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Tuesday, June 30, 2015

The Notice of Commencement: More Important Than You Might Think



CONSTRUCTION
PRACTICE GROUP
                                                          Legal Information for the Construction Industry
                                                            June 2015
 



THE NOTICE OF COMMENCEMENT: MORE IMPORTANT THAN YOU MIGHT THINK

Every construction project (should) begin with the recording of a Notice of Commencement. The notice is required to be signed by the owner of the project and recorded in the public records for the county in which the project is located. The notice should also be posted at the job location.

What does it tell you?

The notice typically contains the name and address of the owner, general contractor, surety and lender (if applicable). It may (but really must) contain a copy of any applicable payment and performance bond posted on the project.

Why is it important?

For the owner, any payments made to the contractor after the Notice of Commencement expires are improper and can result in the owner paying twice for the work furnished to the property. In addition, if there is project financing involved, the lender will want to make sure the Notice of Commencement is recorded after the date its mortgage is recorded. This is because a construction lien’s priority with respect to other mortgages/liens relates back to the recording date of the Notice of Commencement. Any interest recorded after that date, is inferior to that of the (timely recorded) construction lien.

For a potential lienor (contractor, subcontractor or supplier) the Notice of Commencement generally contains all the information needed to properly prepare and serve a Notice to Owner and Notice of Non-Payment (provided one is disclosed). A lienor has a right to rely on the accuracy of the information in the notice of Commencement if and when it seeks to record and perfect any lien or bond claim.

It follows then that the notice can also serve to alert a subcontractor or supplier that a payment and/or performance bond has been posted for the job.  In fact, Florida Statutes §713.23 requires that a copy of a payment bond be attached to the Notice of Commencement when it is recorded.[i] Failure to attach a copy of the bond to the Notice of Commencement can lead to problems for the surety/owner. Florida’s Lien Law states that, “if a notice of commencement with the attached bond is not recorded before commencement of construction, the lienor not in privity (in contract) with the contractor may, in the alternative, elect to serve the notice to the contractor up to 45 days after the date the lienor is served with a copy of the bond.”[ii] Thus the failure to attach a copy of the bond to the Notice of Commencement can actually result in giving a lienor a second bite at the proverbial apple.

Conclusion

Always request a copy of the Notice of Commencement from the party you are contracting with or if possible, the general contractor. It is perhaps one of the most important documents to have in a project file. Not only does it contain needed information to prepare a proper Notice to Owner/Contractor, it can also alert you to the existence of a payment bond and the information needed to serve a Notice of Non-Payment should the need arise. When in doubt of what rights you may have to payment on a given project or what you should include in a Notice to Owner/ Contractor or Notice of Non-Payment, always consult with an attorney knowledgeable with Florida’s Lien and Bond Law. 


[i] In fact, pursuant to Florida Statutes §713.245 a project on which a conditional payment bond has been posted (that is a bond in which surety’s obligation is triggered only to the extent the general contractor has been paid by the owner), the notice must list the bond as a conditional bond and attach a copy of it to the recorded notice.
[ii] Florida Statutes 713.23(c)




BY: JOSE A. RODRIGUEZ, ESQ. 
The Soto Law Group, P.A.
2400 E. Commercial Blvd., Suite 400
Fort Lauderdale, FL  33308
jose@sotolawgroup.com
TEL:  954-567-1776
FAX:  954-567-1778

























The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you free written information about our qualifications and experience. Additionally, the information above is not intended to be legal advice. Please consult with an experienced lawyer if you have a specific issue or dispute.


Office Locations: 2400 E. Commercial Boulevard, Suite 400, Fort Lauderdale, FL  33308
  2901 Q. Street, NW Suite 2, Washington, D.C. 20007

Monday, June 15, 2015

2014 Cases of Interest


CONSTRUCTION
PRACTICE GROUP
Legal Information for the Construction Industry
May 2015

2014: Cases of Interest

  SLG attorneys, Oscar E. Soto and Jose A. Rodriguez, successfully defended a national distributor of fabricated metal products from a bankruptcy trustee’s preference and turnover claims exceeding two million dollars.The claims span Federal Courts in Delaware, Texas and Pennsylvania. The firm’s lawyers efficiently and expeditiously resolved the matter for less than 25% of the amount claimed.

  SLG attorneys Oscar E. Soto and Felena R. Talbott successfully represented the developers of a $50 million health care center in claims asserted by the contractor and its surety. The case was successfully resolved after extensive litigation with the developers off setting contract balances and disputed changes orders against several millions of dollars of delay/liquidated damages.

  SLG Partner, Felena R. Talbott and Associate, Jose A. Rodriguez, successfully prosecuted through jury trial and appeal to the Third District Court of Appeals, a specialty subcontractor’s six figure claim arising from a Miami Beach resort despite allegations by the upstream contractor of defective work. Grundman Fabricators v. Conti Glass Corp. 138 So.3d 454 (3rd DCA 2014).

  SLG attorneys Oscar E. Soto and Dale A. Evans Jr. co-counseled with a New York Law Firm in defense of a $50 million A-E delay claim arising from delay in the opening of iconic Fontainebleau Hotel in  Miami Beach. Case was successfully resolved through multi-party mediation.

  SLG attorneys Oscar E. Soto, Felena R. Talbott and Christina L. Feyen successfully obtained an injunction in a non-compete/trade secrets case on behalf of an automotive electronics manufacturer. The manufacturer filed suit against a former national sales manager who was soliciting manufacturer’s clients in violation of his non-compete agreement. 

  SLG attorney Christina L. Feyen successfully defended a general contractor in Federal District Court who was sued by a subcontractor’s employees for unpaid wages and overtime under the Fair Labor Standards Act (FLSA). The Plaintiffs alleged that the general contractor was liable for the violations as a “joint employer” of Plaintiffs under the FLSA.  The Federal District Court ruled that the general contractor was not liable to Plaintiffs for the alleged violations because Plaintiffs were not economically dependent on general contractor, and therefore the general contractor was not a joint employer of Plaintiffs under the FLSA.  Espinal et al. v. Siltek Group, Inc. et al. U.S. District Court, Southern District (2014).   

  SLG attorneys Alexander O. Soto and Dale A. Evans Jr, successfully prosecuted a General Contractors claims for monies owed on a $25 million custom ocean front residence. The case was resolved in mediation after discovery revealed that owner back charges were unsupported.                                                 





The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you free written information about our qualifications and experience. Additionally, the information above is not intended to be legal advice. Please consult with an experienced lawyer if you have a specific issue or dispute.


Office Locations:    2400 E. Commercial Boulevard, Suite 400, Fort Lauderdale, FL  33308
  2901 Q. Street, NW Suite 2, Washington, D.C. 20007

Monday, June 8, 2015

Top Ten Construction Clauses - Part 3 - Liquidated Damages Provisions

     This article is the third of a ten-part series analyzing ten critical construction clauses.  In this installment, we analyze the “Liquidated Damages Provision.” The first two articles, which addressed the indemnification clause and the mutual waiver of consequential damages clause, can be found at: http://sotolawgroup.blogspot.com/2015/04/top-ten-construction-clauses-part-2.html

I.            OVERVIEW 

     A liquidated damages provision determines in advance the measure of damages if a party breaches the agreement.  The provision is most frequently utilized when a contractor fails to achieve substantial completion of the construction project by the date set forth in the contract.  Two common reasons for using a liquidated damages Provision are: (1) to avoid the difficulty and expense of proving an owner’s actual damages attributable to a contractor’s failure to achieve substantial completion on time; and (2) to incentivize the contractor to stay on the project schedule.  

     The American Institute of Architects’ Agreement between the Owner and Contractor (AIA Document A101-2007) provides a space in Article 3 for insertion of a Liquidated Damages Provision. The AIA’s model Liquidated Damages Provision is set forth in its Guide for Supplementary Conditions (AIA Document A503-2007) and provides as follows:

     The Contractor and the Contractor’s surety, if any, shall be liable for and shall pay the Owner the sums hereinafter stipulated as liquidated damages, and not as a penalty, for each calendar day of  delay after the date established for Substantial Completion in the Contract Documents until the Work is substantially complete: _______________ Dollars ($_________).

II.            ENFORCEABILITY IN FLORIDA

     Before  including a Liquidated Provision in a construction contract, one must carefully ensure that their liquidated damages provision is legally enforceable.  In Florida, the court will not enforce a liquidated damages provision that it determines to be in the nature of a penalty. Where it is doubtful whether a contract provision constitutes a penalty or liquidated damages the tendency of the courts is to construe a provision for payment of an arbitrary sum a penalty rather than one for liquidated damages. T.A.S. Heavy Equip. v. Delint, Inc., 532 So. 2d 23, 25 (Fla. 4th DCA 1988) (citing Hyman v. Cohen, 73 So.2d 393 (Fla. 1954)).  In making this determination, the courts will usually consider:

  1. The reasonableness of the provision;
  2. The certainty of establishing actual damages; and
  3. The intent of the parties.  
See id. (citing Refram v. Porter, 343 So. 2d 1343 (Fla. 2d DCA 1977).  In the final analysis the test is whether the damages flowing from the breach are readily ascertainable at the time the contract is executed. See id. (citing South Florida Regional Planning Council v. Board of County Commissioners of Palm Beach County, 372 So. 2d 1142 (Fla. 4th DCA 1979).

    The most difficult element to establish, and therefore most important element, is the first—the reasonableness of the provision.  This test refers to the concept that the liquidated damages must bear some relationship to the actual damages suffered. To satisfy this objective, an owner wishing to include a liquidated damages provision should carefully evaluate all aspects of damages it may suffer in the event of delay such as lost profits and additional or increased financing charges/interest.  The number ultimately included in the liquidated damages provision must be a product of this analysis, not an arbitrary or punitive amount of money intended to penalize a contractor.

     Second, a liquidated damages provision will be unenforceable in the event that the actual damages resulting from a contractor’s breach of contract were readily ascertainable at the execution of the contract. Third, the intent of the parties must indicate that the provision is not intended to be a penalty.  This can be achieved by including language within the Liquidated Damages Provision that the amount of liquidated damages is not intended as a penalty and that such amount has been agreed upon due to the difficulty in determining the actual damages that will be suffered by the Owner in the event of a failure to complete the work on time. 

III.            ADDITIONAL CONSIDERATIONS

     contractor concerned with the risk of accepting a Liquidated Damages Provision has a few options to limit or offset such exposure. For example, a contractor may insist on the inclusion of an early completion bonus as compensation for the additional risk involved in a liquidated damages provision.  In addition, a contractor should include liquidated damages provisions in its contracts with subcontractors so that it can properly pass through liquidated damages to the responsible parties.

     Finally, owners should consider whether the benefits of including a liquidated damages provision in its contracts outweigh the risks. For example, including such a provision may encourage a hostile working relationship with the contractor, who may feel the need to notify the owner in writing each time it believes the owner has contributed to a delay on the project.  In addition, a contractor who is aware that a liquidated damages provision will be included in the contract may be encouraged to submit a project schedule that is longer that the contractor actually anticipates so that it can begin the Project with a built-in cushion. 

     Consult with an attorney knowledgeable in construction so that together you can decide whether it is advisable to include a liquidated damages provision in your contracts. 

BY: DALE A. EVANS JR., ESQ.
The Soto Law Group, P.A.
2400 E. Commercial Blvd., Suite 400
Fort Lauderdale, FL  33308
dale@sotolawgroup.com
TEL:  954-567-1776
FAX:  954-567-1778

The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you free written information about our qualifications and experience. Additionally, the information above is not intended to be legal advice. Please consult with an experienced lawyer if you have a specific issue or dispute.
Office Locations:  2400 E. Commercial Boulevard, Suite 400, Fort Lauderdale, FL  33308
 2901 Q. Street, NW Suite 2, Washington, D.C. 20007