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This post uses hypothetical scenarios for illustrative purposes only. It does not describe any actual client, transaction, or representation, and is not legal advice.

Consider a common Florida deal pattern. A buyer acquires a specialty construction business — a commercial electrical contractor, a mechanical sub, a build-out firm that fits out restaurants and medical offices. The attraction is the backlog: a stack of signed contracts and half-finished jobs that represent months of booked revenue. The buyer prices that backlog as an asset and structures an asset deal, partly on the theory that an asset deal leaves the seller’s old liabilities behind. Then a subcontractor on a job that was eighty percent complete at closing records a claim of lien for work it was never paid for, and the buyer discovers that the backlog it bought came welded to exposures that the asset structure did not wash off.

Construction is one of the few industries where the unfinished product itself generates security interests in real property by operation of law. Florida’s construction lien law, in Chapter 713 of the Florida Statutes, gives the people who furnish labor, services, and materials a statutory lien on the improved property when they are not paid. That lien does not care much about how the parties papered the change of ownership of the contractor. It attaches to the project, follows the money owed, and surfaces on the timeline of the slowest-paying job in the backlog — which is rarely the timeline the buyer modeled.

The lien attaches to interests most buyers do not think to check

The provision worth understanding before pricing a contractor is section 713.10. Under , a construction lien extends to the right, title, and interest of the person who contracts for the improvement — and, critically, when the improvement is made by a tenant under an agreement with its landlord, the lien can extend to the landlord’s interest as well. A tenant who contracts for an improvement is itself an “owner” for lien purposes and has to be identified as holding a leasehold interest. The statute lets a landlord insulate its fee interest by putting an express no-lien provision in the lease, but that protection is conditional: the tenant has to actually notify the contractor of the no-lien clause, and a knowing failure to give that notice makes the construction contract voidable at the contractor’s option.

For a buyer acquiring a contractor, this reaches further than it first appears. The company being bought is usually the party doing the improving across dozens of sites it does not own — leased build-out space, tenant-improvement jobs, projects where the customer is a tenant rather than the fee owner. Each of those jobs sits inside a web of contract, lease, and notice requirements that determine who can be liened and who cannot. A contractor that has been sloppy about the section 713.10 notice mechanics on its own leased premises, or that is working on jobs where the lease-and-notice chain is broken, is carrying lien exposure and contract-enforceability risk that a buyer inherits along with the backlog.

Why an asset deal does not solve it

The reflex that an asset purchase leaves liabilities with the seller is broadly sound, but construction liens are a poor fit for that reflex because they do not run primarily against the seller as an entity. They run against the improved property and against the unpaid balance on the job. When a buyer takes over a contractor’s open contracts and finishes the work, it steps into the payment chain. If a sub or supplier on a pre-closing phase of the job was not paid, the lien claim it records encumbers the project regardless of which entity signed the prime contract, and the dispute lands on the buyer that is now standing on the site trying to collect the final draw and close out the job.

The exposure concentrates in the work that straddles the closing — jobs that were underway, partially billed, and partially paid when the deal closed. On those jobs the question of who paid which sub for which phase becomes a forensic exercise, and the lien rights of unpaid lower-tier participants are live whether or not anyone surfaced them in diligence. A buyer that modeled the backlog as clean recurring revenue and did not separately model the payment status underneath each open job has priced only half the picture.

The diligence that decides the exposure

Three diligence threads carry most of the risk on a contractor acquisition, and all three reward early attention. First is the open-job audit. For every project in progress, the buyer needs the contract value, the amount billed, the amount collected, and — the part that gets skipped — the amount actually paid down to the subs and suppliers, supported by lien waivers. The gap between what the contractor collected from the owner and what it paid out to its lower tiers is the zone where lien claims are born. Properly executed conditional and unconditional lien releases through the most recent payment application are the documentation that closes that gap, and their absence is a finding, not a formality.

Second is the notice-and-lease chain on tenant-improvement work. Because section 713.10 turns on whether the right notices traveled to the right parties, a buyer should test whether the contractor has been observing the notice mechanics on jobs where the customer is a tenant — both to understand where lien rights reach and to confirm that the company’s own construction contracts are not voidable for a notice failure. Third is bonding and the payment-bond posture on larger projects, since a payment bond changes the lien analysis and shifts where unpaid claimants have to look. These project-level exposures are part of the deal architecture on any construction acquisition, not a post-closing cleanup item.

Pulling the risk into the agreement

Once diligence has mapped the open jobs and the payment gaps, the deal documents have to carry the risk. The buyer will want representations that the target has paid its subcontractors and suppliers through closing, that no liens have been recorded and none are threatened, and that lien waivers have been obtained for amounts already paid. A schedule of open projects with their billing and payment status should back that representation, so the rep is anchored to specifics rather than floating as a general assurance.

Where the open-job audit reveals unpaid lower tiers or thin waiver documentation, the cleanest mechanism is usually a holdback or a special escrow tied to lien releases — money the seller does not fully collect until the at-risk jobs close out clean. That dovetails with the ordinary closing reconciliation, since the working-capital target and true-up are where accrued payables and retainage get squared, and unpaid subcontractor balances are exactly that kind of item. For exposure that cannot be quantified at closing, a special indemnity for pre-closing lien claims keeps the risk on the seller’s side, and where that indemnity sits in the cap structure determines how much protection it really provides. A lien indemnity buried inside a low general cap is not the same protection as a standalone, escrow-backed obligation.

The takeaway

Buying a Florida construction business means buying its open jobs, and open jobs carry statutory lien exposure that an asset structure does not erase. Section 713.10 extends the lien to the interests of those who contract for improvements and can reach a landlord’s interest on tenant-improvement work, with enforceability turning on notice mechanics that a careless contractor may not have followed. The risk lives in the gap between what the company collected and what it paid its subs, and it surfaces on the timeline of the slowest job in the backlog. Audit the open jobs down to the lien waivers, test the notice-and-lease chain, and carry the risk with a representation, a lien-release holdback, and a properly placed indemnity. Price the backlog net of what is owed underneath it.

If you are buying or selling a Florida construction business and want a second read on the lien and work-in-progress exposure before you sign, feel free to reach out to my firm manager, Magda, at Magda@montague.law, or fill out our contact form. Mention you read this post.