If enacted, contractors licensed for less than five years, or contracting in emergency areas within 18 months following the emergency, or that had been disciplined within the last five years would be required to escrow any deposit of $10,000.00 or higher. Failure to do so would be a violation of Chapter 489, Florida Statutes, and be a felony.
House Bill 1563 amends three sections of Florida law to create a new escrow requirement for certain contractors on residential projects, and make it both a licensing violation and a crime for failing to comply. The proposed law would also require certain court costs related to convictions for violations to be contributed to the Florida Homeowners’ Construction Recovery Fund.
The most substantial changes are to 713.345, Florida Statutes, which is amended to add the bulk of the new statute as follows
(2)(a) As used in this subsection, the term:
1. "Substantial completion" means performance that is nearly equivalent to that which was contracted for and when only minor, corrective, or warranty work remains.
2. "Designated contractor or qualified business" means a contractor who is certified or registered under chapter 489 or a business organization qualified by a contractor who is certified or registered under chapter 489 who:
a. Has been certified, registered, or qualified for less than 5 years;
b. Contracts for improvements to residential real property within an area in which a state of emergency has been declared under s. 252.36 for a hurricane within 18 months after the date of the declaration; or
c. Has been disciplined by the Construction Industry Licensing Board or the Electrical Contractors' Licensing Board within the previous 5 years for failing to comply with this subsection or s. 489.126.
(b) A designated contractor or qualified business that receives a payment of $10,000 or more prior to commencement pursuant to a contract for improvements to residential real property must, within 3 business days after receipt, place such payment in an escrow account with a savings and loan association, bank, or trust company located in the state; an attorney who is a member in good standing with The Florida Bar; or a real estate broker licensed in the state, unless such escrow requirement is waived in writing by the owner of the residential real property. If such escrow is waived in writing by the owner of the residential real property, the contractor must provide a copy of a performance bond if required under subparagraph 5.
1. Unless the contract specifies where such payment must be deposited, the designated contractor or qualified business must, within 10 business days after a deposit has been made, inform the owner of the residential real property in writing of the name of the depository institution, attorney, or real estate broker with whom the funds have been deposited.
2. The designated contractor or qualified business may keep funds received from different owners in the same account if the designated contractor or qualified business has financial or accounting records that clearly show how the funds deposited were allocated to each owner.
3. A depository institution, an attorney, or a real estate broker who receives a payment in an amount of $10,000 or more from a designated contractor or qualified business under this subsection for improvements to residential real property is not required to inquire into the nature of any deposits to or withdrawals from the escrow account or to ensure that any withdrawals from such account are used for a specific purpose as required by a contract. A deposit into the escrow account remains the property of the owner of the residential real property except as otherwise provided in this subsection.
4. A designated contractor or qualified business may withdraw funds from the escrow account before the substantial completion of work in the following circumstances:
a. Under the terms of a payment schedule agreed to in the contract between the designated contractor or qualified business and the owner of the residential real property;
b. When required to make payments to subcontractors or for materials related to the contracted job in order to comply with subsection (1); or
c. If the owner of such property violates the contract, but only if the amount withdrawn by the designated contractor or qualified business covers reasonable costs plus liquidated damages not to exceed $500.
5. If the escrow requirement is waived in writing by the owner of the residential real property, a designated contractor or qualified business must obtain a performance bond equal to the value of the contract and provide proof of such bond to the property owner before commencing or continuing the project.
6. A designated contractor or qualified business has control over the disbursement of funds in escrow upon substantial completion of the contract, or any portion that is specifically accounted for in the contract.
(c) The owner of the residential real property may deliver by certified mail, return receipt requested, a written demand to the address listed in the contract for an accounting report of the funds paid to the designated contractor or qualified business. If the address of the designated contractor or qualified business is not provided in the contract, or a written contract or agreement does not exist, the owner must deliver by certified mail, return receipt requested, the written demand to the address that is listed for the designated contractor or qualified business with the Department of Business and Professional Regulation for licensing purposes. Within 60 days after receipt of such demand, the designated contractor or qualified business must provide the owner with an accounting record indicating all payments made to and from the designated contractor or qualified business, including those that were made to subcontractors and for purchased materials, by certified mail, return receipt requested.
(d) The failure of a designated contractor or qualified business to respond to an owner's written demand for an accounting report as required under paragraph (c) creates a rebuttable presumption that a violation was willful.
(e) This subsection does not apply to any of the following:
1. A contract for hourly labor provided by a contractor certified or registered under chapter 489 or a business organization qualified by a contractor certified or registered under chapter 489.
2. A contractor certified or registered under chapter 489 or a business organization qualified by a contractor certified or registered under chapter 489 who owns the real property upon which the improvement or construction is to be completed.
3. A cost-plus contract.
(f) If the value of a contract or addenda thereto is more than $100,000 for a contract for improvements to residential real property, a contractor certified or registered under chapter 489 or a business organization qualified by a contractor certified or registered under chapter 489, must obtain a performance bond equal to the value of the contract and provide proof of such bond to the property owner before commencing or continuing the project.
(g) A contractor certified or registered under chapter 489 or a business organization qualified by a contractor certified or registered under chapter 489 commits a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084, if the contractor or qualified business willfully fails to place funds in an escrow account as required under this subsection.
(h) If a contractor or qualified business pleads guilty or nolo contendere to, or is found guilty of, regardless of adjudication, a violation of paragraph (g), the licensee is subject to discipline under s. 489.129(1)(s).
489.129, Florida Statutes, is also amended to make it a licensing violation to fail to comply with the new statute, as follows:
(s) Committing a violation of s. 713.345(2). If a contractor or qualified business licensed by the board under this chapter pleads guilty or nolo contendere to, or is found guilty of, regardless of adjudication, an offense in violation of s. 489.126(5)(b), (c), or (d); s. 489.126(6)(b), (c), or (d); or s. 713.345(2)(g), the board and the Electrical Contractors' Licensing Board must suspend all licenses issued to such licensee under this chapter for at least 1 year from the date of the conviction. The suspension required under this paragraph is not exclusive, and the board may impose any additional penalties set forth in this subsection.
938.14 is also created by the statute for the purpose of requiring certain court costs to be assessed against contractors convicted of certain violations and to require that a portion of those costs be transferred to the Florida Homeowners’ Construction Recovery Fund.
If passed, the new law would go into effect on July 1, 2024.