Florida Senate - 2021                              CS for SB 378
       
       
        
       By the Committee on Governmental Oversight and Accountability;
       and Senator Bradley
       
       
       
       
       585-02181-21                                           2021378c1
    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 construction
    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 2 1 percent 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 2 specified in s. 215.422. After
   73  July 1, 2006, such payments shall bear interest at the rate of 1
   74  percent per month, to the extent that the Chief Financial
   75  Officer’s replacement project for the state’s accounting and
   76  cash management systems is operational for the particular
   77  affected public entity. After January 1, 2007, all such payments
   78  due from public entity shall bear interest at the rate of 1
   79  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 an
  158  additional 12 percent per annum, computed beginning on the 14th
  159  day after payment is due 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 an additional 12 percent per annum or the rate
  169  specified in the contract, whichever is greater. A person shall
  170  not be entitled to receive both the contract interest and the
  171  statutory interest specified 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.