Underwriting Manual: FL


Mechanic's Liens

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Mechanic’s Lien Coverage Requires Underwriter Approval.


Can the Construction Loan Mortgage have initial priority over mechanic's liens?

Yes. A mortgage can have priority over a mechanic's liens as long as it is recorded prior to a notice of commencement being recorded or the mechanic's liens being recorded. Pursuant to Section 713.07 of the Florida Statutes, mechanic's liens priority dates back to the recording of the notice of commencement. If no notice of commencement has been recorded, the mechanic's liens priority is the date of its recording.

Will initial priority as to future disbursements be retained only if certain procedures are followed?

No. Pursuant to Section 713.06 of the Florida Statutes, a lender who improperly disburses the proceeds from the loan has liability to the owner but has no direct liability to a lienor. Therefore, the mortgage priority would not be lost. However, the lender could be sued in tort by the owner for any damages suffered as a result of the failure to make payments.

If priority is lost, can it be regained?

Yes, if the requirements set forth below in the title company requirements section regarding insuring a mortgage after a Notice of Commencement has been recorded are followed.

Is there a difference between on-site and off-site work?


Is priority the same for all contractors and subcontractors on the same project?

Liens under Sections 713.03 and 713.04 attach at the time of recordation of the claim of lien and shall take priority as of that date. Liens under Section 713.04 are liens stemming from subdivision improvements. Liens under Section 713.03 are liens of architects, engineers, surveyors and landscape architects. Liens under Sections 713.05 and 713.06 shall attach and take priority as of the time of recordation of the notice of commencement but in the event notice of commencement is not filed, such lien shall attach and take priority as of the time the claim of lien is recorded. These liens include all lienors entitled to perfect liens except for those persons that are rendering professional services or are making real property suitable as a site for construction of an improvement.

Time Limits

What are the time periods for recording lien claims by original contractors and subcontractors?

Section 713.08(5) specifically provides that a claim of lien may be recorded during the progress of the work or thereafter but not later than 90 days after the final furnishing of the labor, services or materials by the lienor. The only exception of this rule occurs when the original contractor abandons the improvement or has his contract terminated pursuant to Section 713.07(4). In this instance the lienor must file his claim within 90 days from the contractor's default if the default occurs before the lienor last furnished materials, labor or services to the improvement in order to perfect lien rights against the owner.

After what period of time can you waive a mechanic's lien if no suit is filed?

Section 713.22(1) provides that no construction lien shall continue for a period longer than one year after the claim of lien has been recorded, unless within that time an action to enforce the lien is commenced in a court of competent jurisdiction. Pursuant to Section 713.22(2), the owner of the property may elect to shorten the time within which to commence an action to enforce a claim of lien by recording a notice of contest of lien. The lien of any lienor upon whom such notice is served and who fails to institute a suit to enforce his lien within 60 days after service of such notice shall be extinguished automatically. The clerk shall mail a copy of the notice of contest to the lien claimant at the address shown on the claim of lien or most recent amendment thereto and shall certify such service on the face of such notice and record the notice. Service shall be deemed complete upon mailing.

Removing or Waiving Liens

Is there a statutory procedure for affidavits of completion or notices of completion?

There is no statutory provision for affidavits of completion or notices of completion. However, pursuant to F.S. 713.132, a notice of termination can be filed which terminates the notice of commencement. Said notice of termination must be accompanied by a final contractor's affidavit which states that the contractor has been paid in full as have all subcontractors and that construction has been completed. A notice of commencement expires 30 days after the recording of the notice of termination and final contractors affidavit.

Can a statutory bond terminate the mechanic's lien as an encumbrance on the title)

Liens filed against the property may be transferred from the property to other security by depositing a sum of money or filing a bond pursuant to Section 713.24 of the Florida Statutes. The amount shall be the lien amount, plus the legal rate of interest, plus $500 to apply to court costs. The clerk may charge $10 for making and serving the certificate of transfer.

Can the original, general, or subcontractor's contract or waiver agreement subordinate or waive mechanic's liens by general contractor and/or subcontractors?


Can a bona fide purchaser or bona fide lender take free of mechanic's liens later filed for earlier work?


Title Company Requirements

What are the customary requirements for issuing Loan Policies on construction loan mortgages?

As long as a notice of commencement has not been recorded, the criteria for insuring a construction mortgage is the same as insuring a regular mortgage. If a notice of commencement has been recorded and work has been done within 90 days, in order to insure the mortgage we require the following:

  • Obtain an owners o lien affidavit naming the contractor and all parties giving notice to owner.
  • Obtain a contractors final affidavit.
  • Obtain final lien waivers and releases of all liens from all parties that gave notice to the owner and/or listed as unpaid on contractors final affidavit.
  • Obtain indemnification from the owner and the current certified financial statements.
  • Consider owner and contractor's track record on this and other projects.
  • Consider type of project and how successful it was

When insuring a mortgage after a notice of commencement has been filed and work is to be recommenced, we require the following:

  • The work on the project is to stop pending the filing of the notice of termination, new mortgage and notice of recommencement.
  • The mortgage and the notice of recommencement are to be recorded in the public records and the notice of termination of notice of recommencement must be posted in a prominent spot on the job site.
  • An owners affidavit must be obtained containing the following information:

    • Name and address of all lienors giving mandatory notice to owner pursuant to Section 713.06(2) of the Florida Statutes, or if none are received, the affidavit shall so state.

      Names and addresses of all persons with whom the owner has entered into a direct contract.

    • That all such parties have been paid in full.

    • Contractors affidavit saying that all lienors have been paid to date and containing the names of all lienors who have not been paid in full and the amount due or to become due.

    • Waiver of liens shall be obtained from the following:

    • All persons giving lienors notice to owner named in the affidavit.

    • All persons named in the owners affidavit as laborers, contractors, mechanics, and materialmen who contracted directly with the owner.

    • All persons named as lienors in the contractors affidavit.

    • All lien waivers and releases of lien shall be dated through the date of recordation of the mortgage and notice of recommencement.

    • Indemnification given in favor of Stewart Title Guaranty Company executed by the owners of the property.

Is it customary to add a "pending disbursement" clause or mechanic's lien exception in the Loan Policy insuring a construction loan mortgage?

The mechanic's lien exception is a standard exception in the policy but is almost always deleted. There is a pending disbursement clause that is used as follows:

Liability under this policy is limited to the amount of the proceeds of the mortgage identified in Schedule A hereof actually disbursed in good faith without knowledge of any objection to the title.

This pending disbursement clause requires underwriter approval. This clause is authorized for use solely in Florida. If the insured mortgage has priority over any construction liens, you should use this pending disbursements clause.

Also subject to any bulletins relating to mechanic’s liens.

Updated 3/12/20