Earlier this year in Bartlett Fiber Inc. v. Optical Telecommunications, Inc, a trial court in Miami-Dade County granted summary judgment in favor of an integrated low-voltage contractor based on a Florida statute requiring certain undisputed amounts to be paid to subcontractors once paid for. The decision confirms the narrow application of section 713.346, Florida Statutes. Before jumping into the details of the case, it is helpful have a little background on this statute.
Section 713.346, Florida Statutes, is intended to provide relief to contractors and subcontractors when a property owner or contractor has received payment for work performed by the downstream contractor, but is refusing to pay it. A classic example of this is the dime-holding-up-a-dollar problem: Subcontractor performs $10,000.00 worth of work, but there is an issue with the work that will cost $500.00 to fix. The general contractor is paid for subcontractor’s work, but tells subcontractor it will not pay it anything until the $500.00 issue is resolved. Under section 713.346, Florida Statutes, the subcontractor can bring an action against the general contractor, and request an expedited evidentiary hearing to obtain payment of the undisputed amounts right away—in this example, about $9,500.00.
Section 713.346, Florida Statutes, provides a right to recover attorneys’ fees and a host of pre-judgment enforcement options if the general contractor does not promptly pay the undisputed amounts. And while this example is between a general contractor and subcontractor, 713.346 applies to circumstances where a property owner receives payment for work from a bank or insurance provider, and fails to pay a direct contractor as well.
Shifting back to the case in Miami-Dade county, in that case the telecommunications integrator hired a subcontractor to help it build a telecommunications and access network at a condominium complex that the integrator would manage and service. While the work was performed at the condominium association’s property, the agreement between the integrator and subcontractor and the integrator and the association was clear that the integrator would own the completed work and that the association played no role in the construction of the system. After the system was completed, the integrator was paid a monthly fee by the association for maintenance and use of the system.
When the subcontractor was not paid in full for its work, it sued the integrator under section 713.346, Florida Statutes, arguing that because the integrator was going to receive payments from the association as a result of the work performed, in part, by the subcontractor, 713.346 applied. The trial court disagreed and entered summary judgment in favor of the integrator.
In reaching this conclusion, the trial court noted that before section 713.346, Florida Statutes, applied, the integrator must first have received payment for “constructing or altering permanent improvements to real property.” The trial court determined this had not occurred, since the contracts between all parties made clear that the integrator retained ownership of the entire system, despite it being installed at the association’s property. The trial court felt this was confirmed by the fact that the association did not pay the integrator for the system itself, but rather only paid a monthly fee for the use/maintenance of the system.
There are a couple of practical takeaways from this decision that contractors, especially those in the low voltage industry, can apply to their businesses now. First, it is interesting that the trial court relies on the ownership of the completed work to influence its decision on whether the work improves real property such that section 713.346, Florida Statutes, applies. If you are a subcontractor on a project, ask to see a copy of the contract between the owner and the primary contractor, especially if your subcontract requires you to comply with certain terms of that contract. This will shed light on who owns the work being performed and whether Chapter 713, Florida Statutes, will apply.
Second, the benefits of Florida’s Construction Lien Laws only apply to certain, specific circumstances. While this means that there are times they will not apply to your benefit, it also means that even if they do not apply, you likely have other remedies available to you. While the subcontractor in this case lost under 713.346, Florida Statutes, it had other claims in the litigation that carried on. Do not be discouraged just because you lose a lien right or other right under Chapter 713, Florida Statutes.