Florida Construction Law Authority : Florida Construction Lawyer & Attorney: Becker & Poliakoff Law Firm: Construction Law

Florida’s lien law specifically prohibits a lienor from improperly increasing the amount of its lien beyond the amount owed or including amounts for work not performed. See Section 713.31, Florida Statutes. The lien law even imposes penalties against a lienor for recording such a "fraudulent lien." At the same time, however, the lien law provides that a lien will not be found "fraudulent" if the lienor’s actions in recording it were in good faith. It is important for a lienor to be aware, though, that "good faith" will only go so far in avoiding a finding that its lien is fraudulent.

The lien that a consultant recorded against Mr. and Mrs. Medellin’s home provides an example of how good faith will not always prevent a court from finding a lien is fraudulent. Medellin v. MLA Consulting, Inc., 69 So. 3d 372 (Fla. 5th DCA 2011). While the trial court found that the consultant’s lien was not fraudulent, because the consultant believed in good faith that the amount was due, the appellate court disagreed. The appellate court clarified the good faith exception to be limited to preventing a lien from being deemed fraudulent when the issue is whether the amount included in the lien was due, and there was a good faith dispute over whether it was due. The appellate court found that the Medellins’ consultant’s good faith was irrelevant because the issue was whether the amount included in the consultant’s lien was for work that entitled the consultant to record a lien against the Medellins’ house. Because the work underlying the disputed amount in the consultant’s lien was not lienable, the appellate court found that the consultant’s lien was fraudulent.

With the Medellin court’s holding, it is now even more important that a lienor be sure the amounts it is including in its lien are for work that will properly support a lien.

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No one likes admitting that they have a problem. That holds true even with regard to construction-related problems. However, as Mr. and Mrs. Hochberg found out the hard way, if an owner is able to see the symptoms of a construction defect but does not promptly investigate the cause, determine the entities responsible and file a lawsuit to hold the responsible entities accountable, the owner risks losing his or her claim. Hochberg v. Thomas Carter Painting, Inc., 63 So. 3d 861 (Fla. 3d DCA 2011).

While the Florida Legislature tried to protect owners from losing their claims for construction defects that are not easily seen or obvious (are “latent”) by specifically addressing latent defects in Section 95.11(3)(c), Florida Statutes, the protection provided by the language is limited. Generally, owners have four years in which to file a lawsuit based on a construction defect claim. The latent defect language in Section 95.11(3)(c) delays the start of the four years until a latent defect is either discovered or should have been discovered.  

When the Hochbergs moved into their new home they could smell mold and found damp carpeting in their master bedroom. The Hochbergs hired a mold remediation company and an engineer to investigate the problems, but based on the results of that investigation, only filed an action against the general contractor. Eventually, the Hochbergs were able to identify the specific subcontractor that performed the defective work which allowed water to enter their home and they filed a lawsuit against it as well.

By that time, though, the Court found that too much time had passed since the Hochbergs were on notice of the problem and they could no longer pursue the subcontractor. The Court held that “Florida law is clear that ‘where there is an obvious manifestation of a defect, notice will be inferred at the time of manifestation regardless of whether the [owner] has knowledge of the exact nature of the defect.’” (emphasis added). Based on the Court’s holding, if an owner fails to promptly investigate symptoms of a construction defect (as examples, smells, wet carpet, cracks in walls), the owner not only runs the risk of a small problem becoming bigger and more expensive to fix, but also runs the risk of losing his or her right to hold the responsible entities accountable. The Hochbergs learned that lesson the hard way. Other owners can avoid losing their claims by learning from the Hochbergs’ experience, admitting that they have a problem, promptly investigating it and timely filing lawsuits against the responsible entities.

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With the legislative session in full swing it appears that  SB 1196 and its companion HB 1013, are being pushed to wipe out common law implied warranties relating to residential construction.  These bills are reaction to the recent opinion in Lakeview Reserve Homeowners v. Maronda Homes, Inc., 48 So. 3d 902 (Fla. 5th DCA 2010).

As noted previously, these bills:

-        - would negatively impact homeowner associations, condominiums, co-ops, timeshares and mobile home parks as the term “home” is an all-encompassing term.

-        - Ignores the fact that most new residential dwellings are built in planned communities

-        -  Expose homeowners to liability to repair defective construction and design for which they have no recourse

-       - Homeowners who fail to pay their assessments for these repairs can have their homes foreclosed upon

-       - Will result in homeowners being stuck with shoddy construction with no remedy

SB 1196 has been noticed for public hearing before the community affairs committee on Monday January 23, 2012, at 10am, and per the agenda will be item #16 to be considered. Once past this committee the bill will move to the judiciary and budget committees, although those hearings have not yet been noticed. 

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As the new year begins, and the legislative session draws near, the issue of common law implied warranties and the recent opinion in Lakeview Reserve Homeowners v. Maronda Homes, Inc., 48 So. 3d 902 (Fla. 5th DCA 2010), remain on the legislative agenda. Concerns are being raised as to whether Maronda creates a cause of action for “strict liability” against developers with regard to construction defect claims for improvements to subdivision common areas. For the reasons below it is my opinion that it does not and that my prior analysis as to why SB 1196 is a bad bill for homeowners remains accurate.

Under the existing case law, an implied warranty of fitness and merchantability:

- extends to the purchase of new homes, Gable v. Silver, 258 So. 2d 11 (Fla. 4th DCA 1972); 

- means that a home will be constructed in accordance with the specifications contained in

the building plans filed with and approved by the appropriate governmental authority; David v. B&J Holding Corp., 349 So. 2d 676 (Fla. 3d DCA 1977);

- requires substantial compliance with plans and specifications approved by the governmental authority, of compliance with applicable building codes, and of fitness and merchantability. Drexel Properties, Inc. v. Bay Colony Club Condominium, Inc., 406 So. 2d 515 (Fla. 4th DCA 1981);

- the developer is also responsible for a subcontractor’s improper substitution of materials. Biscayne Roofing Co. v. Palmetto Fairway Condominium Association, Inc., 418 So. 2d 1109 (Fla. 3d DCA 1982);

- a developer is liable for failing to construct according to plans or in a workmanlike or  acceptable manner. Schmeck v. Sea Oats Condominium Association, Inc., 441 So. 2d 1092 (Fla. 5th DCA 1983).

Under Florida law, the doctrine of “strict liability” applies to products,  but does not apply to structural improvements to real property. Plaza v. Fisher Development, Inc., 971 So. 2d 918 (Fla. 3d DCA 2007).

Strict Liability (in the products context) means:

- negligence as a matter of law or negligence per se, the effect of which is to remove the burden from the user of proving specific acts of negligence; and  

- is distinct from breach of implied warranty of merchantability, for injury to a user of the product or a bystander, West v. Caterpillar Tractor Company, Inc.,  336 So. 2d 80 (Fla.  1976).

An action sounding in strict liability requires the plaintiff to prove that (1) a product (2) produced by a manufacturer (3) was defective or created an unreasonably dangerous condition (4) that proximately caused (5) injury. Edward M. Chadbourne, Inc. v. Vaughn, 491 So.2d 551 (Fla. 1986).

The Second DCA distinguished the two standards in rejecting a strict liability analysis, in the context of homes or condominiums, and determining that the implied warranty of fitness and merchantability did not extend to subsequent purchasers.  Strathmore Riverside Villas Condominium Assoc., Inc. v. Paver Development Corp., 369 So. 2d 971 (Fla. 2d DCA  1979).

 The court’s opinion in Lakeview Reserve Homeowners v. Maronda Homes did not create a new cause of action in “strict liability”, but only determined that the homeowners (and their association) could maintain an action for breach of the implied warranties of fitness for a particular purpose, merchantability, and habitability arising out of the defective design or construction of common areas which provide essential services to the homes.

Accordingly, the argument being that Lakeview Reserve Homeowners v. Maronda Homes creates a cause of action for “strict liability” against developers for common area improvements is simply not accurate.

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People sometimes assume the law is a certain way because they believe it would be “unfair” for it to be any other way. Well, the law is not always “fair.” 

To make sure you do not make an incorrect assumption regarding the recoverability of home office overhead damages from a government entity, you should be aware of Martin County v. Polivka Paving. In that case, Polivka constructed soccer fields for Martin County. Because of undisclosed soil conditions, the project took much longer and cost much more than expected. Polivka was successful at the trial court level, with the jury awarding Polivka its contract balance, its additional costs incurred as a result of the challenging soil conditions and a portion of its home office overhead for the amount of time the project took to complete beyond what was expected.   

The appeals court held firm to the letter of the law, however, and struck the jury’s award of home office overhead damages. The appeals court held that the law says a contractor may not recover home office overhead costs from the government unless the government fully suspends the contractor, the government required the contractor to stand by during the suspension and the contractor was unable to take on additional work that would have absorbed the home office overhead otherwise paid for by the suspended project. Despite Polivka’s damages expert explaining how he determined the amount of Polivka’s unabsorbed home office overhead attributable to the impact of the undisclosed soil conditions, the appeals court said the damages are not recoverable because Polivka was not completely idle during the extended period. Given the court’s ruling, Polivka (and contractors like it in the future) will not be allowed to recover any of its home office overhead, no matter how great the impact was or how high of a percentage the project was of its overall business.

The moral of the story is, never assume what the law is. It might not always be what you think would be “fair” and sometimes the courts are unwilling to be swayed from the letter of the law by arguments about what would be equitable in a given situation.

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In the recent case of Lakeview Reserve Homeowners v. Maronda Homes, 48 So. 3d 902 (Fla. 5th DCA 2010), Florida's 5th District Court of Appeal found that a homeowner's association had a claim for breach of common law implied warranties of fitness and merchantability against a builder/developer for defects in the roadways, drainage systems, retention ponds and underground pipes.  The Fifth District found that these items immediately supported the homes by making them "habitable, and so, fit for its intended purpose." 

In reaching this decision, the Fifth District certified conflict with the Fourth District's 1985 opinion of Port Sewall Harbor & Tennis Club Owners, Association, Inc. v. First Federal Savings and Loan Association of Martin County, 463 So. 2d 530 (Fla. 4th DCA 1985).  The Port Sewall case relied on the Florida Supreme Court's prior decision in Conklin v. Hurley, 428 So. 2d 654 (Fla. 1983), which the Fifth District distinguished.

In light of the conflict between the appellate districts, the Florida Supreme Court has accepted the Lakevie Reserve case for review.  In accepting the case for review it is expected that the Supreme Court will resolve the conflict one way or the other.  It should be a very interesting case for those developing or living in homeowner's associations and one with broad implications as to the scope of these implied warranties. 

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If you want work done for free, hire an unlicensed contractor.  The 3rd District Court of Appeals rendered a not-final opinion October 27th articulating a very clear message: unlicensed contractors need not be paid. 
 
In Master Tech Satellite, Inc., etc. v. Mastec North America, Inc., etc. (No. 3D08-2509 October 27, 2010), Master Tech was hired by Mastec North America to install residential digital satellite systems for Mastec's customers.  Mastec North America apparently did not pay for the work.  Master Tech then sued to recover on the contract in an amount in excess of $300,000.00.  During the course of discovery, it was brought to light that the work performed by Master Tech involved at least some electrical work and required a license.  It was also discovered that, in fact, Master Tech did not hold such a license.  The trial court granted summary judgment for defendant based on Sec.489.532, Florida Statutes (2004), which makes an unlicensed contractor’s contracts unenforceable. Since Master Tech was not licensed as an electrical contractor, and the installation work required an electrical contractor's license, the 3rd DCA affirmed trial court's ruling that the unlicensed contractor's contracts are unenforceable and Master Tech was not entitled to recover anything.

What makes this case even more interesting is pointed out in the dissent. The dissenting judge notes that Mastec North America collected payment for the unlicensed work from its customers, but did not have to pay the contractor for the installation work. As a result, Mastec North America benefitted from a six figure windfall.  Such a windfall is a relatively unusual result, but may go to show just how serious the Court's are about stopping unlicensed contracting in Florida.

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