Before commencing construction, a notice of commencement is typically required to be recorded in the public records of the county in which the improvement is located. The purpose of a notice of commencement is to serve as an information source to potential lienors. More importantly, for a lienor, it establishes the priority of construction liens.
The construction lien law provides that if a notice of commencement was recorded and is not expired or has not been terminated at the time of the recording of the construction lien, the priority of the construction lien is established as of the prior recording of the notice of commencement. This principle is known as “relation back” and is illustrated in the example below:
Owen Owner recorded a notice of commencement on January 4, 2021. A construction lien was later recorded on May 24, 2021. The construction lien relates back and attaches as of January 4th, the date of recording of the notice of commencement. The construction lien has priority over any conveyance, encumbrances or demand (such as a deed, mortgage or judgment lien, etc.) recorded after the notice of commencement, except other valid construction liens, which also relate back to the notice of commencement.
In this example above, the construction lien has priority over the mortgage recorded on March 16, 2021 because it “relates back” to the recording of the notice of commencement, which was January 4, 2021.
In the event that a notice of commencement was not recorded, has expired or was terminated, the construction lien takes its priority as of the date of recording (in the example above, that would be May 24, 2021). In this situation, it would be inferior to the March 16, 2021 mortgage and superior in interest to all construction liens recorded after May 24, 2021. This point is significant because if a foreclosure sale is ordered by the court, those lienors with priority under the law are entitled to be paid prior to any entities with inferior interests. If a construction lien is inferior to a mortgage or other construction liens, the lienor is less likely to be paid.
It is important to verify that the notice of commencement has not expired or been terminated if you are a lienor and owed money on a specific project. If it is determined that the notice of commencement has expired or been terminated and the lienor is still owed money, a construction lien should be recorded immediately to preserve lien priority.
This information presents the general scheme of Florida’s Construction Lien Law as of May 2021. The Construction Lien Law is constantly being amended; therefore, this material should not be relied upon in place of experienced legal advice in specific situations. This material is copyrighted and cannot be reproduced without written permission from Barry Kalmanson, Esq.