By C. Popham Decunto, Esq.
In 1992, the Florida Legislature passed a statute to protect contractors and other lienors who continue to provide labor, material and services to construction projects without knowing that the funding for the project had ceased. The legislature realized that it was unfair that contractors would unwittingly continue to provide improvements when the funding had been cut off, which could allow the lender to benefit from those improvements without having to pay for them.
Therefore, under certain circumstances, Fla. Stat. § 713.3471(2), provides contractors and other lienors a cause of action for damages against a lender who has failed to provide written notice to them that it has decided to cease further advances under a construction loan agreement.
Within five days of any decision to cease further advances under a construction loan, a lender must give written notice of that decision to the contractor and any other lienor who has given the lender notice.
If the lender fails to provide this written notice, it is liable for the actual value of the materials and direct labor costs furnished plus 15 percent for overhead profit and other costs from the date the written notice should have been served through the date it is served.
However, the lender’s liability is capped at the amount of undisbursed funds it held at the time it decided to cease further advances under the construction loan.
Mrs. C. Popham Decunto is an associate with Durant & Schoeppel, P.A., in Jacksonville. She specializes in commercial and construction litigation. and may be reached at 6550 St. Augustine Rd., Ste. 105, Jacksonville, Florida 32217, 652-2600, or email [email protected]