Understanding Recent Changes to Florida’s Construction Bond Laws
For most private and public projects, general contractors purchase a construction bond. Indeed, Florida law requires such bonds for all public construction contracts exceeding $100,000. The bond serves to guarantee that all subcontractors, workers, and material suppliers are paid. This is especially crucial with respect to public construction projects, as these parties cannot place a lien against public property in the event of non-payment.
In 2019, the Florida legislature passed House Bill 1247, which amended the state’s construction bond laws. The law formally took effect on October 1, 2019. The most notable change brought by HB 1247 is that state law now prescribes a particular form for a “Notice of Nonpayment.” This refers to the notice that a sub-contractor, laborer, or material suppliers must give before pursuing a claim against the construction bond. This notice has always been required, but prior to HB 1247, the state did not provide the exact form the notice must take.
As amended, state law now states that a party making a notice of nonpayment must do so under oath–i.e., before a notary public–and include the following information:
- the name and address of the general contractor;
- the name and address of the surety, i.e., the company that provided the construction bond;
- a description of the labor or services performed, or to be performed, by the claimant;
- the materials furnished, or to be furnished, by the claimant;
- the amounts previously paid on the account;
- the amounts due or to become due; and
- the claimant’s signature and address.
Requiring the claimant to sign the notice under oath provides an important legal protection for the general contractor. Basically, if the notice itself is found to be fraudulent, the claimant loses any right they might have under the construction bond. In this context, HB 1247 declares a notice fraudulent if the claimant “willfully exaggerated the amount unpaid, willfully included a claim for work not performed or materials not furnished for the subject improvement, or prepared the notice with such willful and gross negligence as to amount to a willful exaggeration.” All that said, the law will not punish a claimant for a “minor mistake or error” in the notice or a “good faith dispute” regarding the amount owed.
Contractors Can Now Seek Legal Fees from Insurers Who Do Not Pay
HB 1247 also permits contractors to recover their legal fees in the event they are forced to sue an insurance company that fails to make a required payment under a construction bond. Previously, the law permitted sub-contractors, laborers, material suppliers, and even project owners to recover such fees, but not contractors. However, this amendment only benefits contractors who obtain construction bonds on or after October 1, 2019, the date the legislation took effect.
If you have additional questions or concerns about how recent changes to the law may affect your interests and you would like to speak with an experienced Florida construction lawyer, contact Linkhorst & Hockin, P.A., today to schedule a consultation.