4 Required Construction Contract Disclosures: Lien Law, Construction Defects and More [VIDEO]
There are four very specific disclosures that may be required by the law to be in your construction contract.
1. Lien Law Disclosure
The first is the Lien Law Disclosure. If your contract is in excess of $2,500 and is for the construction or repair of a residential dwelling up to four units, then your contract is required to include a certain disclosure. This disclosure needs to be at least twelve point-font, bold and all caps and needs to be either on the front page of you contract or needs to be on a separate page signed by the Owner. In essence, this disclosure informs the Owner that if they don’t pay you, you have the right to lien their property and possibly sell it in a foreclosure proceeding. This disclosure is only required by those that have a direct contract with the Owner. If your contract is as a Subcontractor or Supplier, this disclosure is not required by you. Additionally, if the Owner hasn’t suffered any prejudice because you did not include the disclosure, a court will likely not impose sanctions upon you. If the Owner happens to be a licensed General Contractor, the law says they didn’t need the disclosure in the first place.
2. Construction Defect Disclosure
Next is the Construction Defect Disclosure requirement. If you have a contract with an Owner, you’re obligated to include a certain disclosure that informs the Owner that to the extent there is a construction defect, Chapter 558 of Florida Statues will control. Chapter 558 in short is a procedure that exists prior to a lawsuit to give the Owner and the contract an opportunity to hopefully resolve claims regarding construction defects.
3. Recovery Fund Disclosure
Next is the Recovery Fund Disclosure. This disclosure is required for any contract between a contractor and residential owner in excess of $2,500. The disclosure informs the owner that to the extent the contractor violates one of the provisions of Chapter 489, which includes financial mismanagement or any type of fraud committed by the contractor. The homeowner may be able to recover his or her loses from the recovery fund – a fund maintained by the state solely for the purpose of compensating owners because of the violations of contractors.
4. Municipal Disclosures
Finally, are certain Municipal Disclosures. Certain counties and even certain cities require that you include certain provisions in your residential construction contracts. As an example, Miami-Dade County in Chapter 10-33 of their municipal codes requires that a contractor signing a contract with a residential owner needs to include approximately one entire page of disclosures. These disclosures are in addition to, not in lieu of all of the other disclosures we talked about.
If you do the type of construction work that requires these disclosures, it’s imperative that you take the time to amend your contracts so that your contracts comply with the law.