Florida, like all states, has a construction lien statute for private projects so that trade creditors can protect their lien rights. But Florida is the only state with an additional form of protection for private projects called the Notification of Specialty Fabricated Materials. Specialty fabricated materials are materials manufactured specifically for a private project that cannot be sold anywhere else. The notice for specialty fabricated materials must be sent as soon as possible, but no later than 45 days after the first fabrication of the specialty fabricated materials. For private projects in Florida, The Notification of Specialty Fabricated Materials is sent to the owner in case the order of specialty fabricated materials is canceled or not delivered within 45 days. If the notice is not sent in time, then the creditor is left with no lien rights.
Why It Matters:
This part of the statute is often overlooked and underused, said Chris Ring of NACM's Secured Transaction Services. "Companies that could use this part of the statute are manufacturers, like those who fabricate structural steel," he explained. "Making a notification within 45 days of first fabrication maintains their lien rights in case the materials aren't delivered."
Construction credit professional must understand the best time to leverage the Notification of Specialty Fabricated Materials in Florida. "I wouldn't send a notice for specialty fabricated material on a residential job until the value reaches the $2,000-$10,000 range, maybe even more," said Wade Mullins, credit manager at Quality Precast Company, Inc. (Brandon, FL) and member of the Florida Improved Construction Practices Committee. "We do send notices for commercial jobs but we have a few exceptions. I have a customer that pays us from the eighth to the thirteenth of every month by check and I don't need to send a notice for that."
Large orders are more in need of a notice since they have a higher risk of getting canceled by the owner or general contractor. "I counsel people on large orders in the $100,000 range," Ring said. "The notice is a risk mitigator especially if there are concerns that the order will be canceled before the materials are delivered to the jobsite. Wholesalers, companies that buy products from another and resell them, do not meet the criteria because they are buying something in bulk, so they are not eligible to use the statute."
Suppliers that order specialty fabricated materials such as windows, compressors or generators for a specific project, typically do not know when in the 45-day window for the materials to be delivered is, Mullins said. "Essentially, the time starts ticking the day the specialty fabricated materials are first manufactured instead of the day after the delivery as it is for on-the-shelf products like lumber, concrete blocks or ready-mix concrete."
A lot of times, contractors do not like to receive notices early, but it is your legal right to send them, Mullins said. "You can just give them a $10 Release for Construction Documents, which means that the plans and specifications prepared by the design builder, approved by the owner and incorporated into this Agreement by reference after such approval, are to be used to construct the project."
Sometimes contractors don't turn on specialty equipment until they get the Certificate of Occupancy, which is a document that proves the building complies with the plans and specifications that have been submitted and approved by the local building or zoning authority. And by that time, the contractors are requesting their releases.
For private projects in Florida where you need specialty fabricated materials, send a notice out as soon as possible. The Notification of Specialty Fabricated Materials not only protects your lien rights as a trade creditor, but also protects the owner. "The owner needs to collect a release at the time they give a check," Mullins said. "Sometimes we give conditional releases if we receive a check within seven to 15 days. We put material out there for 30-60 days and we're the ones taking all the risk. The owner will accept conditional releases to protect themselves. If they don't get the releases, I have my lien rights."
-Jamilex Gotay, editorial associate