Recent Changes to Florida Homeowners Construction Recovery Fund Effective July 1, 2016
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Contrary to popular belief, the Florida Homeowners Construction Recovery Fund (the “Recovery Fund”) is not “broke.” The Recovery Fund was created under Chapter 489.140, Florida Statutes, and its purpose is to provide relief for Florida homeowners who have been financially harmed by Florida licensed contractors. With residential construction activities increasing throughout the state, it is important for construction lawyers know and understand the role of the Recovery Fund.
Any homeowner or “claimant” is eligible to seek redress from the Recovery Fund, but there are conditions. The first requirement for payment from the fund appears in the statutory definitions. “Homeowner” is defined as the “owner of an owner-occupied residence.” From there, “Residence” is defined as “single-family residence…in which the owner contracting for the improvement is residing or will reside 6 months or more each calendar year…” In other words, payment from the Recovery Fund is limited to residential owner-occupied homesteaded property.
Assuming the property characteristics satisfy the statutory requisites, the Claimant then must have received either a final judgment, arbitration award or CILB final order against a license holder directing the license holder pay restitution. The final judgment, arbitration award or CILB final order must be based upon consumer harm caused by financial mismanagement, abandonment, unapproved contract overages, executing a false affidavit or making false statements. See 489.129(1)(g), (j), or (k) and 713.35, Florida Statutes. Additionally, the homeowner/claimant will need to make some diligent effort to collect on the final judgment or arbitration award.
If no collection or execution is possible, then the homeowner/claimant can file his/her claim with the Recovery Fund. One important consideration to keep in mind when making a claim on the Recovery Fund is that a homeowner/claimant has one year from the conclusion of any civil, criminal, or administrative action or award in arbitration to file the claim. Further, the claim will be limited to actual damages and, until recently, claims were limited to $50,000 per claim and only for Division I contractors (i.e. Certified General, Certified Building, and Certified Residential). That is not the case today and the expansion of the Recovery Fund is further discussed below.
Any payment to the homeowner/claimant of any amount from the Recovery Fund places the contractor’s license on automatic suspension without further administrative action. The contractor’s license will not be reinstated until he/she has repaid in full, plus interest, the amount paid to the homeowner/claimant.
Recently, there have been some significant changes to the Recovery Fund. Governor Rick Scott signed House Bill 535, which permits payments to injured homeowner/claimants from the Recovery Fund for Division II license holders. This effectively added: Sheet Metal; Roofing; Class A Air-Conditioning; Class B Air-Conditioning; Class C Air-Conditioning; Mechanical; all Pool/Spa contractors; Plumbing; Underground Utility and Excavation; Solar; and Pollutant Storage Systems to the Recovery Fund. The maximum recovery against Division II contractors is $15,000 per claim and must be based on contracts entered after July 1, 2016. Division II claims may be considered by the CILB beginning January 1, 2017. There is an aggregate cap for Division II claims in the amount of $150,000.00 per licensee.
This change also places new noticing requirements for all Division II contracts. Effective July 1, 2016, all licensed contractors, both Division I and Division II, must ensure that the Florida Homeowner Construction Recovery Fund Notice is contained in their residential construction contracts. All Division II contractors should immediately change their residential construction agreements to include the statutorily required language. The language is below:
FLORIDA HOMEOWNER’S CONSTRUCTION
PAYMENT, UP TO A LIMITED AMOUNT, MAY BE AVAILABLE FROM THE FLORIDA HOMEOWNERS’ CONSTRUCTION RECOVERY FUND IF YOU LOSE MONEY ON A PROJECT PERFORMED UNDER CONTRACT, WHERE THE LOSS RESULTS FROM SPECIFIED VIOLATIONS OF FLORIDA LAW BY A LICENSED CONTRACTOR. FOR INFORMATION ABOUT THE RECOVERY FUND AND FILING A CLAIM, CONTACT THE FLORIDA CONSTRUCTION INDUSTRY LICENSING BOARD AT THE FOLLOWING TELEPHONE NUMBER AND ADDRESS:
Construction Industry Licensing Board
2601 Blairstone Road
Tallahassee, Florida 32399-1039
Note that the DBPR address has recently changed as well, so all old contract forms should be amended to reflect the new address. Failure of license holders to include the required warning language can result in discipline. On the first violation of failure to include this language, the CILB may fine the contractor up to $500, and the moneys will be deposited into the Recovery Fund. On a second or subsequent violation, the CILB shall fine the contractor $1,000 per violation, and the moneys will also be deposited into the Recovery Fund. §489.1425(2), Fla. Stat. (2016).
The Recovery Fund offers aggrieved homeowners some hope of redress and relief from contractor misconduct. An understanding of the Recovery Fund and its processes is imperative as we all know the easy part is obtaining a judgment, but the hard part is collecting on one.