Prompt Payment Statutes Are Alive and Well: Payment Law

by | Mar 31, 2010 | Bonds, Getting Paid, Liens

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.

Prompt Payment Statutes Are Alive and Well: Payment Law

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.

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