Construction Contracts – Mandatory Provisions

Lien Warnings: The Florida Statutes have requirements for mandatory provisions in contracts.  For example, under Florida Statutes Section 713.015, any contract between an owner and a contractor with a value greater than $2,500 related to improvements to real property consisting of single or multiple family dwellings up to and including four units, must contain a notice provision printed in no less than 12-point font, capitalized, boldfaced type on the front page of the contract or on a separate page, dated and signed by the owner.  The specific mandatory notice language is set forth in the statute.  The notice language essentially advises the owner that those who provide work and materials to improve the owner’s property and are not paid in full have a right to claim a lien against the property, even if the owner has paid the general contractor in full.  The notice also advises the owner that the property subject to such a lien may be sold to satisfy the lien.  The notice also suggests that the owner should protect itself prior to making payment to the contractor by obtaining lien releases from anyone who has served a Notice to Owner.  The notice also warns that the lien law is complex and suggests that the owner consult an attorney.  If the contract is written, the mandatory notice must be set forth within the contract document. If the contract is oral or implied, the notice must be provided in a document referencing the contract.  According to Section 713.015, the failure to provide this written notice does not bar the enforcement of a lien against an owner who has not been adversely affected by the lack of such written notice.
            Construction Defects:  Florida Statutes Chapter 558 sets forth a detailed pre-suit procedure for construction defect claims, involving notices of defects, inspections, responses to alleged defects and denials or offers to repair or pay for repairs.  Pursuant to Florida Statutes Section 558.05 unless the parties to a contract agree that Chapter 558 does not apply, any written contract executed after October 1, 2009, for improvement of real property entered into between an owner and a contractor, or between an owner and a design professional, must contain substantially the following notice: “ANY CLAIMS FOR CONSTRUCTION DEFECTS ARE SUBJECT TO THE NOTICE AND CURE PROVISIONS OF CHAPTER 558, FLORIDA STATUTES.” The statute provides that failure to include this notice in the contract does not subject the contracting owner, contractor, or design professional to any penalty, because the purpose of the contractual notice is to promote awareness of the procedure, not to be a penalty.
Florida Homeowners’ Construction Recovery Fund:  Florida Statutes Section 489.1425 requires that any contract for repair, restoration, improvement, or construction to residential real property must contain a written statement explaining the consumer’s rights under the Florida Homeowner’s Recovery Fund, except where the value of all labor and materials does not exceed $2,500. The required written statement advises the owner that payment may be available from the recovery fund if the owner loses money due to violations of law committed by a licensed contractor.  The written statement also advises the owner further information on the recovery fund is available from the Florida Construction Industry Licensing Board (the “board”) and provides the board’s contact information. The board may fine the contractor up to $500 for the first failure to include in a contract the required written statement.  Upon finding a second or subsequent failure to include the written statement, the board will fine the contractor $1,000 per violation.  The fines collected for these violations are to be deposited into the recovery fund.
Escrow of Funds:  Florida Statutes Section 501.1375 requires an escrow deposit from the prospective buyer of up to 10% of the purchase price of a one-family or two-family residential dwelling to be built by the builder.  The escrow requirement can be waived by contract.  A contract subject to this section must contain the following notice to the owner:
“THE BUYER OF A ONE-FAMILY OR TWO-FAMILY RESIDENTIAL DWELLING UNIT HAS THE RIGHT TO HAVE ALL DEPOSIT FUNDS (UP TO 10 PERCENT OF THE PURCHASE PRICE) DEPOSITED IN AN ESCROW ACCOUNT. THIS RIGHT MAY BE WAIVED, IN WRITING, BY THE BUYER.”