Florida Payment Terms Overview
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- Public Jobs
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Pay When Paid Valid
When unambiguous, a pay when paid provision in Florida can be enforced as a pay-if-paid clause sufficient to bar payment. However, any ambiguously worded clause is treated as a mere timing mechanism such that payment must ultimately be made. DEC Electric, Inc. v. Raphael Constr. Corp., 558 So. 2d 427, 429 (Fla. 1990)
Pay If Paid Valid
Pay f paid clauses are enforceable in Florida if clear and unambiguous, but such clauses are disfavored and require much specificity. In order for the clause to be enforceable, Florida requires the subcontractor to explicitly assume risk of the owner's insolvency, and accept the risk-shfting.
Trust Fund Statute Does Not Exist
Florida does not have a construction trust fund statute that applies to construction projects and payment in the state. However, Florida does have a similar mechanism imposing a fiduciary duty with respect to insurance proceeds. While only applicable to funds from insurance coverage, the rule requires the funs to treated as if held in trust.
Retainage Unregulated
Florida has no specific statutes governing retainage on private projects. Accordingly, retainage is governed by the contract between the parties.
Payment Due to Subs/Suppliers in 30 Days
For Subs & Suppliers, payment required within the later of 30 days after payment is due or 30 days after receipt of invoice, unless otherwise agreed. Payment to GCs is required within 14 days from proper invoice, unless otherwise agreed in contract.
Lien Waivers Regulated
Florida has statutorily provided lien waiver forms, but their use is not mandatory. In Florida, nobody can be forced to use a non-statutory form, but construction participants can agree to use any form they want.
Pay When Paid Valid
When unambiguous, a pay when paid provision in Florida can be enforced as a pay-if-paid clause sufficient to bar payment. However, any ambiguously worded clause is treated as a mere timing mechanism such that payment must ultimately be made. DEC Electric, Inc. v. Raphael Constr. Corp., 558 So. 2d 427, 429 (Fla. 1990)
Pay If Paid Valid
Pay f paid clauses are enforceable in Florida if clear and unambiguous, but such clauses are disfavored and require much specificity. In order for the clause to be enforceable, Florida requires the subcontractor to explicitly assume risk of the owner's insolvency, and accept the risk-shfting.
Trust Fund Statutes Does Not Exist for Public Jobs
A construction trust fund statute does not exist with respect to public jobs in Florida. To the extent that a public job is being undertaken with funds provided from insurance, the same rules applicable to insurance proceeds on private projects would likely apply.
Retainage Cannot Exceed 10%
Florida law mandates that retainage on public projects may not exceed 10%.
Payment Due to Subs/Suppliers in 10 Days
Payment to subs/suppliers due within 10 days after payment received from above, but this is shortened to 7 days after payment received from above with respect to payments to sub-subs. Payment to GCs due 20 days of invoice if invoice does not need specific approval, or within 25 days of approval of invoice if specific approval is required.
Florida has a lot of regulation surrounding construction payment, including rules surrounding retainage, prompt payment, insurance proceeds, lien waivers, no-lien clauses, and more. In fact, Florida has some unique and (at times) contradictory requirements and regulations with respect to construction payment. Knowing what the rules are is important to making sure that payment on a Florida project is smooth and stress free.
It’s very important for construction participants in Florida to carefully review their construction contracts. It’s possible for the payment terms included in even standard contracts to alter and even completely prohibit a participant’s right to payment. Florida allows fairly broad ability for construction participants to alter the general rules and requirements of payment set forth by statute through their specific contracts. Accordingly, it’s imperative for companies on a Florida construction job to make sure they know what they are signing and to be careful to examine contract wording carefully. Additionally, Florida allows this freedom to choose to control lien waivers, as well. Florida has lien waiver forms set out by statute, but allows parties to choose any lien waiver document they want, and agree to non-statutory forms. Since the evidence that non-statutory waivers were agreed to is signature and delivery Florida construction companies should be careful to examine lien waivers prior to exchange.
There are some key laws that regulate the construction payment process in Florida, which include:
- Lien Rights Laws
- Preliminary Notices
- Lien Waivers
- Mechanic Liens
- Bond Claims
- Retainage Laws
- Prompt Payment Laws
While Florida allows broad leeway in modifying the general payment requirements through contract, in some cases there is very specific language that is required. This is particularly true with respect to pay if paid provisions. These clauses are very common in construction contracts and they are even included within the AIA standard documents. However, in Florida, these clauses require very specific language in order to be enforceable. If the language is not explicit, these clauses merely work as a mechanism that can delay the timing of payment, but do not work to withhold it entirely.
However, Florida courts have held that the public policy of ensuring payment of construction participants of all tiers is not as strong as the public policy of allowing freedom of contract. This means, that if the “magic words” are used, though, a contract clause can completely bar the ability of a construction participant to recover payment. Pay if paid provisions are enforceable if they are sufficiently clear and unambiguously shift the risk of non-payment between the contracting parties. DEC Electric, Inc. v. Raphael Constr. Corp., 558 So. 2d 427, 429 (Fla. 1990). This means that it is critical for construction participants in Florida to read their contracts carefully, and make sure they understand what it is they say.
Florida also has additional rules that apply to projects in which payment is to be made from insurance proceeds. While Florida does not have a construction trust fund statute that applies to projects in general, there are similar obligations imposed on parties with respect to insurance funds. That is not the only requirement imposed with respect to insurance proceeds, however.
Florida has recently passed legislation governing “assignment of benefit” contracts with respect to construction work (especially emergency restoration work). This legislation seems to be in direct contradiction of well-established Florida law governing mechanics liens, so it will be interesting to see how it is reconciled.
Waiving lien rights before any work is performed is not allowed in Florida pursuant to §713.20(2) of the Florida lien statute. However, the recently passed AOB legislation purports to specify that:
“Notwithstanding any other provision of law . . . acceptance by an assignee of an assignment agreement is a waiver by the assignee and its subcontractors of claims against a named insured for payments arising from the assignment agreement. The assignee and its subcontractors may not collect or attempt to collect money from an insured, maintain any action at law against an insured, claim a lien on the real property of an insured . . .”
These provisions, and the apparent ability to waive third-party lien rights in the new legislation do not seem like they can live together. In any event, however, it’s important for everyone on a construction project to treat one another fairly. But, when it comes to signing construction contracts in Florida, exchanging payment applications, holding construction funds prior to payment, and eventually, providing or receiving payment itself . . . it’s important to know the rules of the game. This page provides a resource to you to really understand those rules.
