Florida Senate - 2021 SB 378 By Senator Bradley 5-00387D-21 2021378__ 1 A bill to be entitled 2 An act relating to payment for construction services; 3 amending s. 218.735, F.S.; increasing the interest 4 rate for certain payments for purchases of 5 construction services; amending s. 255.071, F.S.; 6 specifying that a person, firm, or corporation who 7 fails to make certain payments relating to public 8 projects commits a misapplication of constructions 9 funds and is subject to criminal penalties; amending 10 s. 255.073, F.S.; increasing the interest rate for 11 overdue payments for the purchase of construction 12 services; amending s. 489.129, F.S.; expanding the 13 list of actions for which a licensee may be 14 disciplined by the Construction Industry Licensing 15 Board; requiring the board to suspend certain licenses 16 for a minimum period of time under certain 17 circumstances; providing construction; amending s. 18 713.345, F.S.; specifying that a contractor, 19 subcontractor, sub-subcontractor, or other person 20 licensed under ch. 489, F.S., is subject to certain 21 discipline if convicted of misapplication of 22 construction funds; amending s. 713.346, F.S.; 23 specifying that a person, firm, or corporation who 24 fails to make certain payments relating to 25 construction contracts commits a misapplication of 26 constructions funds and is subject to criminal 27 penalties; amending s. 715.12, F.S.; increasing the 28 interest rate for certain payments due under the 29 Construction Contract Prompt Payment Law; conforming a 30 provision to changes made by the act; reenacting s. 31 218.76(2)(b), F.S., relating to improper payment 32 requests or invoices, to incorporate the amendment 33 made by this act to s. 218.735, F.S., in a reference 34 thereto; reenacting s. 255.075, F.S., relating to 35 mandatory interest, to incorporate the amendment made 36 by this act to s. 255.073, F.S., in a reference 37 thereto; providing applicability; providing an 38 effective date. 39 40 Be It Enacted by the Legislature of the State of Florida: 41 42 Section 1. Subsection (9) of section 218.735, Florida 43 Statutes, is amended to read: 44 218.735 Timely payment for purchases of construction 45 services.— 46 (9) All payments due under this section and not made within 47 the time periods specified by this section shall bear interest 48 at the rate of 21percent per month, or the rate specified by 49 contract, whichever is greater. 50 Section 2. Subsection (1) of section 255.071, Florida 51 Statutes, is amended to read: 52 255.071 Payment of subcontractors, sub-subcontractors, 53 materialmen, and suppliers on construction contracts for public 54 projects.— 55 (1) Any person, firm, or corporation who receives a payment 56 from the state or any county, city, or political subdivision of 57 the state, or other public authority, for the construction of a 58 public building, for the prosecution and completion of a public 59 work, or for repairs upon a public building or public work shall 60 pay, in accordance with the contract terms, the undisputed 61 contract obligations for labor, services, or materials provided 62 on account of such improvements. A person, firm, or corporation 63 who knowingly and intentionally fails to make the payment 64 required under this subsection commits a misapplication of 65 construction funds, punishable as provided in s. 713.345. 66 Section 3. Subsection (4) of section 255.073, Florida 67 Statutes, is amended to read: 68 255.073 Timely payment for purchases of construction 69 services.— 70 (4) All payments due for the purchase of construction 71 services and not made within the applicable time limits shall 72 bear interest at the rate of 2specified in s. 215.422. After73July 1, 2006, such payments shall bear interest at the rate of 174percent per month, to the extent that the Chief Financial75Officer’s replacement project for the state’s accounting and76cash management systems is operational for the particular77affected public entity. After January 1, 2007, all such payments78due from public entity shall bear interest at the rate of 179 percent per month. 80 Section 4. Paragraph (r) is added to subsection (1) of 81 section 489.129, Florida Statutes, to read: 82 489.129 Disciplinary proceedings.— 83 (1) The board may take any of the following actions against 84 any certificateholder or registrant: place on probation or 85 reprimand the licensee, revoke, suspend, or deny the issuance or 86 renewal of the certificate or registration, require financial 87 restitution to a consumer for financial harm directly related to 88 a violation of a provision of this part, impose an 89 administrative fine not to exceed $10,000 per violation, require 90 continuing education, or assess costs associated with 91 investigation and prosecution, if the contractor, financially 92 responsible officer, or business organization for which the 93 contractor is a primary qualifying agent, a financially 94 responsible officer, or a secondary qualifying agent responsible 95 under s. 489.1195 is found guilty of any of the following acts: 96 (r) Committing misapplication of construction funds in 97 violation of s. 713.345. If a contractor, subcontractor, sub 98 subcontractor, or other person licensed by the board under this 99 chapter is convicted of misapplication of construction funds, 100 the board must suspend all licenses issued to such licensee 101 under this chapter for a minimum of 1 year from the date of 102 conviction. The suspension required under this paragraph is not 103 exclusive, and the board may impose any additional penalties set 104 forth in this subsection. 105 106 For the purposes of this subsection, construction is considered 107 to be commenced when the contract is executed and the contractor 108 has accepted funds from the customer or lender. A contractor 109 does not commit a violation of this subsection when the 110 contractor relies on a building code interpretation rendered by 111 a building official or person authorized by s. 553.80 to enforce 112 the building code, absent a finding of fraud or deceit in the 113 practice of contracting, or gross negligence, repeated 114 negligence, or negligence resulting in a significant danger to 115 life or property on the part of the building official, in a 116 proceeding under chapter 120. 117 Section 5. Paragraph (e) is added to subsection (1) of 118 section 713.345, Florida Statutes, to read: 119 713.345 Moneys received for real property improvements; 120 penalty for misapplication.— 121 (1) 122 (e) If a contractor, subcontractor, sub-subcontractor, or 123 other person who is licensed under chapter 489 is convicted of 124 misapplication of construction funds under this section, the 125 licensee is subject to discipline under s. 489.129(1)(r). 126 Section 6. Subsection (1) of section 713.346, Florida 127 Statutes, is amended to read: 128 713.346 Payment on construction contracts.— 129 (1) Any person who receives a payment for constructing or 130 altering permanent improvements to real property shall pay, in 131 accordance with the contract terms, the undisputed contract 132 obligations for labor, services, or materials provided on 133 account of such improvements. A person, firm, or corporation who 134 knowingly and intentionally fails to make the payment required 135 under this subsection commits a misapplication of construction 136 funds, punishable as provided in s. 713.345. 137 Section 7. Paragraph (a) of subsection (5) and paragraph 138 (a) of subsection (6) of section 715.12, Florida Statutes, are 139 amended, and subsections (4) and (7) of that section are 140 republished, to read: 141 715.12 Construction Contract Prompt Payment Law.— 142 (4) An obligor must pay an obligee with whom the obligor 143 has a contract when all of the following events have occurred: 144 (a) The obligee is entitled to a payment at the time and 145 under the terms specified in the contract between the obligor 146 and the obligee, and the obligee has furnished the obligor with 147 a written request for payment; and 148 (b) The obligor, except an owner, has been paid for the 149 obligee’s labor, services, or materials described in the 150 obligee’s request for payment by the person immediately above 151 the obligor in the chain of contracts; and 152 (c) The obligee has furnished the obligor with all 153 affidavits or waivers required for the owner to make proper 154 payments under s. 713.06. 155 (5)(a) Any payment due under the provisions of subsection 156 (4), excluding any amounts withheld pursuant to subsection (7), 157 shall bear interest at the rate specified in s. 55.03 plus 1 158 percent, computed beginning on the 14th day after payment is due 159 pursuant to subsection (4). 160 (6)(a) The right to receive interest on a payment under 161 this section is not an exclusive remedy. This section does not 162 modify the remedies available to any person under the terms of a 163 contract or under any other statute. This section does not 164 modify the rights of any person to recover prejudgment interest 165 awarded to the prevailing party in any civil action or 166 arbitration case. During the period that interest accrues under 167 this section, the interest rate shall be the rate specified in 168 s. 55.03 plus 1 percent or the rate specified in the contract, 169 whichever is greater. A person shall not be entitled to receive 170 both the contract interest and the statutory interest specified 171 in this section. 172 (7)(a) An owner and a contractor may agree to a provision 173 that allows the owner to withhold a portion of each progress 174 payment until substantial completion of the entire project. The 175 owner shall pay the contractor the balance of the contract 176 price, including the amounts withheld from the progress 177 payments, within 14 days after any of the following events 178 occur. 179 1. Pursuant to the terms of the contract, an architect or 180 engineer certifies that the project is substantially complete 181 and, within the time provided in the contract between the owner 182 and the contractor, the owner submits a written punchlist to the 183 contractor and the contractor substantially completes all of the 184 items on the punchlist. 185 2. The issuance of a certificate of occupancy for the 186 project, and within the time provided in the contract between 187 the owner and the contractor, the owner submits a written 188 punchlist to the contractor and the contractor substantially 189 completes all of the items on the punchlist. 190 3. The owner or a tenant of the owner takes possession of 191 the construction project and, within the time provided in the 192 contract between the owner and the contractor, the owner submits 193 a written punchlist to the contractor and the contractor 194 substantially completes all of the items on the punchlist. 195 196 Any funds retained by the owner beyond the time period specified 197 in this subsection shall accrue interest at the rate specified 198 in subsection (5), computed from the date the payment is due to 199 the date the payment is received by the contractor. If the 200 contract between the owner and the contractor does not provide a 201 time period for the owner to submit a written punchlist to the 202 contractor, the time period shall be 15 days from the issuance 203 of the certificate of substantial completion, the issuance of 204 the certificate of occupancy, or the date the owner or the 205 owner’s tenant takes possession of the project, whichever first 206 occurs. If no written punchlist is given to the contractor 207 within the time provided in this subsection, interest begins to 208 accrue 14 days after the issuance of the certificate of 209 substantial completion, the issuance of the certificate of 210 occupancy, or the date the owner or the owner’s tenant takes 211 possession of the project, whichever first occurs. For 212 construction projects that are to be built in phases, this 213 subsection applies to each phase of the total project. The 214 contract between the owner and the contractor may specify a 215 shorter time period for disbursing all or any portion of the 216 final payment and the retainage. 217 (b) Except as provided in paragraph (a), an obligor and 218 obligee may agree to a provision that allows the obligor to 219 withhold a portion of each progress payment until completion of 220 the entire project. The amounts withheld shall bear interest 14 221 days after payment of such amounts are due under the terms of 222 the contract between the obligor and obligee and the other 223 requirements of subsection (4) have been satisfied. 224 (c) An obligee may, from time to time, withdraw all or any 225 portion of the amount retained from progress payments upon 226 depositing with the obligor: 227 1. United States Treasury bonds, United States Treasury 228 notes, United States Treasury certificates of indebtedness, or 229 United States Treasury bills; 230 2. Bonds or notes of the State of Florida; or 231 3. Certificates of deposit, within the insured limits, from 232 a state or national bank or state or federal savings and loan 233 association authorized to do business in this state. 234 235 Amounts may not be withdrawn in excess of the market value of 236 the securities listed in subparagraphs 1., 2., and 3. at the 237 time of such withdrawal or in excess of the par value of such 238 securities, whichever is less. The obligee shall execute and 239 deliver all documents reasonably required to allow the obligor 240 to document the transfer and the obligee shall pay any recording 241 or registration costs incurred by the obligor in connection with 242 the transfer. The obligor shall pay the obligee any interest or 243 income earned on the securities so deposited within 30 days 244 after the date such interest or income is received by the 245 obligor. If the deposit is in the form of coupon bonds, the 246 obligor shall deliver each coupon to the obligee within 30 days 247 after the date the coupon matures. An obligee may withdraw funds 248 retained from progress payments only to the extent the obligor 249 has withdrawn such funds for the obligee’s labor, services, or 250 materials from the person immediately above the obligor in the 251 chain of contracts. 252 Section 8. For the purpose of incorporating the amendment 253 made by this act to section 218.735, Florida Statutes, in a 254 reference thereto, paragraph (b) of subsection (2) of section 255 218.76, Florida Statutes, is reenacted to read: 256 218.76 Improper payment request or invoice; resolution of 257 disputes.— 258 (2) 259 (b) If the local governmental entity does not commence the 260 dispute resolution procedure within the time required, a 261 contractor may give written notice to the local governmental 262 entity of the failure to timely commence its dispute resolution 263 procedure. If the local governmental entity fails to commence 264 the dispute resolution procedure within 4 business days after 265 such notice, any amounts resolved in the contractor’s favor 266 shall bear mandatory interest, as set forth in s. 218.735(9), 267 from the date the payment request or invoice containing the 268 disputed amounts was submitted to the local governmental entity. 269 If the dispute resolution procedure is not commenced within 4 270 business days after the notice, the objection to the payment 271 request or invoice shall be deemed waived. The waiver of an 272 objection pursuant to this paragraph does not relieve a 273 contractor of its contractual obligations. 274 Section 9. For the purpose of incorporating the amendment 275 made by this act to section 255.073, Florida Statutes, in a 276 reference thereto, section 255.075, Florida Statutes, is 277 reenacted to read: 278 255.075 Mandatory interest.—A contract between a public 279 entity and a contractor may not prohibit the collection of late 280 payment interest charges authorized under s. 255.073(4). 281 Section 10. This act applies to contracts executed on or 282 after July 1, 2021. 283 Section 11. This act shall take effect July 1, 2021.