Construction & Real Estate

Sacha Boegem is an experienced litigator in the West Palm Beach Fox Rothschild office.  He focuses his practice on a wide range of commercial litigation matters, including business disputes and torts, banking/financial services industry litigation, trust and estate litigation, and supplier-distributor litigation and advising.  Below is Sacha’s first post on the South Florida Trial Practice blog.  We welcome Sacha to the blog and look forward to future posts. For anyone with questions or comments regarding this post, you can reach you can contact Sacha at 561-804-4437 or sboegem@foxrothschild.com.

In an opinion released April 22, 2015 Florida’s First District Court of Appeals upheld a trial court’s ruling that Section 713.3471(2) of Florida’s Construction Lien Law precluded common law remedies.  See Jax Utilities Mgmt., Inc. v. Hancock Bank, No. 1D14-664, 2015 WL 1809322, at *5 (Fla. 1st DCA Apr. 22, 2015).  This section sets forth certain notice requirements that construction loan lenders must comply with if they make “a final determination, prior to the distribution of all funds available under a construction loan, that the lender will cease further advances pursuant to the loan.”  Fla. Stat. § 713.3471(2)(a).  The statute also provides that a lender has no liability if it complies with the statute, and provides a mechanism for determining damages if a lender fails to comply.  Fla. Stat. § 713.3471(2)(a) and (b).

As the First District Court of Appeal explained on this issue of first impression for a Florida appellate court, “the plain language of section 713.3471(2) evinces a legislative intent to displace the common law remedies and the statute is so repugnant to common law remedies that the two cannot coexist.”  In Jax Utilities, even though the record did not indicate that the lender had served proper notice under the statute, plaintiff Jax elected not to bring a statutory claim and instead sued the lender for equitable lien and unjust enrichment.  The trial court found that the statute precluded Jax’s common law claims and entered summary judgment for the lender, which the Court of Appeals upheld.

This opinion has not yet been released for publication in the permanent law reports and thus is still subject to revision or withdrawal.  Assuming it stands, however, the opinion potentially provides construction loan lenders with a way to avoid or have dismissed common law claims against them for their alleged failure to provide the statutorily-mandated notice, and limits their liability to the measure of damages provided for in the statute in instances where they are found to have violated the statute.

Service of notices permitted or required under the Construction Lien Law, or copies of notices when so permitted or required, unless otherwise specifically provided, must be made:

  1. by actual delivery to the person to be served; if a partnership, to one of the partners; if a corporation, to an officer, director, managing agent, or business agent; or, if a limited liability company, to a member or manager; or
  2. by common carrier delivery service or by registered, Global Express Guaranteed, or certified mail, with postage or shipping paid by the sender and with evidence of delivery, which may be in an electronic format. Fla. Stat. § 713.18

The terms “managing agent” or “business agent,” in Fla. Stat. § 713.18 require actual delivery to an officer, director, managing agent or business agent. Florida courts have held that these terms connote one who acts as a representative of the corporation and who officially speaks for it in its local business affairs as opposed to a mere employee. See Cont’l Home Parks, Inc. v. Golden Triangle Asphalt Paving Co., 291 So. 2d 49, 50 (Fla. 2nd DCA 1974). If service of notices by actual delivery or by mail cannot be accomplished, then posting on the site of the improvement is permitted. Fla. Stat. § 713.18.

The Plaintiff in an action to enforce a construction lien must allege service of notice in accordance with If a plaintiff fails to allege service of notice in accordance with Fla. Stat. § 713.18. The plaintiff is entitled to amend his or her complaint to allege valid service prior to dismissal of the complaint for failure to follow the statute. S & S Air Conditioning Co. v. Cantor, 313 So. 2d 422 (Fla. 3d DCA 1975).

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W Mason is an associate with the law firm Fox Rothschild LLP. W practices in Fox Rothschild’s Litigation department in West Palm Beach, Florida. W focuses his practice on commercial litigation throughout Florida, with an emphasis on construction litigation. You can reach W at (561) 804-4432 or wmason@foxrothschild.com. Below are some recent posts W has written on Florida Construction Lien Law:

 

Generally, an owner or an owner’s agent is required to record a notice of commencement in the clerk’s office and post either a certified copy of the recorded notice of commencement or a notarized statement that the notice of commencement has been filed for recording along with a copy thereof. Fla. Stat. § 713.13(1)(a). The notice of commencement must contain the following information:

1.  A description sufficient for identification of the real property to be improved. The description should include the legal description of the property and also should include the street address and tax folio number of the property if available or, if there is no street address available, such additional information as will describe the physical location of the real property to be improved.

2.  A general description of the improvement.

3.  The name and address of the owner, the owner’s interest in the site of the improvement, and the name and address of the fee simple titleholder, if other than such owner. A lessee who contracts for the improvements is an owner as defined under s. 713.01(23) and must be listed as the owner together with a statement that the ownership interest is a leasehold interest.

4.  The name and address of the contractor.

5.  The name and address of the surety on the payment bond under s. 713.23, if any, and the amount of such bond.

6.  The name and address of any person making a loan for the construction of the improvements.

7.  The name and address within the state of a person other than himself or herself who may be designated by the owner as the person upon whom notices or other documents may be served under this part; and service upon the person so designated constitutes service upon the owner.

The Fourth District discussed the purpose of the Notice of Commencement in a 1999 decision. As the court explained:

Though the Notice of Commencement was originally required to trigger a commencement date from which to measure time limitations under the Mechanic’s Lien Law, the information contained in the Notice of Commencement provides all the details necessary to complete a Notice to Owner. Indeed, Section 713.13(1)(a), Florida Statutes, requires with Notice of Commencement information including the name and address of the owner and contractor. Thus, the legislature contemplated that the Notice of Commencement would provide the lienor with the current names and addresses of the owner and contractor, so that the lienor could properly mail the Notice to Owner. If no Notice of Commencement was ever posted or recorded by the owner as mandated by the statute, a lienor may have difficulty obtaining the names and addresses of the owners and contractor.

Sasso Air Conditioning, Inc., v. United Companies Lending Corporation, 742 So.2d 468, 470 (Fla. 4thDCA 1999), citing Symons Corp. v. Tartan-Lavers Delray Beach, Inc.456 So.2d 1254, 1259 (Fla. 4thDCA 1984). The Notice of Commencement signals the beginning of a construction project. Gulfside Properties Corp. v. Chapman Corp., 737 So.2d 604, 607 (1stDCA 1999). Under Fla. Stat. § 713.01(5), the “commencement of the improvement” is defined as “the time of filing for record of the notice of commencement provided in s. 713.13.” The key function of the Notice of Commencement is to provide the lienor and other third parties with the information they need to prepare necessary notices and related documents under Florida’s mechanic’s lien statutes. Gulfside Properties, 737 So.2d at 607.

 The failure by a property owner to file a Notice of Commencement does not relieve a contractor or supplier from satisfying the mechanic’s lien statute’s notice requirements. Professional Plastering & Stucco, Inc., v. Bridgeport-Strasberg Joint Venture, et al., 940 So.2d 444, 449 (Fla. 5th DCA 2006), citing Mursten Constr. Co. v. C.E.S. Indus., Inc., 588 So.2d 1061 (Fla. 3d DCA 1991). For instance, where a supplier failed to serve written notice of nonpayment on the contractor, the supplier’s failure to adhere to the requirements of the statute prevented its recovery under a construction bond despite the fact that the owner failed to file a notice of commencement. Murston, 588 So. 2d at 1062-63.

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W Mason is an associate with the law firm Fox Rothschild LLP. W practices in Fox Rothschild’s Litigation department in West Palm Beach, Florida. W focuses his practice on commercial litigation throughout Florida, with an emphasis on construction litigation. You can reach W at (561) 804-4432 or wmason@foxrothschild.com. Below are some recent posts W has written on Florida Construction Lien Law:

 

Previously in this series, the Notice to Contractor condition precedent was discussed in the context of actions in connection with payment bonds. In addition to the Notice to Contractor, Section 713.23(1)(d) of Florida’s Construction Lien Law requires a lienor, as a condition precedent to recovery under a payment bond, to serve a written “Notice of Nonpayment” to the contractor and the surety not later than 90 days after the final furnishing of labor, services, or materials by the lienor. A written notice satisfies this condition precedent with respect to the payment described in the notice of nonpayment, including unpaid finance charges due under the lienor’s contract, and with respect to any other payments which become due to the lienor after the date of the notice of nonpayment. The time period for serving a written Notice of Nonpayment shall be measured from the last day of furnishing labor, services, or materials by the lienor and shall not be measured by other standards, such as the issuance of a certificate of occupancy or the issuance of a certificate of substantial completion.

The failure of a lienor to receive retainage sums not in excess of 10 percent is not considered a nonpayment requiring the service of the notice of nonpayment. If the payment bond is not recorded before commencement of construction, the time period for the lienor to serve a notice of nonpayment may at the option of the lienor be calculated from the date specified in this section or the date the lienor is served a copy of the bond. The notice may be in substantially the following form:

 NOTICE OF NONPAYMENT

(name of contractor and address) 

(name of surety and address) 

The undersigned notifies you that he or she has furnished   (describe labor, services, or materials)   for the improvement of the real property identified as   (property description)  . The amount now due and unpaid is $____ .

If a lienor fails to deliver a notice of nonpayment to the contractor and surety in accordance with the provisions of Fla. Stat. § 713.23(1)(d), no suit may be brought on the bond. See Standard Heating Service, Inc. v. Guymann Const., Inc., 459 So. 2d 1103 (Fla. 2d DCA 1984). As such, unless a lienor timely provides both a Notice to Contractor and Notice of Nonpayment, no action can be maintained against a contractor or surety. Fla. Stat. § 713.23(1)(e). Assuming compliance with the notice requirements, Fla. Stat. 713.23(1)(e) limits the time period for bringing an action on a bond to one year after the provision of labor, material, or supplies by the lienor.

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W Mason is an associate with the law firm Fox Rothschild LLP. W practices in Fox Rothschild’s Litigation department in West Palm Beach, Florida. W focuses his practice on commercial litigation throughout Florida, with an emphasis on construction litigation. You can reach W at (561) 804-4432 or wmason@foxrothschild.com. Below are some recent posts W has written on Florida Construction Lien Law:

 

On May 21, 2014, Florida’s Second District Court of Appeals issued an opinion in Snell v. Mott’s Contracting Services, Inc. affecting construction claims of lien and arbitration proceedings. The court examined the question of whether the award of attorneys’ fees was proper in an arbitration proceeding pursuant to Florida’s Construction Lien Law.

The court held that Section Fla. Stat. § 713.21(1) requires that an “action to enforce a construction lien must be brought ‘in a court of competent jurisdiction’ within one year of recording the claim of lien or it automatically extinguishes.” Moreover, the Court held that an arbitration proceeding is not a “court.”  As such, the lien at issue in this case “became unenforceable pursuant to section 713.22 prior to the issuance of the [arbitration] award” due to the contractor’s failure to file an enforcement action in court within a year.

Given the holding in Snell, it is likely advisable for lien holders to file an action in a court of competent jurisdiction within a year, even if the action is stayed during an arbitration proceeding. Otherwise, lienholders may have difficulty recovering fees or even enforcing a lien to the extent that enforcement in the arbitration proceeding is not complete within year.

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W Mason is an associate with the law firm Fox Rothschild LLP. W practices in Fox Rothschild’s Litigation department in West Palm Beach, Florida. W focuses his practice on commercial litigation throughout Florida, with an emphasis on construction litigation. You can reach W at (561) 804-4432 or wmason@foxrothschild.com. Below are some recent posts W has written on Florida Construction Lien Law:

 

Before, beginning, or within 45 days after beginning to furnish labor, materials, or supplies, a lienor who is not in privity with the contractor, except a laborer, shall serve the contractor with notice in writing that the lienor will look to the contractor’s bond for protection on the work. Fla. Stat. § 713.23(1)(c). If a notice of commencement with the attached bond is not recorded before commencement of construction, the lienor not in privity with the contractor may, in the alternative, elect to serve the notice to the contractor up to 45 days after the date the lienor is served with a copy of the bond. A notice to owner pursuant to Fla. Stat. § 713.06 that has been timely served on the contractor is sufficient.

For specially fabricated materials, the 45-day period begins at the time of fabrication. Actual delivery of the materials to the job site is not required because the fabricated material would have no other useful purpose other than for the particular project for which they are fabricated. See Oolite Industries, Inc. v. Millman Const. Co., Inc., 501 So. 2d 655 (Fla. 3d DCA 1987).

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W Mason is an associate with the law firm Fox Rothschild LLP. W practices in Fox Rothschild’s Litigation department in West Palm Beach, Florida. W focuses his practice on commercial litigation throughout Florida, with an emphasis on construction litigation. You can reach W at (561) 804-4432 or wmason@foxrothschild.com. Below are some recent posts W has written on Florida Construction Lien Law:

 

Owners of real property in Florida can exempt their property from all future liens at the outset of construction by requiring their general contractor to post a payment bond pursuant to Fla. Stat. § 713.23 or 713.245 before construction begins. In general a payment bond is a contract among the surety, the owner, and the contractor. Generally speaking, if a contractor fails to pay a subcontractor, materialman, or laborer, the surety must assume this obligation thereby protecting the owner’s property from a lien.

In order to properly exempt their property from the lien law, the owner must attach and record a copy of the bond with the Notice of Commencement prior to the beginning of construction. As a result of the bond, an unpaid lienor is protected by the bond rather than an interest in the owner’s property. See Resnick Developers South, Inc. v. Clerici, Inc., 340 So. 2d 1194 (Fla. 4th DCA 1976).

A bond furnished by the contractor must be in at least the amount of the original contract price and the bond must be conditioned on the contractor promptly making payments for labor, services, and material to all lienors under the contractor’s direct contract. Fla. Stat § 713.23(1)(a). Any provision in the bond to the contrary will be disregarded.

Where a payment bond contains a condition limiting the liability of a surety to lienors, that provision of the bond will be disregarded by Florida courts. For example, Florida courts have held that a provision of bond would be invalid and disregarded where it provided that the surety would not be liable to lienors unless the owner has made payments to the contractor. See Cohen v. Lunsford, 362 So. 2d 383 (Fla. 1st DCA 1978).

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W Mason is an associate with the law firm Fox Rothschild LLP. W practices in Fox Rothschild’s Litigation department in West Palm Beach, Florida. W focuses his practice on commercial litigation throughout Florida, with an emphasis on construction litigation. You can reach W at (561) 804-4432 or wmason@foxrothschild.com. Below are some recent posts W has written on Florida Construction Lien Law:

 

 

Under Florida’s Construction Lien Law, a lien may be transferred by any person having interest in the real property upon which the line is imposed or the contract under which the lien is claimed from such property by either (1) depositing a sum with the clerk’s office; or (2) filing a surety bond with the clerk. See Fla. Stat. § 713.24(1).

The provisions of Florida’s Construction Lien Law that permit the transfer of the lien are intended to allow a property owner of property to remove a cloud on the title of real property and clear it for sale or additional financing.  The owner may transfer a lien in this manner either before or during a lawsuit on the lien. See e.g. 

The amount of the payment or the bond must be either in the amount demanded in such claim of lien, plus interest thereon at the legal rate for 3 years, plus $1,000 or 25 percent of the amount demanded in the claim of lien, whichever is greater, to apply on any attorney’s fees and court costs that may be taxed in any proceeding to enforce said lien. See Fla. Stat. § 713.24(1). An owner of improved real property is entitled to recover as damages the cost involved in having an invalid construction lien transferred to a bond. See Gentile v. F. Gaudio Tile and Marble Creations, Inc., 596 So. 2d 175 (Fla. 4th DCA 1992).

 

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W Mason is an associate with the law firm Fox Rothschild LLP. W practices in Fox Rothschild’s Litigation department in West Palm Beach, Florida. W focuses his practice on commercial litigation throughout Florida, with an emphasis on construction litigation. You can reach W at (561) 804-4432 or wmason@foxrothschild.com. Below are some recent posts W has written on Florida Construction Lien Law:

 

In order for a supplier of materials or a “materialman” to have a construction lien on a property, his product must either be specially fabricated or actually incorporated into the property. Specifically, Florida’s construction lien statute defines “furnish materials” to mean “to supply materials which are incorporated in the improvement including normal wastage in construction operations; or specially fabricated materials for incorporation in the improvement…” It does not include “any design work, submittals, or the like preliminary to actual fabrication of the materials; or supply materials used for the construction and not remaining in the improvement, subject to diminution by the salvage value of such materials; and includes supplying rental equipment, but does not include supplying handtools.” Fla. Stat. § 713.01(13).

I.  Delivery as Proof of Incorporation of Materials into the Project 

Because it can be impractical for a materialman to prove that the products he furnished to a subdivision project were actually incorporated into the project, Florida law dictates that a showing that the materials were delivered to the project site is prima facie evidence that the materials were, in fact, incorporated into the subdivision.” Fla. Stat. § 713.01(13). To be entitled to the benefit of this presumption, “evidence must be presented which establishes that materials were, in fact, delivered to project…” American Ins. Co. v. Coley Elec. Supply Co., Inc., 354 So. 2d 390 (Fla. 1st DCA 1978). The materialman bears the burden of proof of delivery or special fabrication before being entitled to the presumption.

II.  What Evidence is Sufficient for Delivery?

In Dublin Co. v. Brady Sales, Inc., 380 So. 2d 1095 (Fla. 5th DCA 1980), the Court held that testimony by the president of a material supplier was sufficient evidence for purposes of establishing delivery and taking advantage of the prima facie presumption of incorporation. However, in Beautyware Plumbing Supply Co. v. Columbiad Apartments, Inc., 215 So.2d 42, 44 (Fla. 4th DCA 1968), the Court held that proof that a materialman delivered product to the contractor, without a showing that the delivery occurred at the project site, was insufficient as a matter of law to establish a construction lien in favor of the materialman.

III.  Special Fabricators

Fabricators of custom and specially designed products are governed by a different rule when it comes to incporation. To the extent that a materialman can establish that the product he produced was specially fabricated for a particular project, the materialman can establish entitlement to a lien. This is true regardless of whether the materials were actually delivered to the job site. See Oolite Indus., Inc. v. Millman Const. Co., Inc., 501 So. 2d 655, 656 (Fla. Dist. Ct. App. 1987). In order for a product to be considered “specially fabricated” under Florida’s Construction Lien Law, the materials must be “materials which are ‘not generally suited for nor readily adaptable to use in’ a like improvement.” Surf Properties, Inc. v. Markowitz Brothers, Inc.75 So.2d 298, 302 (Fla.1954). In other words, the specially fabricated materials must have been designed for the particular project and not be appropriate for use in a similar project. To illustrate, in Stunkel v. Gazebo Landscaping Design, Inc., 660 So. 2d 623 (Fla. 1995), the Florida Supreme Court held that trees selected by homeowners for installation at their property by a landscaper were “specially fabricated materials.” Ultimately, as long as the parties intended the specially fabricated products to be incorporated into the improvement, the special fabricator can establish a lien regardless of delivery assuming the other requirements of the statute are met.

IV.  Alternative Approaches

It is also permissible for a witness to testify that he or she can identify the materialman’s product in the finished improvement. See Florida East Coast Properties, Inc. v. Coastal Const. Products, Inc., 553 So. 2d 705 (Fla. 3d DCA 1989). In this respect, it may be possible for a materialman to establish either through lay or expert testimony that his or her products were delivered to the job site.

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W Mason is an associate with the law firm Fox Rothschild LLP. W practices in Fox Rothschild’s Litigation department in West Palm Beach, Florida. W focuses his practice on commercial litigation throughout Florida, with an emphasis on construction litigation. You can reach W at (561) 804-4432 or wmason@foxrothschild.com. Below are some recent posts W has written on Florida Construction Lien Law:

 

Florida construction lien law specifically addresses the situation where one performs services or furnishes materials for the purpose of making a site suitable for construction of an improvement. This typically occurs in the context of subdivisions. Under Fla. Stat. § 713.04, any lienor who, regardless of privity, performs services or furnishes material to real property for the purpose of making it suitable as the site for the construction of an improvement or improvements shall be entitled to a lien on the real property for any money that is owed to her or him for her or his services or materials furnished in accordance with her or his contract and the direct contract. The total amount of liens permitted shall not exceed the amount of the direct contract under which the lienor furnishes labor, materials, or services.

I.  Subdivision Improvements Specifically Covered by Fla. Stat. § 713.04

The subdivision improvement work covered by Fla. Stat. § 713.04 includes, but is not limited to, the following work:

  • grading, leveling, excavating, and filling of land, including the furnishing of fill soil;
  • grading and paving of streets, curbs, and sidewalks;
  • construction of ditches and other area drainage facilities;
  • laying of pipes and conduits for water, gas, electric, sewage, and drainage purposes; and
  • construction of canals;
  • the altering, repairing, and redoing of any of the above.

II.  Liens on Abutting Land

The statute provides specific rules related to public use areas in subdivisions. For instance, when “services or materials are placed on land dedicated to public use and are furnished under contract with the owner of the abutting land, the cost of the services and materials, if unpaid, may be the basis for a lien upon the abutting land.” Fla. Stat § 713.04. For land to be considered “abutting” is must be continuous. There can be no intervening land. See Davis Water & Waste Industries, Inc. v. Embry Development Corp., 603 So. 2d 1357 (Fla. 1st DCA 1992).

Moreover, when “services or materials are placed upon land under contract with the owner of the land who subsequently dedicates parts of the land to public use, the person furnishing the services or materials placed upon the dedicated land shall be entitled to a lien upon the land abutting the dedicated land for the unpaid cost of the services and materials placed upon the dedicated land.” In the case of improvements that “serve or benefit real property that is divided by the improvements,” the provider shall be entitled to “a lien upon each abutting part for the equitable part of the full amount due and owing to the provider.” Fla. Stat. § 713.04. If the part of the cost to be borne by each parcel of the land subject to the same lien is not specified in the contract, “it shall be prorated equitably among the parcels served or benefited.”

III.  Notice and Recording Requirements for Subdivision Lienors

A.  Claim of Lien

In order to be entitled to a construction lien, a provider of services or materials must record a lien within 90 days of the last work or furnishing of materials at the job site. See Aronson v. Keating, 386 So.2d 822 (Fla. 4th DCA 1980).The claim of lien must be served on the owner within 15 days of recording. Fla. Stat. 713.08(4)(c).

B.  Notice to Owner

Florida law does not require that a subdivision lienor serve a notice to owner regardless of privity. However, by electing to serve a notice to owner, the non-privity lienor obligates the owner to see that the lienor is paid to the extent that payments are made to the contractor. Fla. Stat. § 713.04(2).

C. Notice of Commencement

The legislature specifically precludes subdivision lienors from the requirement they record a notice of commencement. See Fla. Stat. § 713.04(1)(“[n]o notice of commencement shall be filed for liens under this section.”). This is primarily because a properly recorded claim of lien relates back to the date of a properly recorded notice of commencement. Therefore, institutional lenders would be remiss to make a mortgage loan to a developer where notices of commencement have already been recorded against the subdivision property because the construction lien would have priority over the lender’s mortgage due to the fact that it relates back to the notice of commencement. Therefore, this specific preclusion serves to allow developers to make preparations for improving property even when financing for the improvement has not yet been secured.

D.  Contractor’s Final Affidavit

The recent amendments to Fla. Stat. § 713.04 have made it clear that a contractor providing a subdivision improvement must comply with Fla. Stat. § 713.06(3)(d) by serving a contractor’s final affidavit in order to receive final payment. In the event that the owner makes a final payment without obtaining a the contractor’s final affidavit, the contractor has made an “improper payment.” In other words, such a payment would not serve to limit the owner’s liability when measured against the contract price pursuant to Fla. Stat. § 713.06.

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W Mason is an associate with the law firm Fox Rothschild LLP. W practices in Fox Rothschild’s Litigation department in West Palm Beach, Florida. W focuses his practice on commercial litigation throughout Florida, with an emphasis on construction litigation. You can reach W at (561) 804-4432 or wmason@foxrothschild.com. Below are some recent posts W has written on Florida Construction Lien Law: