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Florida Construction Payment Bonds

Florida Construction Payment Bonds

Payment bonds, which generally exempt real property from construction liens, protect those parties (except the contractor) who furnish labor, materials, and/or services on a project.  Before a project commences, the owner may require the contractor to furnish a payment bond pursuant to section 713.23, Florida Statutes. In order to exempt the property, the payment bond must be recorded with the notice of commencement. Liens are transferred to the payment bond by recording a notice of bond in the office of the clerk of court. Once the notice of bond is recorded, it transfers liens to the bond in the same fashion as a section 713.24, Florida Statutes, transfer bond.

Even where the owner loses the exemption under section 713.23, by failing to attach the payment bond to the notice of commencement, the bond may still be used to transfer any lien (except the contractor’s) by recording and serving a notice of bond pursuant to section 713.23(2). A late recorded payment bond used as a section 713.24 transfer bond (pursuant to sections 713.13(e) and 713.23(2)) may have other requirement such as timely serving a preliminary notice to contractor on the contractor and/or surety within 45 days of first furnishing services, and timely serving a final notice of nonpayment within 90 days of last furnishing services pursuant to section 713.23. However, the time limits for the lienor to do so, at the option of the lienor, may be calculated from either the dates provided in section 713.23 or the recording of the notice of bond. The statute is silent on whether the requirement under section 713.23(1)(e) of filing the action on the bond within one year from the last furnishing of services also applies. However, the better practice is to file an action on the bond within one year of last furnishing services (as opposed to one year from the recording of the lien) to avoid the position by the contractor or surety that the lienor did not comply with conditions precedent to perfecting its claim under the bond.

The owner (or anyone else having an interest in the property upon which the lien is imposed) can transfer the lien to security by posting a cash or a surety bond with the clerk of court where the lien is recorded. Because the lien is removed from the property, the lienor would file an action against the bond in lieu of a foreclosure action against the property. A claim on a transfer bond must be filed within one year of the recording of the lien, unless the bond was recorded after the action was filed, in which case the Lienor has one year from the date of transfer. Under the statute, unless the time period is otherwise shortened by operation of law (i.e., by a notice of contest under section 713.22), an action filed in the same county or circuit court within one year of the transfer to recover against the security is deemed to relate back to the date of filing the lien action. As a practical matter, if the lienor has already filed a lien foreclosure action, the lienor would simply amend the lawsuit to bring an action under the bond in place of the lien action.

For information on performance bonds click here.

To learn more about Florida construction payment bonds, contact Florida construction mediator and lawyer Gary L. Brown at (954) 370-9970.