LEGISLATIVE UPDATE 2021 – Construction Licensing And The Misapplication Of Construction Funds
If you have any type of contractor’s license, listen closely! The flow of money on a construction project can be intricate and complicated. There are payment applications, retainage, schedules of values, approvals, notices, lien waivers, lenders and more. When funds become limited or tight on construction project, contractors may engage in the age old “rob Peter to pay Paul” routine. However, a new change in the construction licensing laws will likely further deter this from happening.
From a general perspective, the Florida Legislature enacted Section 489 to protect the public health, safety and welfare by requiring significant construction work be performed by licensed contractors. To ensure that work is completed by licensed contractors, Section 489, Florida Statutes, provides that certain acts may be prosecuted as crimes and the Construction Industry Licensing Board has multiple sanctions at its disposal.
A recent change in Chapter 489.129, Florida Statutes provides for disciplinary measures for the misapplication of construction funds. Governor Ron DeSantis signed SB 378 into law on June 21, 2021. More specifically, the new language in the statute creates a whole new category of prohibited act by adding subsection (r), which declares:
(r) Committing misapplication of construction funds in violation of s. 713.345. If a contractor, subcontractor, sub-subcontractor, or other person licensed by the board under this chapter is convicted of misapplication of construction funds, the board must suspend all licenses issued to such licensee under this chapter for a minimum of 1 year from the date of conviction. The suspension required under this paragraph is not exclusive, and the board may impose any additional penalties set forth in this subsection.
Additionally, SB 378 increase the interest penalties under Florida’s Prompt Pay to include “interest at the rate specified in s. 55.03 plus an additional 12 percent per annum” or the rate specified in the contract – whichever is greater. Interest accumulating under Chapter 255 under the new law allows for 2% per month.
The law is not retroactive and takes effect July 1, 2021. A clear understanding of the construction payment requirements for Florida Contractors will help avoiding any possible discipline which may arise for the flow of fund on your construction project.