A pending bill in the Florida Legislature could have some alarming implications for the construction industry. Proposed House Bill 897 (2020), and its companion Senate Bill 1422 (2020), would implement drastic changes to Chapter 713 governing lien rights for subcontractors. The supposed intent of this legislation is to protect homeowners from having to pay subcontractor liens when the general contractor has already been paid. Unfortunately, this poorly drafted legislation leaves any contractor not in direct contract with the owner zero rights for collection. This article will provide a general overview of the proposed changes to the law, how those changes could impact construction litigation, and how contractors may advocate for their rights and impact the legislation.
Summary of Major Changes
Substantial changes to Florida’s lien law include:
- Deleting any right by a subcontractor to record a lien.
- Deleting the concept of a Notice to Owner.
- Repeal of payment bond statutes for private projects.
- Revisions to the final payment affidavit to conform with the act.
- Revisions to the notice of commencement to conform with the act.
The definition of a “lienor” is changed to include only those persons that havea direct contract with the owner.This means that subcontractors, sub-subcontractors, interior designers, architects, engineers, and materialman who have contracted with the general contractor, will lose all right to lien on the property for unpaid work. Only contractors in direct contract with the owner will retain lien rights, regardless of a properly served notice to owner. These changes are probably the most drastic to Florida’s construction law in the past century and would separate Florida from every other state in the country.
Whenever a payment becomes due under the direct contract, except final payment, the owner MAY require the general contractor to provide a payment affidavit, whose form will be much like the current Final Contractor’s affidavit. The owner must then pay directly all persons/companies listed on the Contractor’s affidavit. The bill does not explain what happens if the Contractor does not list subcontractors and suppliers that are owed money, or identifies an incorrect amount, or how the owner would know the contact information for all the subcontractors. Nor does the proposed legislation explain why the owner should have to make tens, if not hundreds of separate of payments.
Frankly, this proposed bill appears to be drafted by a person with no knowledge of the construction industry. Had the proposed bill not already been approved by a committee, we would have ignored it.
Impact of Proposed Changes
If this new law is enacted, contractors not in direct contract with owner have only one source to look to for payment, the general contractor. What happens if your contract with the general contractor has a valid “paid-if-paid” clause? What happens if the general contractor is bankrupt with no assets? These are good questions, with the unfortunate answer being you will likely not get paid. A subcontractor in this situation would have the sole option to sue the general contractor for breach of contract. If your contract with the general contractor does not contain an attorney fee provision, the amount spent in litigation will quickly use the expected profit from the job.
Simply put, if you don’t have a direct contract with the owner under this proposed legislation, your odds of getting paid drop dramatically. Florida would be the only state to abolish liens by subcontractors and suppliers not in direct contract with the owner.
How to Move Forward
Unquestionably, subcontractors and sub-subcontractors will feel the brunt of these negative effects. While this is only a proposed bill, it is important that the construction industry participate in the ongoing dialogue surrounding this legislation to ensure their interests are represented. Frankly, it seems unlikely that this bill would become law in its current form.
Call your Florida legislators. Express to them the profound negative implications this law will have for the livelihoods of Florida’s contractors.
Link to HB 897:
http://www.flsenate.gov/Session/Bill/2020/897/BillText/Filed/PDF
Link to your Florida legislators:
https://www.myfloridahouse.gov/Sections/Representatives/myrepresentative.aspx
Joshua B. Loren and Bruce E. Loren of Loren & Kean Law are based in Palm Beach Gardens and Ft. Lauderdale. Loren & Kean Law is a boutique law firm concentrating in construction law and employment law. Bruce Loren focuses his practice on construction litigation and has been Certified by the Florida Bar in Construction Law since 2006. The firm represents contractors and owners in a wide range of disputes, including payment bond claims, lien disputes, construction defects, and project delays. They can be reached at [email protected] or [email protected] or 561-615-5701.
