Failure to Perform
So you’ve decided to improve your real property. You’ve selected a contractor to perform the work for you and he hands you an agreement which you sign and write out a check as a deposit for 10% of the contract price. Ninety days later you have not seen the contractor you turned your hard earned money over too. What can you now do?
In 1995, following Hurricane Andrew, the Florida Legislature revised the Homebuyers Protection Act. The act provided that a contractor who receives more than 10 percent of the contract price as a deposit for the repair, restoration or improvement to real property must apply for permits (if required) within 30 days of receiving the deposit. More importantly, the contractor must begin working within 90 days after all permits have been obtained (provided that you did not agree to some other time to begin working).
The key is the percentage of the deposit handed over to the contractor. In the situation stated in the first paragraph of this article, the contractor accepted 10 percent making the requirement to apply for a building permit within 30 days and begin work within 90 days of receiving his permit not applicable. It would seem therefore, that if you want to have some control over your contractor’s timeliness in starting to perform, consider giving at least 10.5 percent as your deposit. The reason for this suggestion is in the event your contractor fails to apply for a permit within 30 days or begin building within 90 days of obtaining the required permits, you will be in position to control the outcome of your project by using Florida Statutes to terminate your agreement with your contractor.
The Act gives additional protection in the event your contractor fails to perform any work during a 90 day period of time (assuming the Owner of the property is not the cause of the work being stopped) you may be able to show that the contractor intended to defraud you of those funds paid by you that exceed than the value of the work performed. To take advantage of this part of the Act, you must send a certified letter to the contractor at the address shown on your contract or found on the building permit after 60 days of no work being done. The contractor’s stoppage of work must not be the result of your termination of the contract or a material breach of the contract. In your letter to the contractor, you must tell him that he has performed no work for the past 60 days and that he must recommence construction within 30 days after the date of mailing the letter. If the contractor fails to restart working, it will be presumed by statute that the contractor intended to defraud you and he may be found guilty of criminal and civil theft. This acts as a powerful incentive for the contractor to actively stay on the job.
Suppose you and your contractor have a falling out and you elect to terminate the agreement by firing the contractor. Your contractor can file a claim of lien against your property for the value of the work performed up to the termination. The value of the work can also include the profit associated with the work performed. The downside for the homeowner is that your contractor can foreclose on your property to recover the value in the work and profit lost. In essence you could lose your home (even if its homestead property) to a forced sale by a court of law. However, your contractor cannot begin foreclosing on your property if he or she does not, at least 5 days before filing a foreclosure suit, send to you a Contractors Affidavit telling you of the names of all the companies or individuals that have not been paid including the amounts they are due. Your contractor must have recorded his claim of lien within 90 days of the last day he furnished labor or materials to you and “served” you with a copy of the claim of lien within 15 days of it being recorded in the Public Records.
In the case of Subcontractors, sub-subcontractors and materialmen, they must have previously “served” you with a Notice Owner no later than 45 days from the first delivery of materials or labor to the work site and recorded the claim of lien within 90 days of delivering the last of the materials or labor. Like a contractor they must also serve you with a copy of the claim of lien within 15 days of its recording in the public records of the county where the property is located.
The filing of a claim of lien against your property can have a rippling effect to your attempts to complete the improvements to your property. The effects can include the loss of funding from the financial institution who loaned you the money to make your improvements as well as having to restart the permitting process with your local building departments. In essence, the legislature has provided the persons who improve your property with a very powerful tool to assist them in getting paid.
Knowing this powerful tool exists makes it extremely important to avoid terminating your contract with your contractor if at all possible. It is highly recommended that before terminating your agreement that you have a heart-to-heart talk with your contractor about performance and expectations. However, if you are concerned with the quality of work, lack of performance and can get no satisfaction in your talk with your contractor, you should terminate your agreement and move-on as long as you are prepared for some of the possible consequences that can occur prior to terminating your contractor.
Next week I’ll cover some of the tools the homeowner has to offset a claim of lien.