As the 2004 Legislative Session staggered to a close, only a few bills impacting the construction industry emerged. Of the ten bills identified in the Legislative Preview only two made it into law. A number of others came close only to die in the House when the time for consideration ran out. It was not a pretty sight. Following is a summary of each construction related bill that actually passed. Keep in mind that, although it is not expected, they could still be vetoed by the Governor.
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SB 2696 . SB 2696. This bill limits the use of Owner Controlled Insurance Programs (OCIP) on public construction projects. OCIP's may now be used only on projects that exceed $75 million or exceed $30 million for the construction or renovation of two or more public schools in a fiscal year or exceed $10 million for the renovation or construction of one public school, regardless of the fiscal year. In general it provides:
- An OCIP must have completed operations coverage for at least 5 years.
- The requirement of an OCIP must be set out in the specifications and they must include the minimum safety requirements that must be met.
- The deductible may not exceed $1,000,000 and the public entity will be responsible for payment of all the applicable deductibles on any claims.
- The OCIP cannot include surety bonds.
- An insurer providing a commercial general liability policy must offer coverage for liabilities arising out of current or completed operations performed under an OCIP program for a period extending to the applicable statute of limitations.
- Exempted from the bill are FDOT projects and existing projects which had an OCIP in place before October 1, 2004, or were advertised for bid prior to that date.
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HB 1891. This is a glitch bill cleaning up the Right to Cure statute passed by last year's Legislature. This law requires that the owner provide notice and an opportunity for a contractor to repair any alleged defects in construction on residential property. Residential property is defined to include everything from single family to large multi-family condominiums.
This bill clarifies that repair and alteration to the dwelling or any part of the dwelling on real property is included. It has also added common areas of condominiums or cooperatives to the property covered by this law.
Under this law, a suit may not be filed until the claimant has complied with all of the requirements of providing notice and giving an opportunity to cure. In the event that the suit is filed, the court is required to abate it until the claimant comes into compliance.
The law requires 60 days notice before filing an action. This bill added an additional provision requiring at least 120 days notice before an association representing more than 20 owners may file suit.
This bill sets out procedures for conducting inspections, including destructive testing as may be required. It also clarifies the application of the right to cure. It applies to all actions accruing on or after July 1, 2004, and all actions commenced on or after that date. It further makes it clear that for contracts prior to July 1, 2004, the failure to have the required notice does not bar the application of this legislation. It also applies to every contract entered into on or after July 1, 2004, which contains the required notice conspicuously set forth in capital letters. The wording in that notice has also been changed.
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SB 562. This legislation affects continuing education for alarm contractors. It requires two hours on preventing false alarms. It also adds additional requirements for background checks and fingerprinting for the required identification cards. The cards will now expire every two years and an updated background check will be required for renewal.
SB 2132. This bill revamps the Florida Construction Industries Recovery Fund. This is funded by a portion of building permit fees and reimburses a person who has suffered damages as a result of financial mismanagement by a contractor. The right to recover is limited to homeowners. To make this clearer, it has been renamed the Florida Homeowners' Construction Recovery Fund.
Previously there was a requirement that a final judgment from a court be obtained to qualify for the fund. An arbitration award will now be sufficient to qualify as well. This requirement can be waived where the homeowner is unable to obtain a judgment or award due to death or bankruptcy of the contractor. Any claim for recovery must be made within one year of the conclusion of the action by arbitration or final judgment.
The notice to the homeowner of the existence of the fund has been altered slightly to reflect the change of name and to make it clear that it applies to any licensed contractor and not just those licensed by the State. The bill maintains the provision that the failure to have this notice is subject to a fine of $500 for the first violation and $1000 for each subsequent violation. The maximum recovery from the fund is raised to $50,000 in 2005 for any contracts entered into after July 1, 2004.
A false claim is now a third degree felony with a fine of $30,000 or twice the amount of the fraud, whichever is higher.
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HB 1251. The only bill addressing workers' compensation focused on problems with the Joint Underwriters Association or JUA. This is the source of workers' compensation insurance for those who are
unable to obtain it in the commercial market. This fund is not actuarially sound. Money was appropriated to deal with the problem. In addition, a three tier scheme for coverage was established, which divides coverage into categories based on certain criteria including the experience modification factor with increasing rates for each tier.
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In Everett Painting Company, Inc. v. Padula & Wadsworth Construction, Inc. and Travelers Insurance Company, 856 So. 2d 1059 (Fla. 4th DCA 2003) the Fourth District Court of Appeals recently addressed a series of issues relating to a subcontractor's claim on a school project located in Broward County. The contractor and surety had received a summary judgment denying the subcontractor's claims for retainage, change orders, and delays. On review, the appellate court determined that the summary judgment in favor of the contractor was appropriate, since there was a pay-when-paid clause in the contract. However, the court ruled that this was not a defense for the surety. Because this was a public project, the bond was issued under Florida Statute Section 255.05 and therefore could not qualify as a conditional payment bond authorized by Florida Statute Section 713.245. This would have allowed the surety to assert a pay-when-paid defense.
In the second part of its ruling, the court addressed the subcontractor's claim for unpaid change orders. The court upheld the summary judgment in favor of the contractor and surety on the grounds that the subcontractor failed to produce any documentary support of its change order claims. This was required because, as usual, the contract required that change orders be in writing.
On the claim for delays, the Court found that there were contested issues of fact and sent it back to the trial court for trial.
This case reinforces the importance of getting any changes in writing to assure that payment for the work will be made. It also makes clear that pay-when-paid clauses in public works projects are essentially ineffective, since the surety will remain liable even if the contractor is not.
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Under Florida law, an action to enforce a Claim of Lien must be filed within one year of recording the Claim of Lien. Section 713.22 allows this one year time period to be shortened through the use of a Notice of Contest of Lien.
With a Contest of Lien a suit to foreclose a lien must be brought within 60 days of the filing of the Notice of Contest. The case of Pierson D. Construction, Inc. vs. Yudell, 863 So. 2d 413, (Fla. 4th DCA 2004) addresses the relationship between the Notice of Contest of Lien and the service of the Contractor's Final Affidavit. A contractor must serve the Affidavit on the owner at least 5 days before a Complaint to foreclose a lien may be filed. However, the courts have interpreted this to mean that serving the Affidavit before the statute of limitations expires is sufficient.
In this case, the court determined that the Notice of Contest of Lien shortening the statute of limitations from one year to the 60 days for filing the suit also applied to the service of the Affidavit. Since the contractor in this action did not timely serve the Affidavit, the lien foreclosure action was dismissed.
Steve Marlowe will again be teaching seminars for contractors in 2004. For information see our website or contact:
Contractor's Institute
Call (877) 542-3673 for more information or go to the website www.contractorsinstitute.com.
Omni Financial Services
Call (813) 289-2975 for more information or go to the website www.omni-tampabay.com.
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