Florida Construction Law Authority

Why Should the Condominium Association Require Bonds from the Renovation Contractor

Claramargaret H. Groover — Tue, 08 May 2012 15:23:24 -0500

We often encounter Condominium Associations who have difficulty understanding why they should bond their exterior renovation contract. Many Associations consider it money wasted on another layer of liability protection when they would rather spend the money on actual scope – sticks, bricks, and finishes. They do not expect the surety to pay the claims even if they are made against the Contractor’s Performance and Payment Bonds.

Association Boards often ask, “Isn’t the risk already covered by all the insurance required from the Contractor?” The short answer is, “No”, and here’s why.

A performance bond, unlike insurance, assures the Association that the Contractor, or its Surety, will complete the project even if the contractor goes bankrupt or cannot competently perform to complete the contract. In addition, sometimes a Surety can be required to pay Association claims for work not properly performed even after occupancy. See, Federal Ins. Co. v. The Southwest Florida Retirement Center, Inc., 707 So. 2d 1119 (Fla. 1998).

A payment bond, on the other hand, assures the Association that the Contractor will pay the subcontractors and suppliers under the contract terms agreed between the Association and the Contractor. The payment bond protects the Association from having construction liens recorded on its project, provided the Association properly records the Bond with the Notice of Commencement. Most Associations understand that they do not want unpaid subcontractors and suppliers recording liens on their property, but they are loathe to get into the technical and complex quagmire that is the lien law. Thus, the Surety provides assurance to the Association for both the Contractor’s performance and payment to third parties.

Performance and Payment Bonds are issued together to the Association and to the Contractor once he can demonstrate his creditworthiness. The Surety issues the bonds only after its audit of the Contractor’s contract balances, payment history, and contract performance. In turn, the Surety protects itself by obtaining a General Indemnity Agreement from the Contractor and any spouse, personally, to reimburse the Surety if it is required to pay out Contractor claims on the project.

“But,” you say, “we already know this contractor and we have already determined that he is qualified.” We say, “But wait… There’s more.”

A bonded Contractor is not only accountable for its performance to the Association. The Contractor is also accountable to the Surety, with whom it enjoys a necessary relationship for continued business with public and private owners. Before the surety ever issues the bonds, its underwriters examine the Contractor’s books, records, and practices to evaluate the kinds of contracts completed, the status and payment history under contracts underway, when and why a contractor was sued, if ever, and generally a contractor’s operational practices, i.e., – does the contractor pay its subcontractors, suppliers, and other third parties properly and timely? A bondable contractor tends to be the qualified contractor both because of quality performance in the past and because of responsible business practices. If you want more information about construction bonds, their benefits, and whether your construction contract warrants surety protection, please contact us.

HB 1013 signed by Governor Scott

Sanjay Kurian — Wed, 02 May 2012 13:32:59 -0500

Governor Scott signed HB 1013 into law late last week. The legislation will take effect on July 1, 2012, and attempts to wipe out all common law implied warranties, including for pending litigation. I think there are significant constitutional issues as applied to pending claims. We may find out quickly as the Lakeview v. Maronda case is still pending before the Supreme Court. The Court may be able to address the scope of the warranty and also the constitutionality issue at one time. It will be an interesting decision but may be one of limited value going forward.

Article on HB 1013 in Miami Herald

Sanjay Kurian — Wed, 25 Apr 2012 09:05:18 -0500

Today's Miami Herald has an article, by Toluse Olorunnipa, about the ongoing battle over HB1013. The Governor's office has received over 1,000 emails in recent days opposing the legislation. Opposition to the legislation outnumbers the supporters by a nearly 4-1 margin. Per Governor Scott's deputy press secretary “The Governor is currently reviewing the bill and will make a decision in the allotted timeframe.” The whole article is worth reading here. As usual proponents of the legislation throw out the phrase "judicial activism" which completely ignores that the entire implied warranty was created by the judiciary to overcome another judicial doctrine, caveat emptor. I have discussed the merits of the bill on numerous posts on the blog so I will not repeat them. I know the Governor's office has been in touch with proponents and opponents of the bill to obtain information. The best thing to do at this point is to continue contacting Governor Scott's office and express opposition to the bill.

For information to contact the Governor's office and oppose HB1013, please go here. The governor's office has until April 28 to veto this anti-consumer legislation.

Asking Questions in the Public Bidding Process

Mark J. Stempler — Fri, 20 Apr 2012 10:30:00 -0500

In public procurements, the specifications contained in the bid documents such as an Invitation for Bid or Request for Proposals, along with local codes or statutes, generally govern the process. They are the instructions to the bidders and will help shape the responses. Sometimes the specifications are not clear, or lead to questions from the potential bidders. Some procurements may allow such vendors to pose questions to the owner agency to clarify any misunderstandings.

Many advertised procurements will specify who to send the questions to. It is important to follow the instructions so as not to violate a cone of silence, and to ensure that a response is provided. It is also important to submit the questions within the time period provided. Questions posed after the imposed deadline may not be responded to. Responses to vendors' questions are often posted as addendums to the specifications, and become part of the procurement guidelines. Questions can range from just about anything covered, or not covered in the specifications, including qualification issues, measurements or materials issues, or related information.

As always, be sure to check the specifications for instructions about asking questions about the project.

Did You Include All Costs In Your Bid?

William J. Cea — Tue, 17 Apr 2012 09:30:00 -0500

So it is time to sign your price proposal and get your bid in to a public agency. Have you considered all costs to perform the work, and those that are in addition to the cost of labor and materials?

The public agency's terms and conditions should spell out all of the costs that are to be included in the price proposal. Such costs may go well beyond the cost of the work itself. For example, it may be that the cost of bonds, additional insurance coverage, permits and inspections are to be included in the cost of the work, and therefore the bid amount. It is also important to include all required elements as part of your pricing to make sure that your bid is responsive.

Accordingly, it is imperative that bidders carefully consider all requirements that have a cost when estimating and calculating a bid. Generally, a public agency may hold a bidder responsible for its bid, even when the bidder made a mistake in its pricing. In the event that the bidding terms and conditions are not clear with respect to who is responsible for any additional costs, then bidders should consider seeking a clarification or an addendum from the public agency to avoid any uncertainty prior to submission of the bid.

Did You Include All Costs In Your Bid?

William J. Cea — Tue, 17 Apr 2012 09:30:00 -0500

So it is time to sign your price proposal and get your bid in to a public agency. Have you considered all costs to perform the work, and those that are in addition to the cost of labor and materials?

HB 1013 (SB 1196) presented to Governor Scott

Sanjay Kurian — Mon, 16 Apr 2012 09:57:13 -0500

HB 1013, which eliminates common law implied warranties in common areas of all communities in the state, was sent Friday to Governor Rick Scott for his consideration. Governor Scott has until April 28, 2012 to act on the bill. He can sign the bill into law, veto it, or allow it to become law without his signature. This legislation leaves Florida home buyers with no protections for shared amenities and thereby shifts the burden for repairs to the homeowners and we urge Governor Scott to veto HB 1013.

If you have not yet contacted Governor Scott, please do so and urge him to veto HB 1013. It is the only way to prevent this bill from becoming law. You can e-mail Governor Scott at Rick.Scott@eog.myflorida.com and copy his Legislative Affairs Director, Jon Costello, at Jon.Costello@eog.myflorida.com. You can copy and paste the following suggested text in your message to the Governor:

Please veto HB 1013, which eliminates common law implied warranties in common areas of all communities in the state. This legislation will result in greater costs for Florida’s homeowners, in the form of repairing shoddy construction, and ultimately lead to more foreclosures. This legislation also leaves Florida home buyers with no protections for shared amenities and thereby places the risk on those least capable of protecting themselves. Thank you for keeping Florida’s communities in mind when considering this very bad bill.

Continued Interview with Prominent P3 Investor

Lee Weintraub — Fri, 13 Apr 2012 07:32:19 -0500

In my last post, I summarized the first half of my interview with Jane Garvey, the North American chair of Meridiam Infrastructure, one of the country’s leaders in public/private partnerships (“P3”). Here is the rest of the information she provided in that interview.

I asked her about the effect on P3 momentum caused by the Legislature’s failure to pass the P3 legislation during the last session. Most P3 participants, especially investors, would tell you comprehensive P3 legislation is critical to attract investments in P3 jobs because they create or advance the perception of stability in the P3 process. Many public owners are unsure of how to embark on P3 projects and, in the absence of comprehensive legislation to guide them, they tend to wallow around a bit, adding time, cost and anxiety to the process. Legislation tends to coalesce and educate public entities, prompting them to develop stable structure within their agencies to better anticipate and handle P3 opportunities. The failure of the Florida Legislature to pass P3 legislation during this past session disappoints, but Jane doesn’t believe it will stifle interest in Florida. Her perception is that the political and private will in support of P3 projects, already reflected in the substantial increase in the number of P3 jobs, will overcome the deficiency created by the lack of legislation.

My last inquiry of Jane (we’ll be scheduling a follow-up interview shortly) involved her expectations about the use of P3’s in Florida in the near future. Jane pointed out that Florida was always among the national leaders in P3 on transportation projects (where a P3 statute has been in place for some time now). But she also pointed to the promise of P3 jobs in higher education. We’ve already seen significant higher education P3 jobs, from the University of Florida’s Innovation Village, to the dorms at the University of Central Florida, and the dorms and football stadium at Florida Atlantic University. I know of others currently being considered, but not yet ready for announcement. Jane knows of these too and feels this is the start of a new wave of P3’s in Florida that will take us far beyond the realm of transportation. It appears she’s right, so we’ll continue this series of interviews with P3 leaders in the future.

Orlando Sentinel Editorial Opposes HB 1013

Sanjay Kurian — Fri, 06 Apr 2012 08:44:31 -0500

The Orlando Sentinel Editorial page of April 4, 2012, has come out in opposition to HB 1013, the anti-common law implied warranty legislation. The editorial is reprinted in part below. To view the full editorial please follow the link. Do not forget to contact the Governor's office to veto this legislation.

Editorial Below-

When a leaking underground drainage system pitted roads and driveways and created sinkholes in lawns at aWinter Garden subdivision, homeowners sued the developer to cover the damage and repair costs. After conflicting rulings in lower courts, the case reached the Florida Supreme Court, which heard arguments on it in December.

But before the justices had issued a ruling, the Florida Legislature stepped in like Judge Judy and moved to decide the case — and any future ones like it — in favor of the developer.

Lawmakers often carp about being pre-empted or overruled by "activist judges." But in this case, lawmakers trumped the judges.

Lobbied by the Florida Home Builders Association, the Legislature passed a bill during this year's legislative session that invalidated the legal basis behind the homeowners' lawsuit. And lawmakers made the legislation retroactive, to include the pending case pitting the Lakeview Reserve Homeowners Association against Maronda Homes Inc., even though both House and Senate legislative analysts warned that doing so might be unconstitutional.

The bill is on its way to Gov. Rick Scott's desk. If he signs it, the Winter Garden homeowners likely will get stuck with the bill for re-engineering and repairing their subdivision's faulty drainage system, at $3,800 per house. And homeowners who find themselves in a similar predicament in the future will have fewer options in seeking compensation.

http://www.orlandosentinel.com/news/opinion/os-ed-florida-legislature-lawsuits-040412-20120403,0,841353.story

Ask the Governor to veto HB 1013(SB 1196)

Sanjay Kurian — Thu, 05 Apr 2012 12:58:32 -0500

The Governor's office has received numerous calls and emails in opposition to HB 1013, the anti-implied warranty legislation. We are asking that you continue to urge Governor Scott to veto HB 1013. It is the only way to prevent this bill from becoming law. The bill has not yet been sent to the Governor for consideration, but we expect it to be sent very soon. Therefore, please contact Governor Scott as soon as possible so that your voice can be heard.

You can e-mail Governor Scott at Rick.Scott@eog.myflorida.com and copy his Legislative Affairs Director, Jon Costello, at Jon.Costello@eog.myflorida.com. You can copy and paste the following suggested text in your message to the Governor:

You can also e-mail Governor Scott by logging onto the CALL website and using the “Legislator Connect” feature on the left side of your screen.

You can also call Gov. Scott at 850-717-9238 or write to him at:

Office of Governor Rick Scott

State of Florida

The Capitol

400 S. Monroe Street

Tallahassee, FL 32399-0001

Prominent Investor in P3 Projects Speaks About Florida's Prospects

Lee Weintraub — Tue, 27 Mar 2012 07:45:25 -0500

Jane Garvey, the North American Chair of Meridiam Infrastructure, knows a thing or two about public/private partnerships (“P3”). Meridiam is one of the country’s leaders in P3 projects, from compiling the P3 team and fertilizing it with ideas and experience to investing in the enterprise as a shareholder or lender. Jane is their top person in North America and shared her thoughts with me about Florida’s potential for P3 development. In this blog post and some that will follow, I will share her thoughts with you.

P3s are not ideal for every job. They’re more appropriate for large, complex, innovative projects not neatly fitting into traditional capital programs. The project must be critical to the public owner, as criticality will ensure the facility will be operated for the long-term, thus generating the necessary operational revenue to repay private investors and contractors for their risks. Criticality also ensures strong public sector buy-in, as lack of public commitment to the job may dilute the prospects of success. Historically, critical projects have included transportation as well as social infrastructure, such as schools, courthouses, and teaching hospitals.

The proposed P3 project must have a good revenue stream or it won’t attract investors or lenders. Stable revenue tied to the job, such as shares of federal funds, sales taxes or impact fees, will lure investors. Riskier prospects may deter investors. Without private funding, the P3 delivery method will fail, so it is important for funding to be attracted through assurances of stable revenue sources from which investors may earn an appropriate return on their investment.

Jane echoes the sentiment of everyone who has been through a successful P3 project that one of the most critical components is someone to champion the project or at least champion the notion of an alternative delivery method. Someone from the business community or a public official must advance the cause through the political channels and in the arena of public perception to avoid the project’s defeat at the hands of questionable, controversial or adverse concerns about the project’s viability, feasibility or appropriateness.

Finally, a successful P3 project must be a good fit with the public. The affected public entity must have institutional capability, meaning its various departments and operational structure must be able to seamlessly implement and monitor the job without disruption, delays or excessive red tape. Because disruptions are common when a public agency unfamiliar with P3 exercises its new set of P3 skills, delays can be reduced if the public agency’s decision-makers are well structured and the agency hires a financial advisor and outside legal counsel possessing the required P3 skill set.

Keep an eye on this blog for future posts, including more from my interviews with Jane Garvey, as well as other P3 experts, as we continue picking their brains for nuggets of wisdom we can all use to begin or continue to implement the P3 delivery system in Florida.

Letter to Governor Scott re: HB 1013/SB 1196

Sanjay Kurian — Wed, 21 Mar 2012 14:51:23 -0500

Below is the text of a letter sent today by Alan Becker, Esq., a founding shareholder of the Becker & Poliakoff, asking Governor Scott to veto HB 1013 which wiped out common law implied warranties for common area property. We are requesting that you join us and ask Governor Scott to veto this legislation.

Dear Governor Scott:

I am writing to you with regard to the recently passed HB 1013 (companion SB 1196, “the legislation”) which eliminates common law implied warranties as it pertains to common areas of all communities in the state and asking that you veto this legislation. I was a member of the legislature when what is now section 718.203, providing statutory implied warranties for condominiums, was enacted and am a founding member of Becker & Poliakoff, P.A. which represents close to 4,000 community associations in the state of Florida. With that background, I can state that this legislation is absolutely harmful to consumers, will result in greater costs for Florida’s homeowners and lead to more foreclosures.

I want to assure you that this is not a question of reducing regulation on business. There is no agency regulation dealing with this and no statutory regulation. This is an effort to overturn decades of common law to benefit a few at the expense of many others.

The legislation is purportedly in reaction to the Fifth District Court of Appeal’s decision in Lakeview Reserve Homeowners v. Maronda Homes, which proponents of the legislation characterize as a departure from 40 years of law on common law implied warranties. It was not. Such action ignored the fact that the Fifth District case was appealed and that the Supreme Court heard oral argument on December 6, 2011. The issue of common law implied warranties is rightfully within the purview of the courts. Without waiting for the Supreme Court, the legislature abrogated 40 years of implied warranty case law. Florida’s homeowners will be far worse off.

Despite the concern for the “fragile real estate market” as stated in the preamble, the reality is that most new residential construction in this state occurs in planned communities. These planned communities may be a single subdivision with roads, sidewalks, drainage and sewers to larger master communities with multiple subdivisions, containing hundreds or thousands of lots and homes with appurtenant amenities, roadways, underground piping, rete ntion ponds, drainage areas and utilities. These complex arrangements are used extensively for the purpose of marketing and selling residential dwellings. These common area improvements are necessary in order to utilize the residential dwellings for their intended purpose, and part and parcel of the sale of the individual residential dwellings.

Proponents of the legislation argue that the existence of common law implied warranties damage the real estate market. This ignores the history of such warranties and is total nonsense. The real estate markets for the past 40 years have gone up and down with the economy and the existence of warranties has never been a factor in that rise or fall. The first common law implied warranty for new homes was found in 1972 in the landmark decision of Gable v. Silver. In that case the Supreme Court, which was in the early 70s a fairly conservative Supreme Court, stated:

Undoubtedly, the laws regarding the liability of a builder-vendor of new houses is changing. The…cases indicate a growing trend away from caveat emptor and toward the theory of implied warranty. The movement brings the law much closer to the realities of the market for new homes than does the anachronistic maxim of caveat emptor. “The law should be based on current concepts of what is right and just and the judiciary should be alert to the never-ending need for keeping its common law principles abreast of the times. Ancient distinctions which make no sense in today’s society and tend to discredit the law should be readily rejected.”

The legislature later adopted the language of Gable in creating, what is now section 718.203, providing statutory implied warranties for condominiums. Condominiums in Florida have had both common law warranties and a statutory warranty for 35 years and there has been a significant increase in development of condominiums, certainly not a decrease, since these warranties came into effect. It is the existence of such warranties, along with other consumer protections, which has protected homeowners in the purchase of their condominium units and homes which has helped this increase in development. Do we really want to return to the anachronistic days of caveat emptor and throw the law (and the reputation of this state) back to a time that brought discredit to the law?

With no common law implied warranties, defects in the common areas can expose individual homeowners to significant liability. In most planned communities owners are obligated to be members of the homeowners’ association. Such membership is mandatory. If there are defects to the common areas then the association has an affirmative obligation to fix the defects and will necessarily incur repair costs. The association’s only revenue is the assessments paid by its members who in actuality bear the repair costs. If the assessments are not paid the homes will be foreclosed. In short, someone could lose their home for not paying to repair a common area that, under the new legislation, has no warranty protection if built or designed improperly.

Finally, proponents of the legislation argue that the implied warranty will expose developers to endless liability on HOA property if the Lakeview decision stands. This is simply inaccurate. Under Section 95.11(3)(c), there is a four year statute of limitations, and a ten year statute of repose, for construction defects.

As can be seen from the above, this legislation is anti-consumer, anti-homeowner and will result in homeowners being burdened with shoddy common areas for which they have no recourse. No other class of citizen is left entirely without recourse for such problems with any product or service. Homeowners will be assessed for repairs to these common areas and a number of them, who are now barely making it, will be forced into foreclosure as the legislation shifts the costs of repairs from those who have historically had that obligation to those least able to bear the costs.

I respectfully ask that you veto HB 1013 for the benefit of Florida’s homeowners.

Very truly yours,

Alan S. Becker

For the Firm

The Good Faith Exception to Fraudulent Liens

Ryan Carpenter — Thu, 15 Mar 2012 20:12:28 -0500

Florida’s lien law specifically prohibits a lienor from improperly increasing the amount of its lien beyond the amount owed or including amounts for work not performed. See Section 713.31, Florida Statutes. The lien law even imposes penalties against a lienor for recording such a "fraudulent lien." At the same time, however, the lien law provides that a lien will not be found "fraudulent" if the lienor’s actions in recording it were in good faith. It is important for a lienor to be aware, though, that "good faith" will only go so far in avoiding a finding that its lien is fraudulent.

The lien that a consultant recorded against Mr. and Mrs. Medellin’s home provides an example of how good faith will not always prevent a court from finding a lien is fraudulent. Medellin v. MLA Consulting, Inc., 69 So. 3d 372 (Fla. 5th DCA 2011). While the trial court found that the consultant’s lien was not fraudulent, because the consultant believed in good faith that the amount was due, the appellate court disagreed. The appellate court clarified the good faith exception to be limited to preventing a lien from being deemed fraudulent when the issue is whether the amount included in the lien was due, and there was a good faith dispute over whether it was due. The appellate court found that the Medellins’ consultant’s good faith was irrelevant because the issue was whether the amount included in the consultant’s lien was for work that entitled the consultant to record a lien against the Medellins’ house. Because the work underlying the disputed amount in the consultant’s lien was not lienable, the appellate court found that the consultant’s lien was fraudulent.

With the Medellin court’s holding, it is now even more important that a lienor be sure the amounts it is including in its lien are for work that will properly support a lien.

Public/Private Partnership Legislation Died Without Senate Approval

Lee Weintraub — Mon, 12 Mar 2012 08:15:07 -0500

House Bill 337, codifying public/private partnerships (“P3”) in Florida, was approved by the House last week and sent to the Senate, but it died in the Senate without action before the end of the legislative session last Friday. Although this is a minor loss of momentum for P3s in Florida, it doesn’t change anything as there is still authority for public/private partnerships in Florida public construction. As one attendee asked me at one of our recent P3 workshops, “why do we need this legislation anyways since we can do public/private partnerships regardless of the bill?” He was right and I responded that the legislation had drastically increased statewide awareness of the P3 solution to the public construction budget crunch, which was really the best argument in favor of the bill. So although the bill didn’t pass, it won’t change much and P3s continue to be the hot thing in Florida construction. Stay tuned to this blog for further news, ideas and suggestions about P3s as the process continues gathering momentum even without Tallahassee’s help.

SB 1196 Passes

Sanjay Kurian — Fri, 09 Mar 2012 17:47:09 -0500

Unfortunately SB 1196 passed the Senate yesterday. The next step for the bill will be the governor's desk. The only way the bill does not become law at this point is if the governor vetoes it. If he signs it or merely does nothing the bill becomes law and will take effect, by its terms, on July 1, 2012. The negative impact of this legislation will be substantial for Florida homeowner's.

However, it is fairly certain that there will be challenges to the legislation. How effective the challenges will be remains to be seen. What impact, if any, the legislation has on the Maronda case pending before the Florida Supreme Court will also be interesting.

SB 1196 moving forward

Sanjay Kurian — Tue, 06 Mar 2012 10:34:05 -0500

As noted previously, there are a couple of bills (HB 1013 and SB 1196) pending before the Florida legislature involving HOA warranties which would be devastating for HOAs with common area defects. These bills prohibit implied warranties of fitness and merchantability from applying to streets, roads, sidewalks, drainage areas, utilities, or any other improvements that are not located on or under the lot on which a new home is constructed. In short, the bills will result in homeowners being stuck with shoddy common areas for which they have no recourse. The House version of the bill (HB 1013) has already passed the House of Representatives. The Senate version (SB 1196) had been “stuck” in the Budget Committee. If SB 1196 had remained in Budget, it would have died in committee. However, yesterday SB 1196 was removed from Budget and could be heard by the full Senate this week.

Therefore, its VERY IMPORTANT that you e-mail and/or call your local senator and let him or her know that HB 1013 and SB 1196 are very bad for associations and ask that they vote NO on these bills. If you do not know who your local Senator is, you can find that information on the Senate’s website: http://www.flsenate.gov/Senators/Find

Legislation Would Encourage Public-Private Partnerships

Lee Weintraub — Wed, 29 Feb 2012 11:01:49 -0500

February 29, 2012, Daily Business Review, An ALM Publication
Reprinted with permission.

Board of Contributors: A win-win for public-sector projects

The Florida construction industry continues to limp along but relief may be on the way from the Florida Legislature. House Bill 337 and its companion, Senate Bill 576, have become the springboard for educating public agencies and contractors about the availability of public–private partnerships (P3) as the new means for delivering public construction projects in Florida.

Although P3 projects have already been available in some form in Florida, they have been infrequently used and familiarity with these types of projects among public entities and contractors has been scant. The legislation has increased awareness of the opportunities for P3 projects. But the bills, in their current form, may inadvertently burden the process with well-intentioned, but impractical, requirements.

P3 projects take many forms, but at their most fundamental level they are projects in which private entities finance, in whole or part, construction of public facilities in exchange for the opportunity to operate the facilities for decades thereafter. The private entities recoup their investment by retaining a portion of the fees generated by the facility.

The most prevalent examples thus far of P3 projects have been toll roads. Recent examples also include the Port of Miami Tunnel, sports arenas for the Florida Panthers and the Miami Marlins, the Florida Atlantic University football stadium and dorm construction, as well as dormitories at the University of Central Florida. The University of Florida is currently engaged in a significant P3 project combining private business enterprises and university educational facilities within a new mixed use complex approximately a half-mile away from campus.

With the current public budget crisis, combined with Gov. Rick Scott’s recent request that $250 million of Public Education Capital Outlay funds be returned to the state, public agencies are at a loss about how to fund new facilities, let alone maintain old and aging facilities. Private enterprise could come to the rescue by offering a P3 arrangement.

The Legislation
Under the pending legislation, private entities may approach a public agency at any level of government with ideas for P3 projects. Under the current version of the bills, the public entities would already have policies in place for receiving such ideas from the private sector, addressing issues such as opportunities for competition through public notice (but not traditional bidding or procurement procedures), criteria for choosing among competing proposals, financial analyses of the proposals, etc. The public agency would not be required to select the proposal with the lowest bid amount, but rather may consider price as only one of many factors in evaluating competing P3 proposals.

The bills also permit private entities, who have determined the unmet need for specific public facilities or infrastructure, to submit unsolicited bids pursuant to which the private companies would build and operate the facilities or infrastructure using private funds, rather than wait for public agencies to put P3 projects out for bid. Customarily public agencies request bids from private contractors, but under the pending legislation private contractors may solicit the opportunity to build those facilities before the public agency ever issues a request for bids or proposals. In fact, the private entities could propose P3 projects even before the public agency ever realized there was a need for the facility in the first place. Giving private construction consortiums the opportunity to generate their own work could provide a muchneeded economic stimulus in Florida public construction.

Business Opportunities
The construction industry has noticed the business opportunities P3 projects may provide. People are getting excited about the prospect of builders creating their own business by approaching public agencies with unsolicited ideas for P3 opportunities.

This is a win–win situation: It could put many contractors back to work on lucrative deals as long as the builders can carry the construction costs for a little while. It can also provide public agencies with the much-needed facilities, infrastructure and maintenance they seek, but for which public funding is not available.

Concerns
The trade association Construction Owners Association of America presented a very successful seminar on the pending legislation and P3 projects in general, generating high attendance from public agencies, contractors, lenders, insurers and other industry participants. But as momentum for P3 projects increases, concern grows over whether the pending legislation may contain too many rigid requirements to induce free enterprise to jump on the bandwagon.

For instance, the legislation mandates onerous guidelines be implemented by private agencies before they can consider any P3 project. It also provides that, after the private entity invested significant time and money in developing an unsolicited proposal, it would be put out for competition to other contractors who could submit competing bids without having incurred the costs of developing the initial idea. The legislation would require legislative approval for every P3 proposal at the state government level although the approval procedure is much simpler at every other level of government.

Issues such as these could stifle private interest in P3 projects unless they are addressed before the bill becomes law. Otherwise many industry participants anticipate they will have to work together to fix some of these glitches in a glitch bill to be presented next year. Despite these misgivings, indications are that visionary private entities and public agencies will plan on working together on P3 projects, regardless of what Tallahassee does. The pending legislation does not appear to hurt momentum, but a well-drafted bill could stimulate this process more than anyone initially envisioned.

If passed, the new legislation would take effect July 1, 2012. It will usher in a new era of public construction in Florida, fueled by creative public– private partnerships. The bill presents fascinating and promising opportunities and potential as long as it is not weighed down by bureaucratic requirements and impractical procedures. Many interested and affected parties are working with legislators to try to streamline the bill. In the meantime, you can follow the bill’s status by visiting www.flsenate.gov and typing in SB 576.

Lee Weintraub, a shareholder at Becker & Poliakoff in Fort Lauderdale, is board certified in construction law by The Florida Bar. He represents clients in litigation, arbitration and transactions.

Are Your Payments Proper?

Edward C. Lohrer — Tue, 28 Feb 2012 17:33:23 -0500

The owner of any construction project runs the unfortunate risk that its general contractor will not live up to its end of the bargain. If the contractor has not been paying its sub-contractors or suppliers, the owner may wind up in a situation where it faces liability for liens that exceed the contract price. If this occurs, the owner is faced with the unpleasant situation where it may pay twice for the same work. If however, the owner follows the specific procedures of Florida's construction lien law, the owner’s liability for liens will be limited to the contract price. Put another way, if all of the owner’s payments to the contractor have been “proper”, the owner will have no liability for any lien amount that exceeds the contract price, including change orders. If there is no fixed contract amount, like a cost plus contract with no guaranteed maximum price, the owner’s liability for liens will be limited to the reasonable value of the improvements made.

The specific procedure for making proper payments is found in F.S. 713.06, however there are three key areas an owner needs to focus on. First, the owner must ensure that all potential lienors have been paid prior to making a progress or partial payment to the general contractor. This can be accomplished by obtaining a lien release from both the general contractor and all lienors who have served a Notice to Owner and an affidavit from the general contractor stating that all lienors have been paid to the extent of the payment being made by the owner to the general contractor.

Next, the owner must ensure that all potential lienors have been paid in full prior to making final payment to the general contractor. This is accomplished by requiring the general contractor to provide a final contractor’s affidavit stating that all potential lienors have been paid, or listing those that have not been paid. If the affidavit lists any unpaid lienors, the owner must ensure that they are paid prior to making payment to the general contractor. The owner has no obligation to pay any lienor who has not served a Notice to Owner, and may rely on the affidavit to this extent. It is important to note that the owner may not rely upon the affidavit if it omits unpaid lienors that have served a Notice to Owner. It is critical that the owner obtain final lien releases from all lienors who have served a Notice to Owner prior to making final payment to the general contractor.

Finally, the owner must not make any payments to the general contractor after the expiration of the Notice of Commencement. The owner must also ensure that the legal description contained in the Notice of Commencement is correct, as an incorrect legal description may render payments improper. If the Notice of Commencement is about to expire and the project is still ongoing, the owner should amend the Notice of Commencement to extend the effective period.

In sum, if the owner follows the procedures outlined above, it will limit its liability for liens to the contract price. If the owner makes any improper payments, it may wind up paying twice for all amounts improperly paid, which may result in payment of amounts in excess of the contract price. As such it is critical that the owner ensure that these procedures are strictly followed throughout the project, from the preparation of the Notice of Commencement, all the way through to final payment.

Momentum Continues for Pending Public/Private Partnership Legislation

Lee Weintraub — Tue, 28 Feb 2012 08:21:34 -0500

House Bill 337 and Senate Bill 576, similar companion bills expanding the use of public/private partnerships (“P3”) as the new public construction delivery method of the future, continue to progress through legislative committees. Other than a few amendments, they remain largely intact and appear likely to be passed. Although the statutes would likely need some glitches corrected, they have definitely caught the attention of industry participants. Recent seminars I have held or participated in on P3 projects have generated significant attendance and interest and there is quite a buzz about the prospects of P3. I have been interviewed by a few reporters, indicating that even the media is getting excited about this.

Stay tuned for further updates and start planning now for how you can catch this wave of the future of public construction in Florida. Watch this blog for more updates on the status of the pending legislation and other items of interest.

Is It Too Early To Mediate?

William J. Cea — Thu, 23 Feb 2012 10:00:00 -0500

Mediation is increasingly being used as an alternative dispute resolution method. As the time and expense of litigation increase, parties often turn to mediation as a means to resolve disputes. Additionally, parties are generally required to participate in mediation prior to trial. Prior to proceeding to mediation, however, parties should make sure that they are positioned to make final decisions regarding their case.

For example, if you are a plaintiff in a construction defects case, have you determined the cost to correct the defects? Do you have the opinion of a qualified independent expert who is prepared to testify that the constructed improvement is defective, and that the defendant is liable for the condition?

On the other hand, if you are a defendant, have you investigated the conditions that are subject of the plaintiff's claim? Do you know what the cost to repair would be? Have you decided what you would be willing to do in order to resolve the claim?

Although mediation serves as a cost effective and useful means to resolve claims; and also can serve to avoid the time, expense and uncertainties of a trial, parties need to make sure that they are ready to enter into settlement negotiations. The mediation experience may prove frustrating and unsuccessful if the parties are not fully prepared to resolve their dispute. Thus, parties are encouraged to keep these points in mind as they consider when to request or participate in mediation.