Recovery Fund Red Flags: Final Judgment Mistakes and Issues that Can Result in Delay or Denial of Your Recovery Fund Claim

The Florida Homeowners’ Construction Recovery Fund is a powerful tool for homeowners who have been wronged by a licensed contractor. The “Recovery Fund” or “the Fund,” as it’s often known, helps homeowners who have been harmed by a licensed contractor. Created under section 489.140 of the Florida Statutes, the Fund provides financial compensation to eligible homeowners who meet certain requirements.

To qualify, a homeowner must have a final court judgment, CILB restitution order, or arbitration award against a licensed contractor. The judgment or award must be based on the contractor’s financial misconduct, project abandonment, or false statements about the construction project.

The work must have been done while the contractor was properly licensed, and the homeowner must show proof of the actual financial losses caused by the contractor’s actions. The amount homeowners can recover is limited and may change if the Florida Legislature updates the law.

Homeowners looking to gain access to the Recovery Fund via a final judgment in a court of competent jurisdiction should consider knowledge of the Recovery Fund and its processes as a vital piece of the puzzle. If you are a homeowner who is considering applying for payment from the Recovery Fund, these are some red flags to avoid to prevent the delay or denial of your claim.

Failing to Begin the Court Proceedings with the Recovery Fund in Mind

If you are in court proceedings against a licensed contractor, it is prudent for you to consider the Recovery Fund’s criteria at the start of the proceedings, even if you believe at the time that you could obtain payment from a judgment directly from a contractor, rather than from the Recovery Fund. A contractor’s financial position may quickly change, and a company that seems healthy one day may find itself in dire straits. 

Failing to Base your Civil Case on an Eligible Cause of Action

Your civil action may not be based upon the Recovery Fund itself because the Recovery Fund does not have a private cause of action. However, you need to ensure that the language that you or your attorney chooses to include in your pleadings and the content of the case clearly align with the above-referenced misconduct. For example, if you are looking to access the Recovery Fund because of a false statement that a contractor made with respect to a project, you need to ensure that this statement and the fact that it was false are clearly contained in your initial pleadings. If they are not, then a court will likely be unable to include them in the findings and references contained in the final judgment and you will be forced to separately present evidence to the CILB to establish the licensing violations.

Failing to Obtain a Final Judgment Easily Showing Actual Damages

It is not unusual for a homeowner’s dispute with a contractor to involve a complicated fact pattern and a convoluted set of financial documents. A given project usually involves a number of payments to a contractor, subcontractors, licensing authorities, and other parties, both for material and labor costs. Because of this, it may be tempting for a homeowner who enters into litigation to simply want a declaration from the court that their contractor has acted improperly. However, it is vital to take the extra step to obtain a final judgement with the proper content.

A homeowner should ensure that the final judgment issued by a court contains a specific finding of the amount of actual damages sustained by the homeowner. Actual damages are defined in Rule 61G4-21.002(5), Florida Administrative Code, as the difference between the contract price, together with change orders, and the cost of construction completion by another builder, where the cost of completion is for the same scope of work and materials set out in the original contract. If the homeowner paid a deposit or down payment and no actual work is performed or materials are delivered, actual damages cannot exceed the exact dollar amount of the deposit or down payment.

Additionally, actual damages do not include:

• Post-judgment interest
• Punitive damages
• Attorney fees

Accordingly, the CILB will not grant an award from the Recovery Fund for any of these items. Because of this, if a final judgment contains an award that allows for payment of attorney fees and actual damages, but only states one dollar amount for the judgment without breaking out what the cost of attorney fees was and what the amount of actual damages was, the CILB may be unable to determine the amount of actual damages and deny the claim. This is something to particularly watch out for when a settlement is being negotiated. A homeowner who is settling a dispute with a contractor should ensure that both the settlement agreement and the final order that incorporates that settlement agreement contain a specific line item breakdown of the actual damages and anything else that is included in the payment.

Failing to File Your Recovery Fund Claim Within One Year of the Final Judgment

Your claim to the Recovery Fund must be made within one year of the entry of the final judgment. This is a non-negotiable requirement, and your claim will be denied if you do not file it within one year.

Failure to Obtain a Final Judgment in a Court of Competent Jurisdiction

A contractor may encourage a homeowner to use an informal system or third-party individual to help mediate and resolve a dispute between a homeowner and a contractor. Homeowners should be careful, as it is unlikely that these would be considered a “court of competent jurisdiction,” and thus the CILB would likely reject a Recovery Fund claim based on a settlement resulting from these sources. You should ensure that the actions that you take are in a court of competent jurisdiction- that is, that the filings take place in an actual court, rather than in such an informal setting.  

Additionally, note that you need to obtain a final judgment from the court. This requires you to obtain a formal, written judgment, rather than an informal statement from a judge or something that simply acknowledges a resolution. This gives the CILB a basis to evaluate your Recovery Fund claim. 

What to do if Your Recovery Fund Claim Has a Red Flag

Just because your final order contains a red flag does not necessarily mean that you will be unable to access the Recovery Fund. If the above findings by the court are not in the final judgment, you may still be able to access the Recovery Fund, but you will then have to present sufficient evidence to the CILB to establish the licensing violations. This may be difficult given the amount of time that has likely passed since the events took place that gave rise to the claim. This may also be more expensive, since it may take more of an attorney’s time to reconstruct the dispute and present the facts and violations pertaining to it to the CILB.  

Jimerson Birr’s construction attorneys are experienced in dealing with the Recovery Fund and in the bases for denial. Given the one-year deadline for claims and the intricacies of these and other red flags, it is vital that you pursue your claim speedily and with the help of competent counsel. Contact Jimerson Birr today to help with your Recovery Fund claim!