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Following the lead of many states, Florida announced over $23 million in funding to communities in the Northwest part of the state, signaling the state government’s willingness to bring a boost to its infrastructure in the aftermath of recent years’ storm damage.
A huge focus of the Biden administration, public construction spending has a lot of money coming its way in the next decade — over a trillion dollars at the federal level — and contractors all around the country are poised to take advantage of the opportunities that are sure to follow as more government entities continue to receive funding.
Public works construction can provide major boosts for contractors, but that doesn’t mean there aren’t also challenges in these projects — contractors deal with payment issues on these projects just as much as they deal with them on private ones.
Payment protection on Florida public projects
For the most part, contractors aren’t able to file mechanics liens on public projects, unlike with private projects. The federal government — along with many states — prohibits private entities from claiming an interest in public property.
Rather than filing mechanics liens, public construction projects are required to secure a payment bond prior to work beginning. If there’s a problem with slow payment or nonpayment, contractors file payment claims against the bond rather than foreclosing on public property.
Florida’s Little Miller Act sets some basic requirements for which projects are covered, with the general rule of thumb being that any project over $100,000 funded by a government entity has to have a payment bond.
The Miller Act provides directly for this payment protection at the federal level, and most states have their own version of it — laws often referred to as “Little Miller Acts.” Due to this, being knowledgeable of each state’s Miller Act requirements is a major priority for any company that’s been hired for a public works project.
However, these protections aren’t universal; generally, Miller Act protection only extends to first and second-tier contractors, excluding general contractors, and subcontractors and suppliers lower than second-tier.
Florida bond claims
In Florida, with the exception of the general contractor, the same parties who are allowed to file a mechanics lien on a private project are allowed to make a bond claim on a public project. That includes subcontractors, suppliers, equipment lessors, and laborers, as well as design professionals such as architects, engineers, and surveyors. However, suppliers to suppliers usually can’t file a bond claim in Florida, just as they can’t file a mechanics lien claim on private projects.
The specifics of what is covered in the bond can range depending on the type of contract. For construction management or design-build contracts, design and other non-construction services are not covered by the bond if the bond amount does not specifically include them.
There’s a fairly specific, yet simple, range for when parties can file bond claims in the state, as well. To be acceptable, Florida bond claims have to be received more than 45 days after the claimant’s first furnishing of labor and/or materials to the project, but within 90 days of the claimant’s last furnishing of labor and/or materials to the project.
Lawsuits to enforce the claim against the bond must also be filed within one year from the last furnishing — unless a Notice of Contest of Claim is filed, in which case this timeline is reduced to 60 days.
How to file a bond claim in Florida
- Get a copy of the payment bond. The payment bond contains the essential information you’ll need to make a claim, such as the general contractor’s information and the surety information. This can be obtained either from a project’s general contractor directly, or from the government entity funding the work.
- Send a preliminary notice, known in Florida as a Notice to Contractor. This informs the project’s general contractor that a company may make a claim on the payment bond. Florida law only requires this step from companies who don’t have a direct contract with the general contractor, though it can be a helpful step regardless. This must be served no later than 45 days from the first date of furnishing labor and/ or materials.
- Send a Notice of Nonpayment. This needs to be sent to both the general contractor and surety company after 45 days of furnishing labor or materials on a project, but no later than 90 days after the last date of this work. Similar to preliminary notices, Florida law only directly requires this from companies that didn’t contract directly with the project’s prime contractor.
- File a lawsuit against the payment bond. The claimant on a payment bond has one year after last furnishing labor or materials on a project to file a lawsuit to enforce their claim. However, there’s a catch: A prime contractor can file a Notice of Contest of Claim Against the Payment Bond, which gives the claimant only 60 days from receipt to follow through and enforce their claim on the payment bond.
Florida prompt payment laws
Florida has a number of different approaches to legislating prompt payment depending on which government body is contracting the work:
- State projects: Payment to the prime contractor is due 30 days after the public entity receives the request for payment.
- Local projects: For any project that is contracted by a county or municipal government, school board or district, or other political subdivision, payment to the prime contractor has to be made within 25 days of the invoice approval (or 20 days if no approval is needed).
- Department of Transportation projects: FDOT projects are excluded from the same statutes that govern prompt payment for state and local projects; only final payments are regulated, which need to be made to the prime contractor within 75 days of final acceptance.
- For all projects: Subcontractors have to receive payment within 10 days after the prime contractors have received theirs. All other payments down the chain to lower-tiered subcontractors and suppliers must be made within 7 days of the subcontractor’s receipt of payment from the prime contractor.
Late payments come with a financial burden even beyond the mess they can cause. For state projects, late payments have an interest rate of 2% per month, which is also the case on local projects unless there is a higher interest rate specified in the contract. The interest rate on FDOT projects is set by the state CFO.
How to make a Prompt Payment claim in Florida
If the government entity fails to pay the contractor within the applicable time frame, they can then make a claim via the Prompt Payment Act. To file a verified complaint, contractors need to include:
- The contract for the work that was done on a project
- Description of the work done and a statement claiming that the work done matches the contract terms
- The contract price
- If applicable, the amount of the contract already paid
- The amount that hasn’t yet been paid
- A statement that the unpaid portion of the contract has been due for more than 30 days since labor or materials were provided on the project
- A statement that the party withholding payment has received payment for the claimant’s labor and materials more than 30 days prior to the date of the complaint
Florida’s pay-when-paid vs. pay-if-paid clauses
Florida’s pay-when-paid and pay-if-paid provisions are referred to as contingent payment clauses, and they can serve to shift the risk of nonpayment from the general contractor to subcontractors and suppliers.
A properly enforceable pay-if-paid clause can mean that the subcontractor or supplier will not be entitled to any payment until the project’s general contractor is paid. Pay-when-paid clauses are the “less intense” version of a pay-if-paid clause, as they serve to reinforce that payment to the subcontractor has to come within a certain time period following payment to the general contractor; the obligation to pay remains even if the general contractor isn’t paid.
Though these provisions require certain specific language to be enforceable, they are very often enforceable, meaning that subcontractors should exercise caution when given a project featuring one of these clauses.
Recent state legislation has raised protection for Florida public projects
Beyond the state’s implementation of rules which exist in most states (or at the federal level) already, Florida passed new legislation intended to increase protection for contractors working on public projects.
A 2016 law passed by the Florida State Legislature changed the requirements for keeping and providing records on public works projects and specified which documents need to be provided to government agencies.
Additionally, failing to comply with Florida’s prompt payment requirements can have serious consequences for contractors thanks to another new law. In 2021 the State Legislature increased interest penalties for late payments — with these violations also now leading to the suspension of the contractors’ license. This legislation also solidified penalties for contractors who intentionally misuse funds, with violators assuming the risk of being charged with a felony.
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Protect your payment rights on every public project
Though there are a number of guidelines that absolutely need to be followed in order to secure payment rights on public projects, going the extra mile can ensure that you’re completely protected from nonpayment on public projects.
For example, even though it’s not required for all contractors to send a preliminary notice for a bond claim on projects in Florida, it’s a great way for contractors to increase visibility and communication on projects and encourage faster payment. Rather than going through the difficulty of a bond claim, sending a preliminary notice has a good chance of nudging another contractor into payment. The same is true with the state’s Notice of Nonpayment; though it isn’t always required, it provides an excellent extra step in the process that can help avoid an actual bond claim.
Regardless of Florida’s laws surrounding public records, keeping detailed documentation of project work and its details is imperative for any contractor. If documentation is well-maintained, it can allow a contractor to quickly and efficiently make a payment claim.