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How Does Interest Work on a Florida Construction Lien?


No Florida contractor wants to file a construction lien. But sometimes this is a necessary step to receive payment from a delinquent homeowner. And if it becomes necessary to foreclose on a construction lien, it is critical for you as the contractor to carefully understand the terms of your contract with the delinquent property owner and how they may affect your rights in court.

Distinguishing Between Finance Charges and Late Fees in Construction Contracts

For example, many construction contracts provide for late-payment or delinquency fees. Florida law also allows a judgment creditor to collect a certain amount of interest on the amount owed. These are separate charges, however, and it is important not to confuse late fees with interest charges.

A recent decision from the Florida First District Court of Appeals, Fernandez v. Manning Building Supplies, Inc., helps to explain this distinction. This case involves a construction lien filed by a builder against two of its customers. The lien was filed by a company that provided building materials for the customers’ project to their general contractor.

When the supplier was not paid, it filed a lien against the property and sued both the contractor and the customers. A judge in Duval County ultimately granted judgment on the lien in the amount of $25,157.64. The court also ordered the customers to pay 18 percent annual interest on the unpaid judgment.

The judge based the interest figure on the contract between the customers and the general contractor, which stated that “a delinquent account will cause credit to be suspended and a [1.5] percent monthly delinquent charge to be added” to any unpaid balance. In other words, the judge assumed that the parties agreed to interest of 1.5 percent per month, or 18 percent per year.

But the First District said that was incorrect. What the contract provided for was a “delinquency charge” rather than a “finance charge.” The latter refers to the “cost of consumer credit as a dollar amount.” It is an “additional payment, usually in the form of interest, paid by a retail buyer for the privilege of purchasing goods or services in installments.” The 1.5 percent fee required by this contract, in contrast, is only paid by the customers in the event of a default–it was not a “cost of credit per se.”

Now, this does not mean the buyers are off the hook entirely for interest payments. The court can still assess such interest. But it must reflect the statutory interest rate, which is established quarterly by Florida’s chief financial officer. For example, for court judgments effective as of October 1, 2019, a judgment creditor is entitled to a statutory annual interest rate of 6.89 percent.

Speak with a Florida Construction Lawyer Today

Late fees and interest payments are important tools to compensate builders and other construction subcontractors who are faced with delinquent customers. But as the case above illustrates, it is important to carefully review every aspect of your contract so there is no misunderstanding as to your legal rights. If you need advice or assistance from a qualified Florida construction lien attorney, contact Linkhorst Law Firm, P.A., today to schedule a consultation.




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