By: Tracy M. Evans, Esq., Associate, Saxon Gilmore & Carraway, P.A.

A recent decision of the First District Court of Appeal of Florida (“First DCA”) holds that Florida Statutes § 713.3471, which is part of Florida’s construction lien law, bars an unpaid contractor from asserting common law claims against a construction lender. An issue of first impression for any Florida appellate court, the holding implies that § 713.3471 provides the sole remedy that unpaid contractors can use against a construction lender who stops making advances under a construction loan.

Tevans2-cropped-sIn the case of Jax Utilities Management, Inc. v. Hancock Bank, 40 Fla. L. Weekly D948a, 2015 WL 1809322 (Fla. 1st DCA, April 22, 2015), the contractor filed suit for equitable lien and unjust enrichment against a construction lender, after the construction lender stopped making advances on the construction loan due to the borrower’s default. The borrower, a developer, took out the nearly $16 million loan for the construction of a housing development project. The project failed, and the borrower ceased making payments to the lender. As a result, the lender stopped making disbursements under the loan and filed a foreclosure action against the borrower, which resulted in a final judgment in the lender’s favor. At the time the lender stopped making the loan disbursements, the contractor was owed approximately $500,000.

The contractor filed a separate lawsuit against the lender asserting common law claims of equitable lien and unjust enrichment. The lender moved for the entry of summary judgment arguing, among other things, that Florida Statutes § 713.3471 precluded the contractor from asserting any common law claims against the lender. The trial court agreed and entered summary judgment in the lender’s favor, and the contractor appealed.

Florida Statutes § 713.3471 relieves a construction loan lender from liability to a contractor in the event that the lender ceases construction loan advances, if the lender provides the required notice to the contractor within five business days of the decision to discontinue advances. If proper notice is not provided, the statute also provides guidelines for the lender’s liability.

On appeal, the First DCA affirmed the trial court’s ruling, reasoning that the legislature’s enactment of Florida Statutes § 713.3471 was a clear intent to alter common law because the statute is in direct conflict. The statute lacks a provision preserving common law remedies, which provides further indication of the legislature’s intent to displace common law. Accordingly, the First DCA affirmed the trial court’s entry of summary judgment, holding that § 713.3471 precludes the common law claims from being asserted against a lender who has ceased making advances under a construction loan.

The First DCA’s opinion is not yet final and is currently pending a motion for rehearing. If the decision becomes final and other jurisdictions follow the opinion, § 713.3471 may become the sole remedy unpaid contractors can use if a lender stops making disbursements under a loan. Contractors should review the specific requirements and limitations imposed by § 713.3471, and ensure they seek timely relief under the statute when appropriate. Likewise, lenders should utilize this decision to defend against any litigation filed by unpaid contractors seeking to employ remedies beyond those prescribed by § 713.3471.

 

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