CONTRACTORS SHOULD NOT FORGET TO DELIVER CONTRACTOR’S FINAL PAYMENT AFFIDAVIT

If you are a contractor and entered into a contract with an owner, then you need to serve the owner with a Contractor’s Final Payment Affidavit at least 5 days before filing a lien foreclosure lawsuit. Fla. Stat. s. 713.06(3)(d). Many times, when I am preparing a lien for a contractor, I like to work with the contractor on the Contractor’s Final Payment Affidavit at the same time as the lien to (for lack of a better phrase) kill two birds with one stone. This way, both the lien and Contractors’ Final Payment Affidavit can be served on the owner at the same time and the contractor has perfected its right to foreclose on the lien when it is ready to do so.

As Florida Statute s. 713.06(3)(d) states:

The contractor shall have no lien or right of action against the owner for labor, services, or materials furnished under the direct contract while in default for not giving the owner the affidavit; however, the negligent inclusion or omission of any information in the affidavit which has not prejudiced the owner does not constitute a default that operates to defeat an otherwise valid lien. The contractor shall execute the affidavit and deliver it to the owner at least 5 days before instituting an action as a prerequisite to the institution of any action to enforce his or her lien under this chapter, even if the final payment has not become due because the contract is terminated for a reason other than completion and regardless of whether the contractor has any lienors working under him or her or not.

Failing to serve the Contractor’s Final Payment Affidavit can be hugely detrimental to an otherwise valid lien. Without serving the Contractor’s Final Payment Affidavit, the lien foreclosure lawsuit is not proper and should be dismissed.

For example, in Puya v. Superior Pools, Spas & Waterfalls, Inc., 902 So.2d 973 (Fla. 4^th DCA 2005), a swimming pool contractor hired by a homeowner filed a lien foreclosure lawsuit and received a foreclosure judgment in its favor. There was one huge problem. The contractor never served a Contractor’s Final Payment Affidavit 5 days before filing the lawsuit. The Fourth District reversed the foreclosure judgment because the contractor’s failure to serve the Contractor’s Final Payment Affidavit deprived the contractor of the right to foreclose on the lien: “Where a contractor fails to timely furnish a final payment affidavit, the owner is generally entitled to dismissal of the contractor’s foreclosure lawsuit.” Puya, 902 So.2d at 974. See also Nichols v. Michael D. Eicholtz, Enterprise, 750 So.2d 719 (Fla. 5^th DCA 2000) (affirming trial court’s dismissal of lien foreclosure action where contractor failed to properly provide contractor’s final payment affidavit).

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

QUICK NOTE: PRIOR ACTS EXCLUSION IN INSURANCE POLICY

Posted on May 21, 2017 by David Adelstein Posted in Insurance | Tagged claims made, claims made policy, prior acts coverage, prior acts exclusion, retroactive date

As an insured, it is important to understand the prior acts exclusion in your liability insurance policy. The prior acts exclusion bars coverage for claims that arise out of an act prior to the policy period or specified date in the policy. Knowing this, an insured typically can get some prior acts coverage to cover claims that arise out of an act that precedes the policy period (e.g., after a retroactive date). Perhaps it is not full prior acts coverage (covering claims that arise out of acts that occur at any time) but coverage for claims arising out of an act after a retroactive date (date earlier than the policy period). This becomes important, particularly with claims made policies (such as professional liability policies or directors and officers liability policies) since these policies are triggered by a claim made during the policy period. With the prior acts exclusion or even with the retroactive date, if the claim arose out an act that pre-dates the policy period or retroactive date, the insurer has an argument that the policy does not cover the claim.

A recent decision (discussed here) pertaining to a directors and officers liability policy shows the application of the prior acts exclusion and how courts broadly construe “arising out of” language in the exclusion. In other words, in the recent decision, even though the claim pertained to a wrongful act that occurred during the policy, the underlying act that made it a wrongful act arose out of acts that occurred prior to the policy period. Thus, the court broadly construing “arising out of” language, maintained that the prior acts exclusion barred coverage for the directors and officers claim.

COMPLY AND UNDERSTAND CONTRACTUAL CONDITIONS PRECEDENT

Posted on May 18, 2017 by David Adelstein Posted in Contract Drafting | Tagged condition precedent, contract condition precedent, contractual condition precedent

Contracts oftentimes contain conditions precedent to payment or another affirmative obligation. The condition precedent needs to occur to trigger a party’s obligation to perform. If the condition precedent does not occur, then the obligation to perform is never triggered.

Contracting parties need to understand and appreciate conditions precedent to perform in their contract. This ensures that they perform a condition precedent to trigger another party’s obligation to perform or they know that their obligation to perform is not triggered until the opposing party performs a condition precedent.

The recent ruling in University Housing by Dayco Corp. v. Foch, 42 Fla. L. Weekly D1122a (Fla. 3d DCA 2017) exemplifies the importance of understanding conditions precedent to an affirmative contractual obligation. In this case, parties entered into an agreement where party “A” was required to form a new development company and obtain financing to build a student housing complex. Party “B”, when the financing (loan) was in place, was to transfer certain property to the newly formed development company. Party A forming the new development company and obtaining financing was a condition precedent to Party B transferring certain real property to the new development company.

Party A did not obtain the financing. And, naturally, Party B did not transfer property to the new development company contending that the procurement of financing was a condition precedent to its obligation to transfer property. The Third District, affirming the trial court, agreed with Party B that Party B’s obligation to transfer property to the development company was never triggered because Party A did not comply with a contractual condition precedent. As the court summed up a condition precedent:

Under well established contract law, a condition precedent is a condition which calls for the performance of an act after a contract is entered into, upon the performance or happening of which its obligation to perform is made to depend…. Conditions precedent to an obligation to perform are those acts or events, which occur subsequently to the making of a contract, that must occur before there is a right to immediate performance and before there is a breach of contractual duty.

University of Housing by Dayco Corp., supra (internal quotations and citations omitted).

NEED CONTINUING EDUCATION CREDIT IN FLORIDA? CONSIDER THESE COURSES

Posted on May 14, 2017 by David Adelstein Posted in Uncategorized | Tagged breakfast-and-learn, contract risk, delay, delay allocation, effective project documentation, effective project management, lunch-and-learn, project documentation

Are you a contractor and need continuing education credit? I recently got three one-house courses approved by Florida’s Construction Industry Licensing Board. These one-hour courses are designed for live breakfast-and-learn or lunch-and-learn sessions. They are designed for practical application on key issues facing all in construction. The courses are as follows:

1) Delay! The Project is Late – What do You do and how do You Allocate the Delay?;

2) Contract Risk Considerations; and

3) Effective Project Documentation & Management.

Please reach out to me if you are interested in learning more about these live presentations including whether you think your employees can benefit from a breakfast-and-learn or lunch-and-learn.