Florida Construction Lawyer Blog

The firm's Stuart Sobel appeared on the evening newscast for Channel 10 News in South Florida on Wednesday, December 14, to discuss the unsuccessful challenge to the Port of Miami Tunnel project by Chalks Airline, Inc., the operator of the sea plane base at Government Cut. Stuart represents Bouygues Civil Works Florida, Inc., the constructor of the Miami Access Tunnel, for the public-private partnership among the Florida Department of Transportation and MAT Concessionaire, LLC, the concessionaire chosen to design, build, operate and maintain the tunnel.

Click here to watch the story and listen to Stuart's explanation as to why the court declined an emergency injunction to halt the digging operation based on his arguments on behalf of his client.

A recent ruling by the Fourth District Court of Appeal serves as an important reminder for general contractors and construction firms which are contracted by tenants for improvements to leased property. The court upheld the lower court's decision that found that the contractor could not assert a claim of lien against the landlord when the tenant defaulted on its construction contract. For the landlord's perspective on this ruling and related changes to Florida's lien law, click here to read the article by Fern Musselwhite in our real estate blog.

In its ruling, the court specifically placed the burden on the general contractor, MHB Construction Services, to understand the landlord's prohibition against liens and protect itself by binding the landlord under its construction contract with the tenant.

The appellate panel noted in its decision that the Notice of Commencement filed by the landlord/lessor does not provide the contractor with the right to lien the property of the landlord who is not party to the contractor-lessee contract for the improvements. Also noted in the decision were the facts that the landlord's lease and its properly recorded Notice of Lien Prohibition expressly prohibited claims of lien for improvements made by the tenant, the lease required advance written consent for the improvements by the landlord, and the lease did not require that the improvements be made by the tenant.

The court also was not swayed by the arguments by MHB Construction that a $10,000 reimbursement by the landlord towards the tenant's improvements constituted an unfair scheme by the landlord to avoid liens and use the tenant as a strawman for the improvements. The court found in its ruling that the $10,000 amounted to less than 10 percent of the total costs of the improvements and was contingent on the tenant receiving a final release from MHB.

The contractor in this case is now unable to assert a lien against the landlord and, additionally, must pay the landlord's attorney fees in the matter. Ultimately, it has learned a very expensive lesson about the importance of contractually ensuring its right to a claim of lien against the landlord/lessor in construction contracts with a lessee tenant.

Our South Florida construction law attorneys work closely with our clients to help ensure that their lien rights are soundly protected in all of their contracts with tenants, landlords and owners. We write about important cases and matters affecting the construction industry in this blog, and we encourage industry followers to submit their e-mail address in the subscription box at the top of the column on the right in order to automatically receive all of our future articles.

A recent ruling by the Fifth District Court of Appeal which reversed the trial court's decision serves as a reminder that the Florida courts can find liens to be fraudulent even when they are filed based on a good faith belief that money is owed. The court's ruling is a reminder to contractors to carefully review the amounts included in a claim of lien so as not to include amounts which are not lienable (or which may not be lienable) under Florida law, as they will not necessarily avoid a fraudulent lien based upon a "good faith belief" that amounts were lienable.

The appellate ruling came in the appeal by Daniel Medellin and Susan Medellin of a ruling that contractor UBuildIt had not filed a fraudulent lien against their property because the company had reason to believe that it was entitled to more than $28,000 under the terms of its construction consulting contract with the Medellins. In its initial ruling, the trial court interpreted that under chapter 713 of the Florida Statutes, it was precluded from finding UBuildIt's claim of lien to be fraudulent because the company had a good faith belief that it was owed money by the Medellins.

The appellate panel found that in section 713.31(2)(b), the statute provides "that neither a good faith dispute as to the amount owed nor a minor mistake is sufficient to support a finding that a lien is fraudulent. This is quite different from the trial court's ruling that a good faith dispute as to the amount owed, or a minor mistake, necessarily requires a finding that the lien is not fraudulent."

In its ruling, the appellate judges agreed with the appellants that UBuildIt did not perform labor or services constituting an improvement on their property that would give it the right to file a lien. Instead, its lien was based on breach of contract and lost profits, which are not a proper basis for a lien. The panel agreed with the Medellins that the trial court could conclude that the lien was willfully exaggerated because the lienor included claims that were not lienable, notwithstanding the lienor's good faith belief that it was entitled to payment. The court reversed the parts of the final judgment denying the Medellins' claims for fraudulent lien, slander of title, and attorney's fees. It directed the trial court to reevaluate, on remand, its ruling on the slander of title claim in light of the fact that the lien was not based on lienable services, and to determine the amount of attorney's fees to award to the Medellins.

Our attorneys will continue to write about important court decisions and legal issues impacting the construction industry in Florida, and we encourage industry followers to submit their e-mail address in the subscription box on the right in order to automatically receive all of our future articles.

Our construction law attorneys in South Florida work very closely with our clients in reviewing and finalizing all of their job contracts. A decision by the Fifth District Court of Appeal from earlier this year serves as an excellent reminder for construction firms of the importance of avoiding mistakes in their contracts stemming from the use of multiple job proposals before contracts are finalized.

L & H Construction Company, the general contractor in the case, filed the appeal after the trial court ruled in favor of Circle Redmont, the subcontractor which had sued L & H for breach-of-contract. The trial court concluded that the contract between the two parties was in error as a result of a mutual mistake or scrivener's error stemming from Redmont's submission of multiple job proposals, which L & H had requested. The error resulted in an impasse on the issue of whether Redmont would complete the installation of a staircase or simply supervise the installation.

The appellate panel agreed with the trial court's ruling that the word "install" in the contract was the result of a mutual mistake, and it was the express understanding of both parties that Redmont would supervise the installation rather than actually install the staircase. However, the appellate court ruled that the trial court's judgment was internally inconsistent. It could not support the lower court's finding that L & H breached the contract in May 2006, as it could not find any conduct by L & H that constituted a breach by that date. The court noted that it was hampered in reviewing the record because the trial court had sustained objections by Redmont and disallowed evidence about exactly what transpired when the parties reached the stalemate on the installation issue. The trial court found that this evidence constituted settlement negotiations, represented attorney-client communications, or was irrelevant. As a result, the panel ruled that this resulted in insufficient evidence to support the trial court's final judgment, so Redmont essentially may have lost the appeal due to its own objections regarding the admission of the additional evidence.

Of course, this litigation very likely could have been avoided by both parties if they had thoroughly reviewed the contract for ambiguities to ensure it was complete and correct. The mistake now appears to have proven to be very costly for Redmont as well as L & H, and the case has become just one of the many examples of the potential implications of errors in construction contracts. Our other construction law attorneys and I will continue to monitor and write about cases and issues such as this, and we encourage industry followers to enter their e-mail address in the box on the right in order to automatically receive all of our future blog posts.

With the financial difficulties that developers, contractors and community associations are undergoing during the worst economic downturn of the last generation, disputes regarding construction defects can take a very significant toll on their already strained resources. Florida law governing this type of construction dispute is very conducive to mediation between the parties, and the construction law attorneys in South Florida from our firm often advise our clients to consider mediation and make serious efforts to use it whenever possible to resolve these potentially costly and time-consuming claims.

By creating a process for construction defect claims that begins with providing notice of the specific defect and giving the contractor/developer an opportunity to investigate and respond, Florida Statute 558 serves as a de facto precursor to mediation. These legal requirements have traditionally made mediation a popular alternative dispute resolution option for these defect claims in the state, and the sour economy and real estate market have also combined to create greater incentives for all of the parties involved in these cases to find equitable and expedited settlements through mediation.

Unlike arbitration, which for construction defect cases is typically used only when called for in the contract between the parties, mediation is generally a voluntary and nonbinding option for construction defect disputes. In addition, it is likely to be mandated by the court after the filing of the lawsuit in an attempt to have the parties explore the possibility of finding a resolution outside of the courtroom.

Mediation for defect cases has proven to be very effective in part because of the use of certified mediators who are familiar with construction law matters. The parties involved will select a neutral mediator who has a great deal of construction industry experience. This experience often enables resolution since the neutral is familiar with both the legal and construction issues involved in a matter. For example, Steven Siegfried and Stuart Sobel from our firm are regularly selected to serve as mediators for these cases.

Mediation, whether required as part of litigation or as a pre-condition to further legal action, can often result in a quicker and less expensive mechanism to resolve construction defect issues. While some discovery is usually necessary in order to reach a resolution through mediation, often times, mediation avoids significant litigation discovery costs. Moreover, in this current economic climate when many developers and contractors have reduced their staff, a prompt resolution through mediation reduces the hours of involvement required by developers and contractors in a prolonged litigation. Accordingly, developers and contractors can focus on business and not litigation.

Additionally, with mediation, the parties remain in control of the terms of resolution and decision-making process; whereas in litigation or arbitration, the decision is left to a judge, jury or arbitrator(s). This control, as well as the general nature of the mediation process, also helps to preserve business relationships which may be destroyed by prolonged and costly litigation.

In a mediation, each side will essentially present their case to the mediator, who then works with each of the parties to help broker a settlement. If the mediation fails to find a resolution to which the parties can agree, none of the discussions in the mediation process are admissible in a subsequent litigation.

In addition, mediation can be an effective means of engaging insurance carriers for contractors, subcontractors and suppliers into the process for cases in which there is insurance coverage based on the allegations of the complaint. If an insurance company is involved in the defense, engaging it in the mediation process can be critical to finding a fair resolution and avoiding continued litigation.

The vast majority of cases are resolved prior to trial. Ideally, mediation will often allow the parties involved to cut right to the heart of the matter and find a fair resolution. Thus, engaging in serious mediation proceedings with an effective mediator can be one of the best ways to resolve a construction litigation dispute in a timely and cost-effective matter, particularly in this economic climate.

As the residential and commercial real estate markets continue their slow climb back to health, many of our client general contractors are now finding themselves working with developers whose ongoing financial viability has fallen into serious peril. Some of these developers have filed for Chapter 11 bankruptcy, typically to remain operating their projects and/or to stave off a lender foreclosure. The ensuing bankruptcy court litigation may take years to unfold and consume large sums in legal fees.

What should a contractor expect when a developer files for bankruptcy? First, it is important to quickly consult with an attorney specializing in bankruptcy. We emphasize "quickly" due to the fact that when a project owner files for bankruptcy, it is likely that certain significant decisions over what will occur with the project going forward and how the contractors will be paid may be made immediately after the bankruptcy is filed. There are crucial decisions that are made in the bankruptcy case which require that the contractors participate in the court process in order to best protect their ability to get paid.

It is prudent for the contractor to have a plan in place before a developer files bankruptcy in order to adequately preserve the contractor's rights. Generally, in bankruptcy, secured creditors get paid first and unsecured creditors get paid at a discount from what remains in the bankruptcy estate. Therefore, obtaining a security interest in the project or other assets of the developer provides an advantage to the contractor once the developer files bankruptcy.

Immediately upon the filing of a bankruptcy petition by the developer, its assets go into what is called the "bankruptcy estate" and the "automatic stay" goes into effect. The automatic stay prohibits creditors, such as contractors, from taking any action to collect amounts due from the debtor/developer, and it is broadly construed. Collection activity in violation of the automatic stay is often met with sanctions being imposed against the creditor by the bankruptcy court.

If a contractor continues to work on a project for an owner that has filed for Chapter 11 protection, then it is wise to undertake measures to protect the contractor's right to payment for current work. Although the automatic stay and preference rules prevent a contractor from collecting on pre-bankruptcy sums due, these rules do not apply to work that a contractor performs or materials furnished after the bankruptcy case is filed and while the case is pending. To best protect a contractor's interest, the bankruptcy case should be monitored to ensure that the claims against the developer are properly listed and classified (as secured, for example).

Another important element in a bankruptcy case for a contractor to look for is the Chapter 11 debtor's right to either assume or reject the construction contract at any time before the confirmation of the debtor's reorganization plan. This event could take several months. To assume the contract, the debtor is required to cure all defaults, which means paying the contractor and the contractor's subs and suppliers in full. Additionally, as a condition to assumption, the debtor is required to provide adequate assurances that it will make the future payments on the contract.

With that said, for the contractors with financially troubled developer clients, it's important that they give serious consideration to the possibility of negotiating a workout settlement for a lesser sum than they are owed in order to avoid being one of many creditors in a possible future bankruptcy. Once they get the first indication of financial strains from the developer, they should consider the possibility of meeting the situation head-on with their client and seek an out-of-court workout.

In general, most contractors will typically fare better by negotiating a workout settlement rather than going through the Chapter 11 bankruptcy process to collect on their debt. Once the developer is in bankruptcy, all bets are off. There will be a number of creditors, and the entire matter is under the control of a federal bankruptcy court and, perhaps, a Chapter 11 trustee assigned to administer the developer's case. Also, the developer's legal fees will erode a great deal of the funds that it has remaining to pay its debts, and the entire process could take years to complete. Contractors should give careful consideration to making a smart business decision and settling for less than they are owed before they get embroiled in the bankruptcy proceedings.

If an out-of-court workout cannot be reached and the developer files for bankruptcy, contractors need to be sure to make every necessary effort to establish their claim and play an active role in the entire process. They should work closely with both construction law and bankruptcy attorneys to ensure that they follow through on every detail in pursuing the matter. Once a contractor is deemed by the bankruptcy court as a secured creditor, they may have a claim for their attorney fees to be redeemed in the bankruptcy if there is any remaining equity in the property. However, if there is no equity, then the lender will have full priority over the property, and the contractor will be forced to pay its own legal fees, which can become substantial for large and complicated Chapter 11 cases.

Our South Florida construction lawyers and I are working very closely with many of our contractor clients to help them to make the soundest legal and business decisions in their dealings with financially troubled developers. We will continue to write about these and other important issues for construction businesses in Florida, and we encourage industry followers to enter their e-mail address in the box on the right in order to automatically receive all of our future blog posts.

Last month, the Fifth District Court of Appeal upheld the validity of an allegedly defective Notice of Termination. The court found that a mortgage recorded on the date that the Notice of Termination was filed maintained priority over a subsequently recorded construction lien.

In LaSalle Bank National Association v. Blackton, Inc., the Fifth DCA reversed a trial court which had declared a construction lien superior to a prior recorded mortgage based upon an allegedly defective Notice of Termination. The same entity was both the owner and builder of the home at issue. A Notice of Commencement was filed prior to construction commencing. Upon completion of the home, the builder/owner sold the home. The builder/owner recorded a Notice of Termination in order to shorten the one year effective date of the Notice of Commencement. On the same date, two mortgages were recorded against the property.

Subsequent to the new owners taking possession of the property, they hired a contractor to correct some deficiencies in the construction of the home. The correction contractor was not paid in full, and it recorded a construction lien against the property. Thereafter, the homeowners defaulted on their mortgages. The mortgagees and the correction contractor both obtained judgments against the homeowners.

The trial court declared that the Notice of Termination was ineffective because the owner and builder were the same entity. The appellate court declared that there was no such prohibition in Fla. Stat. § 713.132. Additionally, the appellate court was not swayed by the correction contractor's claim that the contractor's affidavit attached to the Notice of Termination was a nullity because it was authored by and intended for the use of the same entity, the owner/contractor. The appellate court did not comment on whether the contractor's affidavit was a nullity, because it was superfluous. While § 713.132(2) allows an owner to rely upon a contractor's affidavit to show that no lienors remain unpaid, the owner had already complied with § 713.132(1) by including a statement in the Notice of Termination that all lienors had been paid.

In its decision, the Fifth DCA wrote that under the correction contractor's interpretation of the law, "a Notice of Termination executed by an entity that was both the owner and the contractor would be valid only if accompanied by contractor's affidavits executed by each and every subcontractor retained on the job. We conclude that Chapter 713 does not impose such a cumbersome and unnecessary procedure."

Our construction law attorneys in South Florida will continue to monitor and write about important court decisions and legal issues affecting the construction industry in Florida. We encourage industry followers to enter their e-mail address in the box on the right in order to automatically receive all of our future blog posts.

In Weitz v. M.H. Washington, the Eight Circuit held that critical path testimony is not necessary to support a delay claim, making this a potentially precedential decision.

In the case, Weitz, a general contractor, retained an expert to analyze responsibility for delays on a townhome project. The expert employed "windows analysis," which distinguishes activities on the critical path with those with "float" time where a delay does not affect the overall job, and a "baseline schedule" that he created for his analysis.

M.H. Washington moved to exclude the testimony as unreliable. Washington argued that the expert's testimony was unreliable because it was premised upon the baseline schedule that was the expert's own creation and did not distinguish float and critical path activities. Therefore, the expert was not able to distinguish particular activities on the project as on or off the critical path, and the owner argued that it was incapable of verifying the opinion.

Weitz countered that the expert had testified that in his experience "near critical path activities" should be analyzed as critical. Furthermore, the baseline schedule was derived from the original project schedule, and Washington had not employed its own expert to analyze and refute its expert witness' opinion.

The District Court in allowing the expert's opinion had noted that it had some apparent weakness, but was sufficiently specific to allow Washington to analyze the opinion and identify specific documents which arguably could demonstrate flaws in the analysis.

The Eight Circuit discussed Daubert v. Merrell Dow Pharms, Inc. in holding that the District Court did not abuse its discretion in allowing the testimony. It noted that Washington's argument about which activities should have been excluded from the "critical path" do not rise to the level of inherent unreliability because most activities become critical if they are all that is left to complete the work. Furthermore, the court held that the expert's use of his own schedule went to the weight, not the fundamental reliability of his analysis.

A recent ruling by the Third District Court of Appeal affirmed the lower court's decision that a subcontractor used delay tactics in its dispute with the general contractor for a construction project at a Miami Beach elementary school. The appellate panel confirmed the trial court's decision that the subcontractor had been properly terminated.

The case stemmed from a breach-of-contract action filed by Mario's Enterprises Painting and Wallcovering, Inc. ("Mario's") against Veitia Padron, Inc., the general contractor which had contracted Mario's as a painting subcontractor for renovations at the Feinberg Fisher K-8 Center school in Miami Beach. Once the painting work began at the school, lead was discovered in the building that was being painted, and the general contractor notified the subcontractor of several deficiencies in its work. However, the subcontractor refused to return to the school to complete its work until the lead report on the entire project was completed, even though the tested levels in the building that had been painted were well below acceptable exposure limits.

The general contractor notified the painter that if it did not return to the jobsite to continue working within 72 hours, the company would hire a replacement painting subcontractor to complete the project. After the painting was completed by the new subcontractor, Mario's sued the general contractor for breach of contract. The trial court found in favor of Veitia Padron, and the appellate panel upheld the decision and noted in its ruling that "there is sufficient competent evidence in the form of correspondence and witness testimony in the record to uphold the trial court's findings that the painter's actions were essentially delay tactics and that it was properly terminated."

This ruling reaffirms that the courts will not tolerate delay tactics by subcontractors after they are notified of deficiencies in their work and a dispute arises. Our attorneys who focus on construction law matters will continue to monitor and write about court decisions affecting the construction industry in Florida, and we encourage industry members to submit their e-mail address in the box on the right in order to automatically receive all of our blog posts.

In today's real estate market, contractors must be very cautious and proactive in order to effectively assert and assure their lien rights. There are several potential loopholes in Florida law between the state's Lis Pendens Statute and Construction Lien Law, and the South Florida construction law attorneys at our firm believe that there is one specific discrepancy between the statutes that has the potential to be particularly troublesome for contractors.

Here's a common example that illustrates this problematic grey area for construction firms:

Under Florida's lien law, a contractor must record its claim of lien within 90 days of its last day of work, and it has one year in which to file suit to enforce that claim of lien. Let's say a contractor is performing work on a project where the lender files a foreclosure suit and lis pendens. If the contractor has not recorded its claim of lien as of the date of the recording of the notice of lis pendens and does not intervene in the foreclosure suit to enforce its claim of lien within 30 days of the bank's recording of the lis pendens, the contractor, potentially, could be forever barred from enforcing its claim of lien based on Section 48.23, Florida Statutes. Since it is entirely possible that a lender could file a lawsuit to foreclose its mortgage and record a lis pendens without any actual notice to the contractors working on the property, this has the potential to be a very serious legal challenge for contractors performing work in the current market. Section 48.23, Florida Statutes states in pertinent part:

Except for the interest of persons in possession or easements of use, the recording of such notice of lis pendens, provided that during the pendency of the proceeding it has not expired pursuant to subsection (2) or been withdrawn or discharged, constitutes a bar to the enforcement against the property described in the notice of all interests and liens, including, but not limited to, federal tax liens and levies, unrecorded at the time of recording the notice unless the holder of any such unrecorded interest or lien intervenes in such proceedings within 30 days after the recording of the notice. If the holder of any such unrecorded interest or lien does not intervene in the proceedings and if such proceedings are prosecuted to a judicial sale of the property described in the notice, the property shall be forever discharged from all such unrecorded interests and liens.

Generally, a lienor recording a claim of lien will not do a title search of the property until it files its foreclosure action. The lienor has one year from the date of recording its claim of lien to file its foreclosure action. Consequently, a lender can file a foreclosure action and record a lis pendens, and the lienor will have no actual knowledge of the lis pendens until a title search is performed at the time of the filing of the lawsuit. If the lis pendens was recorded more than 30 days before, it appears that Section 48.23 of the Florida Statutes could bar the enforcement of the lienor's claim of lien.

This application of Section 48.23, Florida Statutes can be detrimental to contractors, subcontractors and other lienors as defined in Chapter 713 who are working to improve the property that is secured by the mortgage, which, arguably, benefits the lender. The lienors may not have reason to know that the lender has started foreclosure proceedings and, pursuant to the Construction Lien Law, the lienors may still be within their rights to record a claim of lien even after a lis pendens is recorded.

There is little case law dealing with the interplay between these two important statutes. Accordingly, lienors working on projects in this uncertain economic climate should make every effort to keep a close and careful eye on the financial and legal status of the project, and they should act quickly to record their claim of lien as soon as appropriate after non-payment. In addition, it is vital for the lienors to work with a qualified and experienced construction industry attorney and perform title searches on the property in order to determine whether a lender (or other lienor) has recorded a lis pendens that could impact their ability to foreclose their claim of lien.

Our lawyers who focus on construction law matters in South Florida will continue to write about important legal and financial issues for the industry in the state, and we encourage industry members to submit their e-mail address using the box on the right in order to automatically receive all of our future blog posts.

A recent appellate ruling reversed the trial court's decision and cleared the president of a carpentry company from individual liability after the lower court found that he had filed a fraudulent claim of lien. The ruling has the potential to affect many other cases in which the courts determine that a claim of lien is fraudulent and, as a result, statutory damages are awarded.

In the case of Bruce Tansey Custom Carpentry, Inc. v. Goodman, Edmond B. Tansey, as president of the carpentry company, contracted with Goodman and subsequently filed a claim of lien and an amended claim of lien against Goodman. In its final judgment, the trial court determined that the contracting parties were Gary W. Goodman, Jennifer Goodman, Edmond B. Tansey, individually, and Bruce Tansey Construction, which was the fictitious name of Edmond B. Tansey at the time that the contracts were executed.

The trial court found that Tansey's claim of lien and amended claim of lien were fraudulent, and that Edmond B. Tansey, individually, and Bruce Tansey Custom Carpentry, Inc. were both liable to the Goodmans for statutory damages. The Florida Second District Court of Appeals reversed the ruling that Tansey was individually liable on the grounds that the complaint and amended complaint did not allege individual liability and, even if the complaints had alleged that Tansey was individually liable, the evidence did not support individual liability because Custom Carpentry was the lienor and Tansey signed the liens as president of Custom Carpentry. The appellate ruling also found that neither the original lien nor the amended lien stated or implied that Tansey, individually, was the lienor.

The attorneys who focus on construction law in South Florida at our firm as well as others throughout the state will be sure to reference this decision whenever questions arise about individual liability in cases where the court finds that a claim of lien is fraudulent. Our firm will continue to monitor and share information about important court decisions for the Florida construction industry in this blog, and we encourage industry members to submit their e-mail address in the box on the right in order to subscribe to the blog and automatically receive all of our future posts.

A recent decision by the First District Court of Appeals represents a potentially significant boon for the scores of contractors and other lienors that turn to the courts to seek payment for their work under the terms of a construction contract. In the case of Whitehead v. Tyndall Federal Credit Union the appellate court reversed the lower court's decision and found that Florida law required the credit union to notify the contractor of its decision to stop advancing funds while the contractor continued work on a construction project.

In Whitehead, the contractor (Whitehead) entered into a contract with a developer for the construction of a home. Disputes arose between the contractor and the developer. Consequently, the developer advised the contractor that no further draws would be disbursed to the contractor. However, having not been formally terminated, the contractor continued to work.

The contractor was terminated approximately one month after being advised by the developer that it would not receive further disbursement. It was not compensated for the work it performed between informal and formal termination, and the bank did not disburse any money for its benefit. Approximately one month after termination, the developer hired a completion contractor. Upon the completion contractor completing its work, the bank disbursed the remaining construction loan funds to the completion contractor.

In Whitehead's lawsuit seeking payment for its work on the project, it named the credit union as a party defendant, alleging violation of Fla. Stat. 713.3471 based upon the lender's failure to notify the company of its decision to cease disbursing funds. In the case, the lower court entered final summary judgment in favor of the lender, finding that the credit union had not decided to discontinue disbursement of the construction loan, as it eventually disbursed the entire construction loan when it issued payments to the contractor that was hired to complete the project. The appellate court reversed the ruling and stated in its judgment that Florida statutes required that once a construction lender "knows that it will stop advancing funds to a contractor or any other lienor, the lender has a duty to notify the contractor of its decision." In reaching its decision, the court concluded that "the obvious purpose of [Fla. Stat. 713.3471] is to prevent exactly what occurred here: the unjust termination of payments to a contractor who continues work, without any notice from the lender that payments will be terminated."

The construction law attorneys in South Florida at our firm and throughout the state will certainly reference this decision in other cases involving lenders which terminated payments to contractors and other lienors without advance notice. We will continue to write about court decisions such as this that have important implications for the construction industry in Florida, and we encourage industry members to subscribe to our blog by adding their e-mail address in the box on the right in order to automatically receive all of our future posts.

A recent construction lien claim and appeal that we handled on behalf of Miami-based CDC Builders, Inc. against developer Riviera Almeria, LLC led to a reversal of the lower court's decision that would have discharged CDC's construction liens over two stalled Coral Gables custom home projects. The appellate court's ruling in the case overruled the trial court's interpretation and application of Chapter 713 of the Florida Statutes wherein the trial court incorrectly discharged and invalidated CDC's construction liens against the developers due to the trial court's finding that the contractor's interim payment requests were inaccurate.

The appellate ruling, which has significant implications for many other contractor lawsuits and construction liens, was the subject of a report in the Thursday, December 9, edition of the Daily Business Review. The article quoted 3rd District Court of Appeal Chief Judge Juan Ramirez who wrote that the Miami-Dade Circuit Court's ruling in this case would have "a deleterious impact . . . on the construction industry as a whole. If we agree with the trial court, the purpose of liens would be undercut. Liens could be subject to attack for inaccuracies or simple mathematical errors. That was not what the Florida Legislature intended when it enacted the construction lien law."

The article further explains:

"Miami-Dade Circuit Judge Gill Freeman granted the developer's motion for partial summary judgment and discharged the lien, ruling that CDC had wrongly filed false interim payment applications because it had withheld subcontractor money.

The 3rd DCA panel ruled that Freeman should not have discharged the lien because CDC was adhering to its contract with Riviera.

'Not only was CDC Builders allowed to withhold a retainage, it was contractually required to do so,' Ramirez wrote.

The opinion also pointed to state law, which 'does not prevent any person from withholding any payment, or any part of a payment . . . if there is a bona fide dispute regarding the amount due.'

The court added that 'to agree with the trial court's application of the statute would mean that otherwise valid liens would violate the lien law.'"

We were very pleased to have helped our client prevail in this appeal, and we believe the reversal of the trial court's decision in this case is going to have a positive impact for many of the contractors which have filed construction lien claims in the state. The South Florida construction law attorneys at our firm will continue to write about important cases and rulings in the state's courts, and we encourage those who are interested in our analysis and insights to add their e-mail address to the subscription box at the top of the column on the right in order to automatically receive all of our future blog posts.

Last week in our community association blog I wrote about how a recent decision by a Florida appellate court in the case of Lakeview Reserve Homeowners v. Maronda Homes, Inc. 35 Fla. L. Weekly D2413 (Fla. 5th DCA 2010) has far-reaching implications for homeowners associations in construction defect disputes with developers. In its ruling, the Fifth District Court of Appeal court has broadened the implied warranty of fitness and merchantability granted to purchasers of new homes to include structures in common areas of a subdivision that immediately support the residence in the form of essential services. To learn more about this case and how it will further enable community association and construction defect lawyers in Florida to protect consumers who rely on the expertise of the developer for the proper construction of their new home, click here to read the full post.

Construction defect lawsuits against developers and their contractors can become very complicated and prolonged, and our recent $9 million settlement on behalf of the condominium association for the Continuum on South Beach illustrates the complex nature of this litigation for attorneys who focus on construction law.

The Continuum settlement came after more than six years of litigation, and the case had grown so large and complex that if first caught the attention of the editors of the Daily Business Review when they covered it in lengthy report entitled "South Florida Cases Show How Defect Lawsuits Multiply" in April of 2009.

The case took another 18 months to reach its conclusion, and when it did the Daily Business Review decided to share the details with its readers in a report on Tuesday, Nov. 30, which read:

A messy, 6-year-old battle over construction defects at a Miami Beach condo tower is drawing to a pricey conclusion.

The insurer for the developer and contractors of the Continuum on South Beach and the condo association of the 314-unit South Tower have reached a $9 million settlement. The deal is to be submitted to Miami-Dade Circuit Judge Gill Freeman by Wednesday. Once she signs off on the settlement, the costly repairs can begin, ending the dispute that dates to 2004.

The Continuum on South Beach and the South Tower Condominium Association sued developer South Beach Ocean Parcel, managed by Ian Bruce Eichner; the architecture firm Fullerton Diaz Architects; and several subcontractors.

The suit claimed design and construction defects led to leaky windows that damaged stucco, drywall and flooring in portions of the 40-story tower. The condo association also accused Eichner and the developer of misrepresenting the project's amenities, a violation of the state Deceptive and Unfair Trade Practices Act.

The trial was scheduled to begin on Nov. 8, but a tentative settlement in September put that on hold.

This settlement could not have been achieved without the focused efforts of my partner, Steven M. Siegfried, Esq., our dedicated staff and the contributions of our co-counsel, David B. Haber.

Because these types of cases become very complex and time consuming as developers file their own subsequent lawsuits against subcontractors, it is imperative to work exclusively with lawyers who focus on construction defect lawsuits. We have represented hundreds of property owners and community associations in construction defect claims since our inception in 1977, and our experience and capabilities enables us to achieve favorable outcomes.