be wary of reducing employee tips based on credit card charges. The idea behind this is that if an employer is charged a 3% service charge on credit card transactions, that employee who is claiming those credit card tips should bear that cost. Thus, it is a common trend that employers will reduce an employee’s tips by 3% as a result of this credit card transaction fee. While the FLSA allows for this deduction at the federal level, Florida law on this matter is still undecided, so reducing employee tips by this amount comes with its fair share of risk.

Mandatory service charges are another aspect requiring close attention by business owners. For example, in restaurants when the party is six people or more, or when room service is ordered at a hotel, customers are used to receiving an 18% mandatory service charge that is already included on the bill. While most of us consider this an automatic tip that will go to the server or employee attending to the customer, it actually is part of the taxable sales price of the food or drinks, and thus the business owner does not have to share this charge with the employee. Only when the mandatory service charge is separately and clearly stated as a gratuity or tip will the employer be legally obligated to give the benefit to the employee.

As always, it is important to consult with a local attorney before making changes on how to handle tips in the workplace.

Zach Brown is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

Pitfalls of Purchasing a Business

By: Kyle Jensen, Esq.
Clark, Campbell, Lancaster & Munson, P.A.

Acquiring an established and successful business may appear to be an attractive and low risk proposition for both experienced or novice entrepreneurs; however, there are numerous issues a prospective buyer should consider and pitfalls to avoid before purchasing a business. Asking the right questions and conducting proper due diligence can save the buyer significant time and money and put the buyer in a strong position to succeed once it purchases the business.

Generally, there are two basic ways businesses are sold. The first is the sale of the ownership interests of the business. The second is the sale of the assets of the business. Each avenue provides various benefits and detriments, and a prudent buyer will consider all factors before determining how it will acquire the business. For example, purchasing the ownership interests of the seller allows for a smooth transition of the business, but may also expose the buyer to significant liabilities. Further, purchasing the assets of the seller may, but not always, allow the buyer to avoid certain liabilities of the seller, but may also require the buyer to renegotiate advantageous contracts with the seller’s vendors and customers.

Regardless of whether the buyer is purchasing the seller’s ownership interests or the seller’s assets, the buyer should determine the potential liabilities the buyer may be exposed to after the purchase, such as whether there are any (i) outstanding lawsuits against the seller, (ii) outstanding taxes due, or (iii) security interests filed against the seller’s assets. It is vital that the buyer ascertain its exposure to potential liabilities and either adjust the purchase price of the business accordingly or walk away from the deal.

Other issues the buyer should consider relate to the operation of the business once purchased. For example, the buyer may want to obligate certain owners or employees of the seller to assist the buyer with the transition and operation of the business after closing. The buyer may also want to impose a non- compete on the seller and its owners, prohibiting them from competing with the buyer in its business. Lastly, if the seller is renting the premises where it operates, then the buyer should carefully review the lease to confirm the terms are agreeable to the buyer and that the seller can assign and the buyer can assume such lease. It is always prudent for the buyer to require the seller to obtain the landlord’s consent to such assignment.

The above items are just a few of the numerous issues a buyer must consider when purchasing a business. Accordingly, it is often in the best interest of a buyer to retain an experienced business attorney to assist them with purchasing a business.

Kyle Jensen is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

A Starting Guide to Non-Conforming Uses

By: Zachary H. Brown, Esq.
Clark, Campbell, Lancaster & Munson, P.A.

Question: If I’m operating a business in a zoning district that my business is no longer eligible to operate in, what can I do?

Property owners have been experiencing issues revolving around zoning since the concept was first implemented in the 1920’s. For example, local governments have zoned property that was historically used for commercial or industrial purposes to something more in character with the surrounding neighborhood, such as residential or office. While some property owners thought that this was an overreach of governmental power, the Supreme Court of the United States ruled that local governments had this authority under the Constitution. Local governments now use this tool regularly to effectively plan their cities.

So, what are the options available to property owners whose ability to use the land has been severely limited as a result of a zoning change? One option available involves continuing to use the land under its current use under a common exemption that deems it “non-conforming.” Non- conforming uses are a way local governments “grandfather” in properties that no longer adhere to the local zoning regulations.

Non-conforming properties are typically properties that, at one time, were not prohibited under the zoning laws of whatever local government the property is situated in, but as zoning laws have changed the property can no longer operate as it has historically. In addition, “non-conforming” does not only apply to the use of the property itself, but also to structures and lot regulations that are associated with the property.

Local governments are wary of non-conforming uses because the property is being used in such a way that makes it inconsistent with the government’s planning purposes. As a result, many local governments will put caps on when a use can be discontinued and then continued again. For example, in the City of Lakeland if a property owner ceases operating a property as a non- conforming use for 365 days, then local law prohibits you from continuing the operation of that property as a non-conforming use. It is important that if the property owner is operating a business as a non-conforming use, that they continue to do so, or risk losing that prerogative indefinitely.

Local governments are also likely to place restrictions on non-conforming uses that limit the expansion of the structure or use that is deemed non-conforming. This is a result of the local government trying to keep the non-conforming use limited to what it was prior to the zoning change in hopes of discouraging expansion of that use, so as to fit the local government’s planning purposes. This is also included in the City of Lakeland’s Land Development Code, with the only exception to this being alterations to structures that are seen as maintenance or repair.

Conclusion: Local governments have become creative in the planning of municipalities, but sometimes this creativity comes at the expense of local property owners. If such a situation has come about, or if you are currently associated with a property that is non-conforming, the best course of action is to consult with a local attorney about your best options to maintain the property as it is and to keep the non-conforming designation.

Zach Brown is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

Defect Disclosure Requirements for a Residential Sale

Historically, when real property was being bought and sold the doctrine of caveat emptor or “let the buyer beware” controlled. Under this doctrine, it was the buyer’s sole responsibility to determine if any defects were affecting the property and the seller had no obligation to bring such defects to the buyer’s attention.

Many jurisdictions, including Florida, have abandoned the doctrine of caveat emptor to an extent and have created a duty for sellers to disclose certain defects. In a Florida residential sale, where the seller of a home knows of facts materially affecting the value of the property which are not readily observable and are not known to the buyer, the seller is under a duty to disclose them to the buyer. If the seller fails to disclose latent defects, then the buyer can bring a lawsuit against the seller for damages relating to any such defect.

Importantly, selling a house “as-is,” or including an “as is” clause in a residential sales contract does not excuse the seller’s duty to disclose latent defects. An “as-is” sale is a sale in which the seller has no obligations to make repairs to the property but the seller still must disclose any known latent defects.

When selling your home, it is important to make any disclosures regarding potential latent defects in writing. If you make disclosures regarding latent defects orally you may have difficulty proving at a later date that you made the disclosures. If a buyer then brings a lawsuit against you for failing to disclose a latent defect, you might not be in as strong a position as if you had made the disclosure in writing at the outset. As a best practice, when disclosing latent defects, do so in writing.

A seller is only responsible for disclosing latent defects which the seller has actual knowledge. A seller’s obligation to disclose latent defects does not turn the seller into a guarantor as to every condition of the house being defect-free. If a buyer purchases a home and discovers a latent defect, he or she will not be able to hold the seller liable unless the seller knew of the defect and the defect materially affects the value of the property. This protects sellers from being in the almost impossible position of being responsible for any latent defect in a home that becomes known to a buyer after the sale.

The Florida statutes make certain exceptions regarding disclosure of some latent defects which certain buyers may consider to be material. For example, a seller has no obligation to disclose that an occupant of the property is infected with HIV or AIDS; or that the property was the site of a homicide, suicide, or death.

If you have purchased a home and discovered a latent defect for which you believe the seller had actual knowledge and failed to disclose, you should promptly consult with an attorney to explore any legal options you might have. Similarly, if you are a seller who

has been contacted regarding a claimed latent defect in a house you sold, you should promptly contact an attorney to discuss your legal options.

Matt Kelly is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.

Are Peanuts and Crackerjacks at the Ballpark Still Deductible for a Business?

By: Kevin R. Albaum

The Tax Cuts and Jobs Act of 2017 (“TCJA”) lowered tax rates for businesses.  However, certain business deductions of the past were eliminated as well.  This article will address entertainment expenses and business meals under TCJA.

Under TCJA, entertainment expenses incurred on and after January 1, 2018 became non-deductible (previously they were 50% deductible).  That leads to the question…well what is considered entertainment to the IRS?  The Internal Revenue Code (“The Code”) defines entertainment as follows:

“Entertainment” means any activity which is of a type generally considered to constitute entertainment, amusement, or recreation, such as entertaining at night clubs, cocktail lounges, theaters, country clubs, golf and athletic clubs, sporting events, and on hunting, fishing, vacation and similar trips, including such activity relating solely to the taxpayer or the taxpayer’s family. The term entertainment may include an activity, the cost of which is claimed as a business expense by the taxpayer, which satisfies the personal, living, or family needs of any individual, such as providing food and beverages, a hotel suite, or an automobile to a business customer or his family.

The Code’s definition of entertainment was not changed in TCJA so the old definition remains in place.  Note that the definition for entertainment includes “providing food and beverages”.  This has led to confusion in the tax community as business meals have generally been 50% deductible since 1993. Additionally, TCJA did not change or reduce this 50% deduction for business meals.

We know that business meals are a 50% deduction and that entertainment is no longer a deduction. We also now know that the Code’s definition for entertainment includes food and beverages.  Are food and beverages at an entertainment event with current or prospective clients still deductible? The IRS has now issued some guidance on that question in a notice released on October 3, 2018.

For a business meal to be deducted in an entertainment setting, it must meet the following requirements:

  1. The expense is an ordinary and necessary expense paid or incurred during the tax year in carrying on any trade or business;
  2. The expense is not lavish or extravagant under the circumstances;
  3. The taxpayer, or employee of the taxpayer, is present at the furnishing of the food or beverages;
  4. The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact; and
  5. The food and beverages must be purchased separately from entertainment, or the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts.

Here are a couple of examples:

Example 1:  A business owner takes a prospective client to a professional baseball game and buys two (2) suite tickets that include food and beverages.

Result:  The full amount paid is not deductible as a business expenses because no invoice, bill, or receipt was obtained that separated the cost of food and beverage from the cost of the overall ticket.

Example 2:  A business owner takes a prospective client to a professional baseball game and buys two (2) suite tickets that include food and beverages.  The business owner requests and obtains an itemized receipt showing the food and beverages expense was $200 and the game experience expense was $800.

Result:  The food and beverage expense is entitled to a 50% deduction but the $800 games experience expense is a non-deductible entertainment expense.

This guidance provided by the IRS is helpful, and it is a good idea to always obtain itemized receipts, invoices, or bills for food and beverages in any entertainment setting. However, if you are unsure whether a food or beverage deduction is allowed, it is recommended that you consult with your tax professional.

Kevin Albaum is an attorney in the Elder Law Practice at Clark, Campbell, Lancaster & Munson, P.A. Questions can be submitted online to thelaw@cclmlaw.com.

Employer Access of an Employee’s Personal Information on a Work-Device

Clark, Campbell, Lancaster & Munson, P.A.

Question: What information may an employer access from an employee’s employer-issued mobile device?

Answer: If proper procedures are followed, employers are entitled to recover any information an employee has stored on an employer-issued device.

Interception of Electronic Communications and the Cloud
As technology advances, sometimes the law is painfully slow in keeping up with it. While many people still don’t quite understand how “the cloud” works, it has been a way for people to store their information without having to plug a phone into a computer to keep it backed up. This process ensures users that should a phone become lost, damaged, or replaced, the cloud allows customers to easily access old information and provides a seamless transition to a different device that includes all of the messages, photos, contacts, and music that was on the previous device. While most people frequently use this type of technology with regards to cell phones, it is equally common to connect laptops and tablets to the cloud.

The cloud becomes complicated when it comes to employer-issued devices because the line between what is work and what is personal to the employee begins to blur. If an employee sets up a cloud account on an employer-issued device and receives personal text messages on that device, can an employer use that information in any future lawsuit stemming from the employer- employee relationship? If certain procedures are followed, then the answer is probably yes.

The federal government has enacted the Electronic Communications Privacy Act (commonly referred to as the “Wiretap Act”) which prohibits the unauthorized interception or access to electronic communications. The Wiretap Act imposes civil and criminal penalties on any potential offender. Similarly, the federal government has enacted the Stored Communications Act, which prohibits the unauthorized access of stored wire and electronic communications and transactional records held by third-party internet service providers (ISPs). The State of Florida has adopted provisions that mirror its federal counterparts.

Collectively, these laws would seem to hinder employers from accessing information that is received by, or is stored on, an employer-issued device. While the law is not fully up to date with regards to cloud technology, there two critical trends in the law that allow employers to access information on a employer-issued device.

First, the Wiretap Act has an intentionality requirement that means it will not apply to many employers. This means that if an employee downloads his or her cloud account onto an employer-issued device, the employee is the one who caused that information to be stored on that device, not the employer. In a recent federal case, an employer sued a former employee for violating the employee’s contractual non-compete clause, using texts the employer had received on a work iPhone because the employee set up an Apple iCloud account. The court ruled that the employee was at fault for setting up the cloud account, and the employer did not violate the Wiretap Act because the employer did not intercept the communications intentionally.

Second, both the Wiretap Act and Stored Communications Act have consent provisions that exempt certain parties from the law. While most employees don’t realize it, employment policy handbooks or manuals that are given to new employees may contain a consent provision that allows an employer to store and monitor communications on an employer-issued device. Several courts have found that these consent provisions, with regards to using an employer-issued device, are enough to overcome liability that may be imposed by the Wiretap Act and Stored Communications Act.

Conclusion
Provisions in employer-issued employee manuals may address what information the employer is entitled to access and monitor on employer-owned devices. As long as the employer is not taking proactive steps to confiscate personal messages from an employee, it is unlikely that any criminal or civil liability will arise. The employer may be able to use information stored on an employer-issued device in a dispute should an employee or former employee decide to initiate litigation against them. In any case, consulting with an attorney is the best course of action before using any information on an employer-issued device.

Questions can be submitted to thelaw@cclmlaw.com.

Construction Liens – Timing is Key

By: J. Matthew Kelly, Esq.
Clark, Campbell, Lancaster & Munson, P.A.

Under Florida law, certain individuals and entities who provide labor, work, or materials for the improvement of real property may have a lien on the real property for the value of the labor or materials supplied. These liens are known as construction liens and are governed by Sections 713.001-713.37 of the Florida Statutes. These potential lienors may use construction liens to secure payment in the event they are not paid for their services. Even in cases where a contractor is paid in full, a supplier or subcontractor who has not been paid may still have lien rights against the property.

The process is different depending whether a potential lienor directly contracted with the property owner or whether the potential lienor is a subcontractor or supplier who contracted with the general contractor. In the latter case, the process for securing a lien includes the following:

The first step requires potential lienors to provide a “Notice to Owner”. A Notice to Owner is generally required to be served within 45 days of the potential lienor commencing to furnish his or her labor, services, or materials. The Notice to Owner statutory form can be found in Section 713.06(2)(c) of the Florida Statues. The Notice to Owner notifies the owner of the real property that the potential lienor has provided materials or services, describes the materials or services, and informs the owner that the potential lienor is entitled to a construction lien on the real property. Depending on the circumstances these notices must be served upon the owner, general contractor, designated person, and/or the lender for the project.

Following the Notice to Owner, a “Claim of Lien” may be recorded at any time during the progress of the work or thereafter but not later than 90 days after the final furnishing of the labor or services or materials by the lienor, or no later than 90 days after the termination of the contract between the general contractor and the owner. The Claim of Lien should be recorded in the clerk’s office for the county in which the property is located. The statutory template for a Claim of Lien can be found in Section 713.08(3) and must meet certain requirements as enumerated within the statute. The Claim of Lien must be served on the owner prior to recording or within 15 days after the recording of the Claim of Lien.

Constructions liens are generally valid for a period of one year after the claim of lien has been recorded. Any lienor who intends on enforcing his or her construction lien must file a lawsuit to foreclose the lien within the one-year period. An owner may shorten the one-year period from one year to 60 days by recording a “Notice of Contest of Lien.” The owner must also service the Notice of Contest of Lien on the lienor. If a lienor is served with this notice and fails to initiate a suit on the lien within 60 days, its lien will be extinguished.

Florida’s construction lien law framework can be very complicated and nuanced. It contains many pitfalls related to who is qualified to lien, notices and documents required to be served and recorded, and many strict deadlines. If the specific timeline and structure is not followed it can result in the loss of lien rights. To avoid these pitfalls and ensure your rights are protected, I recommend working with an attorney when dealing with Florida’s construction lien process.

J. Matthew Kelly is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to thelaw@cclmlaw.com.