We’ve all been there (I say all because I was a contractor before I ever thought of becoming a lawyer). You complete a job, submit the invoice, and wait for payment. And wait. Eventually the homeowner or contractor tells you they are not going to pay you the balance due until you come out and fix some minor, punch-list-worthy issue. If you balk, you may get paid nothing. If you make the fix, you may open up Pandora’s box of never-ending repairs. The person holding the money never feels pressure to at least pay you something, because what are you going to do? Sue them rather than make the repair?
Yes. Because you may not actually have to go through an entire lawsuit to get paid the undisputed amounts you are owed. Section 713.346, Florida Statutes, provides an expedited process to determine, and require payment of, undisputed contract sums where a person or entity has received money to pay for construction services but has not yet paid for those construction services. Wait—before your eyes glaze over—here is what that means in plain English.
Assume a homeowner hires you to do work and she has a bank providing the construction financing or maybe an insurance company paying for the work. Your contract with the homeowner is for $10,000.00. You complete the work and the homeowner receives the $10,000.00 from the bank or insurance company but does not pay you anything. Maybe the homeowner claims that your work is incomplete or that in finishing your work, you damaged some other part of her home. Maybe that incomplete work or damage is only worth about $1,000.00, but the homeowner is withholding the full $10,000.00 as leverage to force you to complete that work (and maybe more).
Under § 713.346, Florida Statutes, you can sue and request a hearing to determine the amount you are owed in as little as 15 days. At that hearing, the court will determine the undisputed amount you are owed—in the example above, approximately $9,000.00—and require the homeowner immediately pay those sums. If the homeowner does not, then the court can provide for writs of garnishment, injunctions, and any other legal or equitable remedy to ensure prompt payment of the undisputed amount. And while the example above references a homeowner, § 713.346, Florida Statutes, would also apply where a general contractor received funds from a bank or property owner and failed to pay a subcontractor, where a subcontractor received funds from a general contractor and failed to pay a material supplier, or any similar arrangement.
Sounds like a great solution as compared to a long, drawn-out lawsuit, right? There are a few things of which you should be aware. First, you cannot take action under § 713.346, Florida Statutes, until the payment has been past due for 30 days or the person received the funds with which to pay you and has not paid for 30 days—whichever is later. Again, in our example, you could not sue the homeowner under § 713.346, Florida Statutes, if the insurance company took 90 days from when you finished the work to issue payment to the homeowner. You would have to wait 30 days from when the homeowner received the money.
Second, while the hearing contemplated under § 713.346, Florida Statutes, can be had quickly; it is essentially a miniature trial. The court will take evidence from both sides, and make a determination as to how much of the money due is undisputed. Expert testimony may be required to resolve questions over whether work is complete, defective, or caused other damage. If the homeowner (or general contractor, subcontractor, person withholding payment, etc...) presents evidence of defective work, breach of contract, or otherwise creates a dispute regarding the amount actually due, the court may not order payment in full or any payment. At that point, the case would proceed just like any other litigation.
There is very little guidance under the law as to what constitutes a “dispute” over the amount due under a contract. In one reported case, the court determined that of $165,980.95 owed under a subcontract, only $95,972.35 could be immediately awarded under a statute similar to § 713.346, Florida Statutes, where the general contractor presented evidence that its damages were approximately $70,000.00. Those damages included back charges, expenses, and warranty work.
While not every payment dispute will warrant an action under § 713.346, Florida Statutes, its purpose is to prevent a homeowner or contractor from withholding significant sums of money to extract additional work over minor claims. Fortunately, § 713.346, Florida Statutes, does award attorneys’ fees to the prevailing party. And just knowing that this relief is available may provide contractors with additional negotiating leverage to resolve disputes early and without litigation.
This article was originally published on July 1, 2016 in the Tampa Bay Builders Association’s Building Barometer. You can click here to access the original version.