LENDER LIABILITIES
Under
Florida Law, a lender may be defined as any person or entity who loans
money to the owner for the construction of, or improvement to real property.
The lender will usually secure their loan by legally recording the mortgage
in the property records. Oftentimes, the lender will make periodic loan
disbursements to cover construction costs.
If this
occurs, the lender must record this information on the Notice of Commencement
prior to making construction disbursements. Failure to record the Notice
of Commencement will not operate to relieve to lender of the responsibility
to comply with Florida Construction Lien Law.
Florida's
Lien Law may hold a lender liable in the event that improper loan disbursements
are made. If a lender receives a Notice to Owner, he is required to make
sure that proper payments are made. The lender is not prohibited from disbursing
loan proceeds directly to the owner, and this may operate to relieve the
lender of liability for improper payments on the project.
Because
lenders have potential liability, it is recommended that potential lienors
serve the Notice to Owner on both the lender and the owner.
At the
time of final payment, the lender is required to obtain an affidavit from
the contractor stating that all lienors under the direct contract have
been paid in full. If some lienors have not been paid, the contractor must
list all lienors and the unpaid balance due. The lender may pay all lienors
directly, and subtract the amount of payments from the balance due to the
contractor.
If
the unpaid balance due to lienors exceeds the amount of undisbursed construction
funds, the lender may not make additional payments until the contractor
has paid the difference to the lender.
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