In a case of first impression in Florida, the First District Court for Appeal ruled that the sole remedy available to an unpaid contractor seeking to recover from a construction lender which stops making advances prior to the distribution of all construction loan funds, lies in Florida’s Construction Lien Law. As a part of its decision, the court ruled that an unpaid contractor is barred from asserting all common law claims against the construction lender, including claims for equitable lien and unjust enrichment.
In Jax Utilities Management, Inc. v. Hancock Bank, 40 Fla. L. Weekly D948a, 2015 WL 1809322 (Fla. 1st DCA April 22, 2015) (opinion subject to revision or withdrawal), a housing development project in Jacksonville, which was to consist of 429 single family homes, failed. The developer defaulted under the construction loan, and the lender ceased making disbursements to the borrower/developer under the loan., The lender ultimately foreclosed its mortgage. At the time the lender stopped making future loan disbursements, the contractor, which provided utility, water and sewer improvements to the project, was owed approximately a half-million dollars. The contractor sued the lender for an equitable lien and for unjust enrichment. The contractor, however, did not assert a statutory cause of action against the lender pursuant to Section 713.3471, which is part of Florida’s Construction Lien Law and defines a lender’s responsibilities to a contractor for construction work where the lender decides to stop making advances prior to the distribution of all construction loan funds.
The trial court entered summary judgment in favor of the lender. On appeal, the court considered whether Section 713.3471, Florida Statutes, precluded the contractor’s common law claims for equitable lien and unjust enrichment. (The other issue was whether the contractor’s equitable lien claim was barred by the statute of limitations.)
The appellate court affirmed the trial court’s summary judgment and held that the contractor’s common law claims against the construction lender were barred. The court reasoned that in enacting Section 713.3471, the Florida Legislature clearly intended to alter the common law. According to the appellate court: “[a] common law claim would conflict with the statute. If a lender complies with the statute, it has no liability. If the lender fails to comply, a contractor may seek damages prescribed by the statute.”
If problems with a construction project develop to the point that the lender ceases making advances, contractors and other construction lien claimants must be aware of Section 713.3471 – it may be their only remedy.