Getting Paid Fast

Not receiving payment for your work is a principal concern on every job. Especially today, with everyone facing tough economic challenges, it has become a real concern to get paid when you are supposed to. Generally, contractual disputes on construction projects are complicated by the fact that not all of the parties have actually contracted with each other. It is not uncommon for several layers of separation to exist between the persons or entities actually performing the labor, services or providing materials and the owner. The general contractor, architect, or engineer may each contract directly with the owner. The general contractor will in turn then contract with any number of subcontractors, who themselves contract with one or more sub-subcontractors and/or material suppliers. The one constant is that the owner remains responsible for making payments when due. Once paid over, however, the money does not always flow down the chain as it should. This problem becomes more acute as the project nears its end.

One of the many reasons parties hesitate to file a court action to recover money owed is the cost of litigation and the length of time it takes to obtain a final judgment. The Florida Legislature recognized this problem and set out a workable solution providing for swift payment. There is a little known provision of Florida’s Construction Lien Law, Fla. Stat. §713.364, which allows any person who provided labor, services or furnished materials constituting a permanent improvement to real property, on a private project, to get paid the undisputed amount owed on an expedited basis. This provision also awards the prevailing party its reasonable costs and attorney’s fees at trial and on appeal. This last point usually catches the attention of most, because it is generally understood that you cannot recover your costs and attorney’s fees unless you record a lien or such a recovery is in your contract. For those contractors and materialmen who failed to record a lien and who mistakenly omitted an attorney’s fees provision from their contracts, this prevailing party provision in Fla. Stat. §713.364(7) provides the proverbial “hammer” and the needed leverage to assert a forceful claim.

How does this work?

Generally, the cause of action arises once any person has received a payment for work on a project and then fails to make payment to its contractors, subcontractors, sub-subcontractors, laborers or material suppliers within thirty (30) days after the date the labor, services or materials were furnished and payment was due or within 30 days after the date payment was actually received, whichever is later. Requesting a sworn statement of account is a good first step to confirming the amounts paid. Once the complaint is filed, the Court is obligated to set a hearing upon not less than 15 days notice. The only defenses to this action are that payment was not actually received or that a bona fide dispute exists as to what is owed. This is further qualified by the fact that any alleged defense must be proven by competent substantial evidence before the Court at the expedited hearing. If the defenses cannot be proven at that time, then the moving party is entitled to a money judgment for the undisputed amount as well as its reasonable attorney’s fees and costs.

It may take a “village” to successfully complete a construction project, but it only takes one payment hic-up to derail a job. Being aware of your statutory rights to payment may surely come in handy to keep both you and your project on track.

1 Similar relief for public projects is set forth in Fla. Stat. §255.071

Prompt Payment: A Requirement, Not an Option

Florida Statute §255.071 is a little known but potent tool for subcontractors and materialmen. It allows them to seek immediate payment on undisputed contract obligations due on public projects from contractors who have already been paid.

While a contractor may find it preferable for cash flow reasons to simply keep a subcontractor waiting, even after receiving payment for its portion of the work from the municipality or public entity requesting the work, it is neither legal nor smart. Contractors would do well to heed the recent ruling by Florida’s Third District Court of Appeal. The Court made clear that ignoring this statute comes with the penalty of paying accrued interest, attorney’s fees and costs, holding that the subcontractor was “entitled to various immediate remedies” for rapid recovery of the undisputed contract obligations.

And it isn’t just on public jobs that subcontractors have this level of protection. Florida Statute §713.346 provides similar guidelines for contractors performing private work.

It States in Pertinent Part:

Any person who receives payment for constructing or altering permanent improvements to real property shall pay, in accordance with the contract terms, the undisputed contract obligations for labor, services or materials provided on account of such improvements.

Ever mindful of the uneven bargaining position in which most subcontractors and materialmen find themselves, the legislature sought to level the playing field. Florida lien law, along with these statutes, are one way of doing so. Follow the payment dollars, some of them may be yours.

Prompt Payment Statutes

A recent case addressed a little known Florida statute. Fence Masters Inc. v. Zurqui Construction Services Inc. stemmed from a subcontractor’s request for payment on work done to improve public property under a contract with a general contractor. Owed $165,980.90 which the general contractor refused to pay, the subcontractor filed suit and learned during discovery that, in fact, the general contractor had been paid by the owner — the City of Ft. Lauderdale — for all monies due the sub. Alleging a violation of Florida Statute §255.071, the subcontractor sought, but initially lost its request for, a judgment before the trial court. On appeal, the subcontractor was vindicated, when the Third District Court of Appeal agreed with Fence Masters’ lawyers and held that the subcontractor was entitled to various immediate remedies for the rapid recovery of all undisputed contract sums.

Florida Statute §255.071 provides:

(1) Any person, firm or corporation who receives a payment from the state or any county, city or political subdivision of the state, or other public authority, for the construction of a public building, for the prosecution and completion of a public work, or for repairs upon a public building or public work shall pay, in accordance with the contract terms, the undisputed contract obligations for labor, services or materials provided on account of such improvements.

(2) The failure to pay any undisputed obligations for such labor, services or materials within 30 days after the date the labor, services, or materials were furnished and payment for such labor, services or materials became due, or within 30 days after the date payment for such labor, services or materials is received, whichever last occurs, shall entitle any person providing such labor, services, or materials to the procedures specified in subsection (3) and the remedies provided in subsection (4). (2. When dealing with a local government entity, the obligation to pay actually matures within 15 days following receipt of payment.)

What this means, as supported by the Third District Court of Appeal, is that anyone receiving payment from a public entity for work done on a public project is statutorily obligated to pay the labor or material provider for the undisputed contract sum.

Failing to do so within 30 days of receiving payment or the last day the work or material was supplied, subjects one to significant immediate risk. Remedies include the ability to request an accounting from the contractor as to the use of payments received from the owner, the placement of a temporary injunction against the recipient of monies paid by the owner, prejudgment attachment against the contractor, and of course, the recovery of interest as well as accrued attorney’s fees and costs. It should be made clear, however, that these remedies are available only to the extent there is no genuine dispute regarding the contract sum and there is no material breach of the contract by the subcontractor or materialman making the request.

While this decision and the referenced statute apply to public projects, all is not lost for those working on private contracts. In fact, Florida Statute §713.346 provides similar rights to subcontractors, sub-subcontractors, materialmen and suppliers performing work on nonpublic work.

Florida Statute §713.346 states in pertinent part:

Any person who receives a payment for constructing or altering permanent improvements to real property shall pay, in accordance with the contract terms, the undisputed contract obligations for labor, services or materials provided on account of such improvements.

A party who believes he or she may not have been timely or properly paid can utilize other provisions of Florida’s construction lien laws allowing for a party to request a copy of the owner’s contract and a statement of amounts due or about to become due (otherwise known as a Request for Sworn Statement of Account under Florida Statute §713.346). This leaves the party receiving the request with 30 days to respond under oath. One holding a valid lien can also make written demand on the owner for a written statement under oath showing the amount of all direct contracts and the amount paid by or on behalf of the owner for all labor, services, and materials furnished, the dates of payments made, and the estimated costs for completion. The same rules apply; the owner has 30 days to supply a responsive statement under oath. These responses can set the stage for a lienor’s prompt payment request.

The lesson is clear for contractors — pay promptly any undisputed construction obligation or suffer serious consequences later.