How to protect your lien rights
WHERE SHOULD YOU APPLY THE MONEY?
Florida's Mechanic's Lien Law requires that those paying money and those receiving money should designate and should inquire, respectively, where the money is to be applied. Failure to do so can result in loss of lien rights.
Specifically, Florida Statute 713.14 deals with designation of money to material accounts when there is a running account or multiple contracts. Subsection 1 requires that an owner, contractor, subcontractor or subsubcontractor when making payments to designate the contract or items of account to which the money is to be applied. Subsection 2 requires that when any materialman, subcontractor or subsubcontractor receives a payment for materials, a demand must be made upon the party which is making the payment for designation of the account and also a designation of the items of the account to which the payment should be applied. If you do not request a designation, your construction lien rights could be lost to the lienor, according to David S. Tupler, a Fort Lauderdale-based attorney who sepcializes in liens.
The focus of this article will be on subsection 2 which deals with the duty placed on subcontractors, subsubcontractors and material suppliers to demand a designation of account for materials supplied on a project. If a demand is made but no response is forthcoming, the lienor can apply the money as they see fit unless they have knowledge of the source and its intended purpose. If the party making the payment makes a designation of account which is incorrect and the potential lienor is aware of this error, they are still under a duty to make the proper credit to the account and thus protect the owner's property from improper liens. Florida Statute 713.14 provides no specific form and does not specifically state that the demand must be in writing. Obviously, the better practice would be to make the demand for designation of account in writing and to send it by USPS Certified Mail to the party that made the payment. Although no specific form is required pursuant to the statute, it is suggested that any written request should contain the following information:
REQUEST FOR DESIGNATION OF ACCOUNT TO CREDIT PAYMENT
Thank you for your check no._____, dated __________________, in the amount of ________________. Pursuant to Section 713.14 of the Florida Statutes we are required to request a designation of the account and the items of that account to which the payment is to be credited. Please notify us as to which job and the specific invoices to which the payment should be applied.
The purpose of Florida Statute 713.14(2) is to protect the owners and others from diversion of payments to other accounts or debts, and to avoid subjecting the owners' property to mechanic's lien when the owner has made a payment which has been passed on to the lienor. Always err on the side of caution, and never assume that you have lien rights.
This blog is not intended as a complete review or summary of Florida Statute 713.14 but only as a general overview of what the Florida statute requires and what its intended purpose was.
Note: An attorney specializing in construction law can help you understand related construction laws, specific to Hollywood and Fort Lauderdale courts.