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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The general rule is that bid protests must be timely filed in order to be considered. Most government agencies in Florida have specific deadlines for which a bid protest must be filed. These deadlines are expressed in terms of days, or even hours, and may specify the exact method that the protest or notice of protest must be submitted to be considered timely filed. A Protest filed after the deadline is usually considered a waiver of the protestor’s rights. 

There are, however, scenarios where a protest technically filed after the deadline may still be considered. This is exemplified in the recent case Pro Tech Monitoring, Inc. v. State Department of Corrections. There, a protesting bidder was supposed to hand-deliver its formal bid protest petition to the clerk by a certain date. The agency’s clerk, however, did not stamp the petition in until the next day, and the agency determined the protest was untimely. However, the protestor had tried to deliver the protest before the deadline, but could not reach the clerk’s office because the public was not allowed in the area of the building where the clerk’s office was located. The person delivering the protest gave it to the security guard at the restricted area, and even requested and received a time-stamped copy of it. Under those circumstances, an appellate court determined that the protest was in fact timely filed as a matter of law.

The court also relied in part on the doctrine of equitable tolling, which in layman’s terms occurs when someone has been either misled, lulled into inaction, or has been prevented from asserting his rights in some extraordinary way by the government agency. This may come up when a protestor detrimentally relies on a representation made by an agency or a representative thereof. In this case, the agency’s policy of not allowing the public to reach the clerk’s office prevented the protestor from fully complying with the agency’s interpretation of the rule.

The acceptance of protests filed after a deadline are the exception, and are not the rule. Agencies, however, generally have discretion to accept late filed protests and might do so under the right circumstances.

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It’s no secret that cash is tight these days and unfortunately that translates into payment problems on many jobs, including high-profile public projects. Don’t fall into the trap of overconfidence in your ability to get paid based solely on history or good relations with your customers. Owners, contractors and subcontractors alike are all feeling the pinch of reduced work, higher collateral requirements for bonding and rising insurance costs, just to name a few. That customer with whom you’ve worked well for years may be experiencing serious cash problems of which you aren’t aware, leaving you to hold the bag if you haven’t properly perfected your claims while on the job.

Whenever a claim for payment of additional money arises, whether by unsigned change order, delays, unforeseen site conditions, or otherwise, immediately review your contract to determine your notice requirements. Many contracts require written notice of the claim within a specified deadline, containing specified details and mailed in a specified manner to specified individuals. Failure to comply may deprive you of entitlement to payment. 

Make sure you send a Notice to Owner or, if the job is bonded, a Notice to Contractor within 45 days of your first day of work on the job to preserve you ability to perfect lien or bond claims within 90 days of your last day of work if necessary.

Always watch out for circumstances whereby notices like these must be served and don’t refrain from doing so simply because you’ve worked for years with your good customer. These types of notices don’t harm anyone, don’t suggest any distrust and aren’t antagonistic. But if you fail to send them and cash on the job dries up before you’re paid, you can never go back and you may be left out in the rain.

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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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I wanted to address key terms for any contruction contract.  Although some of these may seem mind numbingly obvious, I have seen contracts over the years that failed to address very critical points.

1. Scope of Work - What are you trying to get done?  For more detail go here.

2. Contract Price - What is the price and how do we determine that? It depends on the type of contract.  Does the price include permitting, bonding or additional insurance?

3. Start Date and End Date - When do you want the work to start? When should it be completed?

4. Insurance - How much and who has to carry it?

5. Indeminfication - Who has to hold who harmless?  

6. Dispute Resolution - Are you agreeing to arbitration or litigation in the case of a dispute?  Which disputes are subject to these provisions? What jurisdiction will these disputes be resolved in? Does the prevailing party get their legal fees back? Where do legal notices go?

7. Record keeping by the contractor - Especially important in Unit Price and Time and Materials contracts.

8. Warranties - How long do they run? Who provides them? Do they cover materials, installation or both?

9.  Access - How will the project be accessed? Will units be occupied and how is that addressed?

10. Identifying the Owner's Representative - Who will be dealing with the contractor on a daily basis and what is the scope of their authority?

This is not meant to be an exhaustive list as each project has their own individual concerns.  However, the list should give an owner an idea of how complex even the most simple contract can be.

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There are several types of contracts which are used in between owners and contractors. The primary ones are lump sum contracts, unit price contracts, time and materials, construction manager and design-build.

Lump Sum:

A lump sum contract is the most basic agreement between a contractor and owner. The contractor agrees to provide specified services for a specific price. The owner agrees to pay the price upon completion of the work or according to an agreed payment schedule. T lump sum includes the costs of labor and materials and the contractor’s overhead and profit. The benefits of a lump sum contract for the owner are primarily that the costs are known at the outset of the project and the contractor has the risk if additional materials or time is needed.

Unit Price:

In a unit price contract a fixed price is established for each unit of work. A common example for condominium associations is a unit price for cubic feet of concrete repair on a balcony renovation project. This is useful as the price is set for the that unit of work.  Like a lump sum contract, the contractor is paid an agreed upon price, regardless of the actual cost to do the work. Unlike a lump sum contract the agreed upon price is usually for a small component of the work and not the entire project so the final cost may not be known at outset since the contract quantities at bid time are only estimates. Any contract for cost plus should require the contractor to keep careful records so as to be able to show quantities.

Time and Materials:

In a time and materials contract the contractor charges an hourly rate for labor, and there can be a certain percentage added to the materials and labor for profit. The perceived benefit for the owner is that they are not paying for any fluff that a contractor may build into the lump sum, and contractors are ensured that they will a fair profit. However, this contract shifts the price risks completely from the contractor to the owner. In the absence of checks and balances for the types of materials used and the actual time spent, including a guaranteed maximum price the owner could be giving the contractor a blank check.

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In this market, more and more contractors are being asked to sign agreements, letters or statements of understanding with the owner’s construction lender before work begins. The purpose of these agreements is to give the lender some level of control over the work and corresponding costs, but it could come at some peril to the contractor. The terms of these agreements vary widely from lender to lender, but they generally restrict change orders absent lender approval, commit the contractor to the draw schedule and payment requirements in the loan document regardless of what the underlying construction contract provides, and sometimes require the contractor to indemnify the lender for costs should anybody lien the job. The incentive to sign these agreements is high, especially now when contractors are looking for work wherever they can. However, resist the temptation and make a good business decision. I recently saw a contractor lose a claim worth more than $300,000 because of a bad letter they signed for the lender containing some of these provisions. Absent that letter, which didn’t even look like a formal agreement to the contractor, the contractor could have been paid. Now, the contractor won’t.

When the owner approaches you and tells you the lender needs you to sign a certification, letter or memo of understanding, you need to realize it could have the force of a contract. Treat it like a contract. Get a copy of the loan document and ensure its terms are consistent with your construction contract. Negotiate terms with which you’re uncomfortable, get legal counsel if necessary and, if you can’t shake the feeling that the agreement is too restrictive or burdensome, consider walking from the deal. The contractor who lost $300,000 because of his letter to the lender sure wishes he did.

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As often happens on construction projects, disputes arise between the contracting parties. One party may claim they have not been paid. The other party may claim the work has not been done or was improperly done. What happens when the parties are unable to amicably resolve their differences and their contract has an arbitration clause? Must the parties arbitrate their dispute or can their dispute be decided in a court of law?

Florida courts generally find arbitration provisions enforceable. Public policy considerations favor arbitration. When practical, all doubts regarding the scope of an arbitration clause should be resolved in favor of arbitration. In determining whether there should be arbitration in a particular case, courts generally consider three matters: (1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether the right to arbitration was waived.

Whether a valid agreement to arbitrate exists will typically be determined by the terms of the parties’ contract. In this respect, the parties should ensure the contract makes clear that arbitration shall be the legal mechanism to resolve their disputes.

Whether an arbitrable issue exists will also typically be determined by the language in the contract; including what matters are defined to be subject to arbitration. For example, is the arbitration agreement limited to claims arising out of alleged breaches of the contract? Are tort-type claims within the scope of the arbitration agreement? The parties should be mindful of fully indentifying the scope of issues they wish to have arbitrated.

Whether the right to arbitration was waived is generally examined in the totality of the circumstances, and whether a party has acted inconsistently with its right to arbitrate. Filing an answer in a lawsuit without seeking arbitration, or active participation in a lawsuit, may be viewed as inconsistent with and act as a waiver of the right to arbitrate.

In sum, a carefully worded arbitration provision will go a long way toward defining what types of disputes will and will not be subject to arbitration. The party seeking arbitration also needs to be mindful that it does not take any actions that are inconsistent with their arbitration rights.

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Most of my practice concerns the representation of Owners. I am routinely involved in the preparation of construction contracts for re-roofing of structures, repainting of structures, major alterations and site improvements. Although it is very basic, owners need to take care to make sure the contracts they sign for these types of construction services protect them. Here are a couple of tips:

• If it is a one page contract (perhaps with fine print on the reverse side) handed to you by the contractor, it is probably not going to be adequate to protect the owner. 

• If the contract does not have a specific commencement and completion date with those time requirements being of the essence of the contract, then in most occasions the contract is not adequate. 

• If the contract does not require the contractor to have insurance and list the types of insurance and the amounts of coverage which are to be carried, then it is not adequate.

• The contract should have a provision providing for prevailing party attorneys’ fees and specify the exclusive venue (location) where any lawsuit arising out of the contract would have to be filed. 

These are only a few of the items that an owner should be looking for in contracts. Perhaps the most important thing of all is to make sure your lawyer reviews the contract before you sign it.

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It is an easy enough question, what is the scope of your project? For example it may be simply to reroof the building. However, what materials should be used, what will be done with damaged plywood decking, does the existing roof need to be pulled off or can it be roofed over? These are all basic questions that need to be addressed from what appeared to be a simple question.

As the owner, the scope is very important for purposes of knowing what your expectations are and that the contractor understands those expectations.  The scope will also impact the price. In our reroof example, what is the contractor doing with the air conditioner stands on the flat roof? Are they being removed and put back, or the being removed and new ones put in? Can the work be done with the air conditioning units in place?  Whether a reroof or any construction work the scope of the work needs to be clear and defined for everyone's benefit.

Ensure that the terms of the contract pertaining to the scope are worded clearly enough that you as the owner understand it. Make sure the contract addresses the scope of work. Make sure the scope is what you understand it to be. If you do no see something in the scope that you believe should be there then bring it up to your design team and make sure it is put it in. Do not leave it out and assume that everyone is on the same page.  Next week we will be discussing types of construction contracts.

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 In choosing a Contractor, often the Owner chooses a Contractor through a bidding process. Sometimes the Owner engages a Contractor on their own.  However the Contractor is contracted it is important to spell out the details of the terms. Courts will not protect an Owner from a bad deal that the Owner has voluntarily entered. This means that those multimillion dollar one page contracts floating around (I have seen a number of them over the years) will be enforced by a court if the Owner does not live up to the terms, no matter how one sided.

In the bidding process, the Owner, with the help of the Design Professional, sends out a bid packet to various contractors and invites them to bid on the project.  The Owner and Design Professional then evaluate the bids and review the responsiveness of the bid, the responsibleness of the bids (is the bidder lowballing now in hopes of issuing change orders later, or has a bidder missed key components of the work) and of course the price itself. Once the Contractor is chosen the Owner must negotiate the terms of the contract with the Contractor. The relationship between the Owner and the Contractor is the subject of a separate contract from that of the Owner-Design Professional.  Often the form of this contract is issued with the bid package.

The basic terms of the project should address what work will be done, the start date, end date and the amounts to be paid. We will address the specific terms in a future blog. However, this contract should also address what is included or excluded in the price. Are permit costs included? What specific materials should be used? Are specific subcontractors being requested? Or more likely, are specific subcontractors being excluded? These items need to be spelled out in the contract before the work begins on the project. The Owner does not want to wait until work begins as at that point most negotiating leverage has been lost.

There are forms of agreement between the Owner and Contractor. The AIA form most often used is the AIA 101, but depending on the project other AIA documents could be used as well. One key thing to note in the use of the AIA A101 is that the A201 is specifically incorporated by reference.  The A201 is a 40+ page general conditions which is rarely, if ever, provided by the the  contractor to the owner.  This is often not nefarious as a lot of contractors do not realize that the A201 is incorporated by reference.

In addition to the AIA there also exists the Engineering Joint Contract Documents  Committee(EJCDC) or Associated General Contractors of America (AGC) forms. In addition, some contractors have homegrown forms that they may feel comfortable working from. Remember all of these documents are forms. These are a starting point in negotiations of terms.  Just because a term appears in the form does not mean the owner is obligated to accept it.  As noted above, the parties are stuck with the terms they negotiate, no matter how bad they may be.  Next week we will talk about the scope of the project.

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Once the owner has decided to undertake a project they generally retain the services of a design professional. The design professional is the engineer or architect hired by the owner to be used at various points throughout the project. General discussions between the owner and design professional should include the owner’s expectations of the projects, budgets, specific materials which need to be used or special considerations about the project. In both renovations and new construction these discussions would also include aesthetic considerations.

 Although all these discussions may happen, the scope of the design professional’s relationship with the owner is that which is spelled out in the contract between the owner and design professionals. An owner in retaining the design professional needs to define his expectations of the design professional, and those expectations should be reduced to a written contract. As an owner, if you want the design professional to provide contract administration then you must ask for it in the contract. This is true for any service being provided by the design professional. 

The contract should identify at which points the design professional will be involved: schematics, design, coordination of other design professionals, role with sub consultants, and contract administration. In addition the contract should address the standard of care, insurance requirements, right to use instruments of service and potential termination by either party. No one enters a contract with the expectation that it will go awry, but such possibilities must be contemplated and addressed early on before the parties move forward.

Some of the more commonly used forms are the AIA B-101 (2007) and the AIA B141 and B151 (1997). Although these form documents may provide a starting point, there are plenty of areas where additional information needs to be included so that the owner is adequately protected.  Remember, a form contract is just a starting point.

Next week I will discuss the  Owner-Contractor relationship.

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  This is part 1 of our series on Construction Contracting for the owner.  Once you have decided to begin a construction project, whether this project is a reroof, concrete restoration, painting, repaving or anything else, there are generally 3 main groups involved.

The first of these groups is the owner. The owner is the person or entity on whose behalf the work is being done. The types of owners range from an individual, development entity, hotel, condominium association, homeowner's association or a governmental agency.  Although the owner may be using a bank to finance the construction, the owner is the party generally responsible for ensuring payment to the other 2 groups.

The second group is generally the design professionals. This group consists of the engineer or architect hired by the owner to prepare any drawings or specifications for the work to be done.  In larger projects, the owner may contract with an Architect who then hires various subconsultants (geotechnical engineer, structural engineer, waterproofing consultant, etc) who for our discussion form the design group.  Design professionals are generally involved at the beginning of a project. They are often engaged to help with the schematic phase and the design phase and may help an owner with budget and cost issues. However, the scope of the design professionals relationship with the owner is that which is spelled out in the contract between the owner and design professionals.

The third group to a construction project is the contractor group. This group consists of the general contractor or construction manager, with whom the owner is in privity, subcontractors, subsubcontractors and suppliers. The owner has a contract with the general contractor who is responsible to the owner and directs the subcontractors. The type of work to be done, the time frame for the work, the cost of the work and every consideration between the owner and the contractor group is that which is spelled out in this contract.

Although these are the general groups to a construction project some variations do exist.  For example, in a design-build setting the design group and the contractor group are together on one team.  Every project is different and needs to be treated that way.  Next week I will be discussing the Owner - Design Professional relationship in part 2 of our series on Construction Contracting for the Owner.

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Whether new construction, renovations or repairs, as an owner you have decided to begin a construction project.  

Before you start any work some basic questions must be answered: What are you trying to accomplish?  What is your budget?  What type of warranties are you receiving?  I will attempt to outline some of these issues in a new weeklu series on construction contracting for the owner.  The series will consist of the following topics: 

1. Parties to a construction project

2. The Owner - Design Professional relationship

3. The Owner - Contractor relationship

4. Scope of work

5. Types of contracts

6. Essential Terms of construction contracts

7. Closing out the project

If you are an owner, and that may be an individual, hotel, condominium or homeowner's association, I hope that you will be able to take some valuable information away from this series as you begin your construction project.  

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 A frequent occurrence on construction projects (once the economy turns and new projects actually begin again) is when one party presents a proposed contract to another for signature and the recipient fails to sign it, but begins working on the job anyway. You may be surprised to know you may still be bound to the contract terms even if you never sign the agreement. The contract may bind you if your acts, conduct or performance on the job suggest you agreed to its terms. In other words, even if you don’t sign a contract, you may nevertheless be bound to its provisions if you act as though the contract was in force (submit pay requests in accordance with the contract’s draw schedule, conduct job site meetings as called for in the contract, submit change order requests to the person identified in the contract to receive them, etc). In fact, case law goes so far as to make an arbitration clause in an unsigned contract binding if the court finds the parties consented to other terms in the agreement. Therefore, beware of the unsigned proposed contract. Either sign and return it or make your suggested changes to it, but if you simply ignore it, you do so at your own risk!

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How do you monitor a public agency's review and evaluation of bids and proposals? What right do you have to observe evaluation committees when proposals are evaluated? The answers to these questions provide assistance to bidders who want to actively monitor the award process.

First, Florida Statutes, Chapter 119, known as the Public Records law provides that bids and proposals are generally open to public inspection and copying at the time of a notice of a decision or intended decision, or within 10 days after the bid or proposal opening, whichever is earlier. While there are some limited exceptions to this general rule, bidders that want to obtain information as to their competitor's bids or proposals can do so by making a public records request. Additionally, bidders may make public records requests for bid tabulation sheets, memorandum or other documents that reflect a review and analysis of the bids and proposals and the evaluation process. This way, you can become familiar with your competitor's terms and conditions, and stay on top of the review process. By doing so, you will also be better positioned to assess whether there are any grounds to protest. Protests will be the subject of future postings.

Next, bidders are also entitled to sit in and observe the deliberations of evaluation committee meetings and the meetings of governing bodies. The Florida Sunshine Law (Florida Statutes, Section 286.011) generally requires that meetings of public bodies and committees with delegated authority to evaluate bids and proposals be open to the public. This means that the body or committee is required to provide public notice of scheduled meetings, and that bidders are permitted to attend the meeting. It does not necessarily mean that bidders will be afforded the right to speak at the meeting, but at a minimum, you have the right to attend as a member of the public.

Similar to obtaining public records, attending public meetings affords bidders the opportunity to stay up to speed on the review and evaluation process and may provide critical information in the event the award is protested. Note, you may not be the one to protest, but what if a competitor does and you were the selected bidder? If you attended the public meetings, you may be better positioned to assist the agency with the defense of the award.

Thus, it is important to stay on top of the award process. This is true in case you want to challenge the decision, but also in case you need to defend it.

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A recent Fourth District Court of Appeal Case, Florida Hurricane Protection and Awning Company, Inc. v. Pastina, shows the importance of defining the scope of a prevailing party attorneys’ fee provision in contracts.  In Pastina, the attorneys’ fee provision in the contract allowed for the contractor to recover its attorneys’ fees when the contractor had to sue for collection of any amounts owed.  There was no mention of any situation where the owner could recover fees.  Subsequently, a dispute arose between the parties and the owner prevailed at trial and sought to recover his attorneys’ fees.  The trial court held that under Section 57.105(7), Florida Statutes, the unilateral attorneys’ fee provision in the contract became bilateral and allowed the homeowner to recover his attorney’s fees.  The Circuit Court, acting in its appellate capacity, upheld that decision.

The Fourth District Court of Appeal, en banc, held that although the statutory section may apply, that the action between the parties was beyond the scope of the attorneys’ fee provision.  That is, since the action did not arise out of the contractor’s collection efforts of unpaid sums, that the prevailing fee provision did not apply and the owner could make no claim under it.  This opinion was by a majority of the en banc panel, and elicited two separate dissents.

The opinion means that in negotiating contracts, parties need to be careful as to the scope of the prevailing party attorneys’ fee provision.  If the parties intend that in any and all potential litigation between them has the prevailing party with its right to claim its attorneys’ fees then the language should be modified to state that.  Unfortunately for the owner in the Pastina case, it appears that the contractor had a standard form that the owner signed and did not have recourse to either negotiate the terms or did not have the sophistication to negotiate those terms.  Presumably the Court would have found that the attorneys’ fee provision would have been similarly inapplicable had the contractor been the prevailing party in this case, but because the issue was not raised the Court did not deal with that issue.  However, this again points to the need to have a very specific and detailed review of any contracts, including the attorneys’ fee provision, before such contracts are executed.

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