The decision makes clear that homeowners seeking to recover from the fund must take reasonable, and diligent steps to recover on a judgment or award, even if those efforts seem like they will be fruitless, before the Construction Industry Licensing Board can disburse an award from the Homeowners Construction Recovery Fund.
Demaria v. Construction Industry Licensing Board arises from a 2004 contract between a contractor and a homeowner, pursuant to which the contractor was build a new home for the homeowner. During construction, disputes arose between the parties over improper change orders and payments and the homeowners ultimately filed a lawsuit against the contractor. During that litigation, the contractor’s company filed for Chapter 11 bankruptcy protection, automatically staying the litigation.
The homeowners made no effort to intervene in the bankruptcy, and nothing else happened in the civil lawsuit between the homeowner and the contractor until 2014, when the circuit court administratively closed the case. The homeowners never obtained a judgment against the contractor through their lawsuit. In 2015, a final decree was entered in the bankruptcy, discharging the homeowner’s cause of action. Shortly after that the homeowners applied for a disbursement from Florida’s Homeowners Construction Recovery Fund. In 2020, the Construction Industry Licensing Board entered an order approving the homeowners’ claim and awarding them the $25,000.00 from the fund—maximum amount allowed. The contractor appealed the award.
On appeal, the First District Court of Appeal reversed the award. In reaching its decision, the appellate court first outlined the requirements imposed on a homeowner in seeking reimbursement from the Homeowners Construction Recovery Fund. The court expressly recognized that “claimant[s], then, must put in some legwork before coming to the recovery fund.” (emphasis in original).
This legwork includes obtaining a judgment, arbitration award, or restitution order that “specifies the actual damages suffered as a consequence of [the licensing] violation.” Further, the claimant must apply any other amounts from the contractor or any other source to the damages or restitution awarded, before seeking money from the recovery fund. Further, the claimant must first “exhaust[ ] the limits of any available bond, cash bond, surety, guarantee, warranty, letter of credit, or policy of insurance,” and must show diligence in attempting to execute on any judgment obtained. And where a contractor has filed for bankruptcy, the claimant must try to have the claim against the contractor removed from the bankruptcy proceedings and establish that he or she was unable to do so, before the failure to obtain a judgment against the contractor can be excused.
The court concluded by characterizing the recovery fund as “a last resort for a claimant to get paid on losses that already have been liquidated in another forum..
The appellate court then shifted to the homeowners’ actions. The court first recognized that the homeowners did “nothing at all while the bankruptcy proceeding continued” and let their “state court suit just sit dormant.” The court also found that even if the homeowners’ felt the efforts in bankruptcy court would be “fruitless” they still must make the attempt in order to recover any amount from the Homeowners Construction Recovery Fund. Because that did not happen here, the court concluded that the award from the recovery fund was made without proper statutory authorization and must be set aside. Specifically, the court stated “At bottom, the board's final order granting the [homeowners] an award out of the recovery fund -- in the absence of a civil judgment, arbitration award, or restitution order -- was rendered without statutory authorization [and should be set aside].”
There are two key takeaways from this decision. The first, for contractors, is that awards from the recovery fund can be challenged, and where appropriate, should be. Contractors who have an award made from the fund as a result of their violation of Chapter 489, Florida Statutes, must pay back the amount paid out by the fund, plus interest before their license can be reinstated. Further, amounts paid out by the fund cannot be discharged by a contractor through bankruptcy.
The second, for homeowners, is that the Homeowners Construction Recovery Fund truly is a last resort, and that a great deal of effort needs to be put forth before seeking to recover from the fund.