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20Oct 2018

When working in the construction industry, disputes with clients are almost inevitable. While most jobs will go smoothly, it is important to know what to do when you run into a conflict that simply can’t be resolved through normal communication. In most cases, the two options will be to either go through an arbitration process to come to an agreement, or file a lawsuit and let the courts decide. While there are certainly situations where a lawsuit is the best move, most of the time arbitration will actually be the better choice. Here are some of the biggest benefits of arbitrating a dispute in the construction industry.

It’s Much Faster

The court system in Florida is often backlogged with cases that they need to hear, which can result in a significant delay in getting to your case. Additionally, the courts tend to allow both parties significant amounts of time to really expound on their position. With arbitration, the arbitrator will help guide the process with a focus on coming to a conclusion that all parties are happy with. This typically takes a lot less time than going through the courts.

It’s Much More Affordable

Going to court is an expensive process. You will need to retain your attorneys for a much longer period of time compared to arbitration, which means higher fees. Additionally, there are a variety of court fees and other expenses that will all add up quickly. Arbitration is almost always a much more affordable option for both parties.

You Choose the Arbitrator

When a lawsuit is filed, the judge who will hear the case is assigned by the courts without any input from those in the case. This is done to ensure an impartial judge. With arbitration, however, both parties will need to agree on who they go to. This will help ensure the arbitrator hearing your case is knowledgeable in the specific areas where your conflict exists.

You Get a Final Decision

Once the arbitrator has ruled on a case, the decision is final. This will allow everyone involved to go back to their normal work and focus on their respective businesses. While a judge’s ruling tends to stand, it is possible to appeal, so you can’t be certain that the case is really over for quite some time.

The Goal is Mutual Satisfaction

When you file a lawsuit, you really have to fight to have the judge agree with you on every point with the hopes of having everything you want granted by the courts. With arbitration, however, it is more of a negotiation and compromise with the hope that both parties can walk away reasonably happy. This can help maintain a positive relationship between all parties involved.

We Are Here for You

Whether you opt for arbitration, or a lawsuit is the best option in your case, FCLG is here for you. We can represent you in either situation and provide you with a reasonable approach to help you get the outcome you’re looking for. Contact us to discuss your options and get this conflict put behind you.

20Aug 2018

When working on large projects, banks and other financing companies aren’t going to send you the full loan amount up front. Instead, they will provide the funding as it is needed over the course of the project. This reduces the risk for them but can also help to lower the total amount of interest you have to pay. While using this strategy can be a great thing for everyone involved, it also presents a risk of disputes occurring when it is time to get to the next phase of funding. Draw request disputes can wreak havoc on a project and should be avoided if at all possible. The following tips can help reduce the risk of a draw request dispute.

Be Clear with the Draw Schedule

When negotiating a project, and especially the financing of the project, it is important to be very clear with your draw schedule. Simply identifying dates of draw requests is insufficient. Additionally, you need to really think through the entire project so you can predict when additional financing will be needed and how long each step of the project will take. Spending some extra time at this planning stage will go a long way toward reducing the risk of a dispute down the road.

Stay on Schedule

Keeping your work progressing on schedule is one of the most important things you can do to avoid draw request disputes. While some delays are impossible to avoid, it is usually smart to do everything you can to meet the established deadlines in your contract. In many cases, it will even be preferable to pay employees and subcontractors overtime to catch up on work than it would be to fall behind. This is because the costs associated with a draw request dispute can far surpass those of temporarily increased labor expenses.

Clearly Identify Milestone Accomplishments

While draw request schedules will often include timeframes, they will also have specific milestones set as requirements for releasing funds. As you are progressing with the work, make sure you keep these milestones in mind. Providing proof that specific milestones have been reached will eliminate the most common causes for any disputes and help to ensure your financing is provided on the agreed upon schedule.

Keep Open Communication with the Client

For many draw requests, the financing company is going to need approval or confirmation from the client or other contact used to ensure the project is on schedule. Make sure you know who the lender is working with on your loan and stay in regular communication with them so they can more easily approve the draw request. If they need to contact you for any clarification, be available to them and open with any information they require.

Take Action Quickly on Any Disputes

While these tips should help you minimize the risk of draw request disputes, they can’t eliminate them entirely. In the event that you find yourself in a dispute, it is important to take action quickly. The longer the situation lasts, the worse it can become. Talking to a construction law attorney can help you to handle any disputes appropriately and get the results you’re looking for. Contact FCLG to go over your options and get the help you need.

20Jul 2018

The simple answer to this question is no, you can’t file a lien on a public project in Florida. This is because all public property is actually exempt from having liens filed against them. This is because the property is supposed to be “owned” by the Florida government on behalf of all the citizens of the state. It wouldn’t be fair to the citizens if that property were taken because the government agency responsible for it failed to pay their bills.

Of course, it is also unfair if a contractor’s company does work for the state of Florida but never gets paid. This is why most public projects will require that a payment bond be put in place before the project begins. This will serve to ensure the contractor is able to get paid, and the state property is protected. For projects with the state, these bonds are governed primarily by Florida Statutes Section 713.18.

What is a Payment Bond?
A payment bond is similar to a type of insurance that will pay out when a contractor files a claim (assuming it is a valid claim). If the Florida agency that hired the contractor is unable to pay for some reason, the bond will pay the money. While this isn’t a very common situation to face, it can and does happen at times, which is why contractors should never agree to a project with the state without having one in place.

Federal Government Projects
If the job is on federal land within the state of Florida, the same type of rules and regulations will apply. The Federal Miller Act is the set of laws that will govern a federal project like this, but in basic terms it will require you to have a payment bond in place and that the bond would pay out when a valid claim is filed. These types of laws and regulations can make projects with either state or federal governments more confusing than a standard agreement, which is why it is important to have an attorney working with you every step of the way.

Contact Us Today
Whether you have already started a job, or you are still negotiating with a state or federal agency, it is a good idea to speak with an attorney before moving forward. Contact Florida Construction Law Group to discuss your situation and ensure you will get paid for a job well done.

20Jun 2018

Subcontractors are essential to most large construction jobs, but they can also cause some major problems. To help avoid miscommunications and other issues, it is critical to always use subcontractor agreements that are properly written, and include all important information, and signed by all parties involved. The following are five of the most important things that should be included in every subcontractor agreement.

1.   What Work is Required?

Give a detailed description of what work needs to be done by the subcontractors. This should include information about where the work is needed, what type of materials should be used, the colors (if applicable) of the paint, and much more. The more detail that can be included here, the less likely it is that there will be any type of conflict that needs to be dealt with here. It can be helpful to have all parties involved work together to write up this section of the agreement so you can be confident that all parties are on the same page.

2.   Include Important Dates

Specific dates by which work needs to be completed need to be included in the agreement as well. The dates should be very realistic, and take into consideration different types of problems that may occur while the work is being completed. It can be a good idea to have multiple milestone dates in place to help keep the project moving forward. If there are any penalties for missing deadlines, or rewards for finishing early, those should be listed in this section too.

3.   How to Exit the Agreement

There are times when a subcontractor just won’t be able to complete the work as agreed upon. Having specific instructions on how to cancel the agreement, and what (if any) penalties will they face for backing out. When having this portion written up, make sure to consider the impact to the overall job in determining what will need to be done should the subcontractor agreement have to be canceled.

4.   Insurance Requirements

If you need the subcontractors to hold specific types or amounts of insurance, this should be listed in the agreement as well. It may even be a good idea to add in a section where the insurance policy number, the company through which it was acquired, and any other relevant information so it is all easily accessible and verifiable.

5.   Signatures & Initial Areas

All contracts will have a place for everyone to sign at the bottom, but subcontractor agreement may need some additional signatures and initials. Having a spot for the subcontractors to initial for each section can serve to verify that they have read and understood the information contained within. This can help to further strengthen the agreement should it be challenged.

Get the Help You Need

Don’t try to craft a subcontractors agreement on your own. Instead, work with an experienced construction law attorney to ensure everything is handled properly. Contact FCLG to go over all your options, and get your agreements written properly.

20May 2018

When the owner of a property hires a contractor in Florida, they will typically want to have the contractor secure a performance bond in place prior to starting the project. This bond offers protection to the property owner so they can be confident that the job will be done as agreed. The protections to the project will cover the conditions of the finished product, the costs, and the time period for completion.

What Does the Performance Bond Do?

Performance bonds are a special type of surety bond that exists between the owner of the property, a surety, and the contractor. The contractor is the principal for this type of bond and will be responsible for obtaining the bond. The owner is the obligee, and they will be the ones who are being protected by the bond. The bond is then backed by the surety company, who will be responsible for the total amount of the bond should something go wrong.

Ensuring a Job is Completed

For the owner of the property where work is being done, the biggest reason to have a performance bond is to ensure the work is completed successfully. If the contractor is unable to complete the tasks as required, the bond will pay out to the owner. The owner can then take that money to find a new contractor and have the job completed as needed.

Contractor Investigation

Another advantage of a performance bond is that the surety company that actually issues the bond is going to do their research on the contractor or contractors that are being hired. This is in addition to whatever research the property owner completes. Surety companies typically evaluate the contractor’s financial statements, their credit, any references they have, their resume, and current or past work the contractor is responsible for. For contractors, it is very important to ensure all of these things are going to portray a positive image of them so they won’t have any trouble having performance bonds issued.

Contractors can also benefit greatly from the investigation that is done by the surety bond company. Top contractors can earn a strong reputation, and more easily qualify for the bonds. This will often attract additional customers to their company, which can be very helpful for building a business.

Getting the Help You Need

Whether you are looking to get a new performance bond, or you are having legal issues enforcing one, it is a good idea to work with an experienced Florida construction law attorney. Contact FCLG to discuss your situation and get the help you need today.

20Apr 2018

For most construction companies, it is necessary to have a combination of full-time employees and independent contractors to complete specific jobs. Each of these two types of workers will be able to fulfill different types of roles so that jobs can be completed properly and on time. When using independent contractors and employees, however, it is critical to understand what the differences are from a legal perspective.

Florida has a variety of laws on the books governing how each of these types of workers are to be treated, and how to determine which classification a person should have. Learning about these differences will help ensure you are able to complete jobs successfully and that you don’t run into any legal difficulties. The following are some key differences between these two classifications.

Payment Arrangements

An employee will have a regularly scheduled paycheck. The pay may be based on a set salary, an hourly wage, or some other factors, but it will be distributed in regular intervals. For independent contractors, payments can be made in many ways based on the needs of the job. This can include lump sum payments at the completion of a job, partial payments up front with the remainder upon completion, or any number of other configurations.

Work Schedule

While the specific hours worked by an employee may vary, they will generally be required to work a fairly regular schedule over a long period of time. This period of time is often undefined and set to continue until either the construction company, or the employee, decides to end the relationship. Contractors will typically have shorter term work intervals where they are paid to complete a specific task on a specific project.

Tools & Equipment

When someone is working directly for your company as an employee, your business will typically be responsible for providing the tools, equipment, and other required supplies to complete their job. Independent contractors, on the other hand, will often supply their own. This is especially true of specialized contractors who may need very specific tools to complete their jobs.

Importance of Getting it Right

Owners of construction companies need to make sure they are classifying each employee properly, or they could run into legal issues. If misclassified, the worker could sue for lost salary, benefits, or other perks that they should have been entitled to. Having an attorney review your specific situation, and helping to properly classify everyone who does work at your company, can provide a significant amount of legal protection. Contact FCLG to schedule a consultation and learn what we can do for you.

20Mar 2018

As a construction company or general contractor, virtually all new jobs start out on a positive note for all parties involved. Over the course of the job, however, things can deteriorate and result in some major issues. Even when both parties are attempting to do the right thing, differences of opinion, miscommunication, and other problems can make it very difficult. If you’re not careful, these types of problems can lead to a costly and time-consuming lawsuit. Read through the rest of this blog post to learn some effective ways to minimize the risk of legal action being necessary.

Use Specific Language in All Agreements

Whenever working on a contract or other agreement, make sure you use specific language regarding what will be done and what is expected. Include details such as the colors that will be used, the types of materials, when the work should be completed, and more. The more precise this type of documentation can be, the less likely that there will be any type of conflict that could lead to a lawsuit.

Regular Communication

Once a job starts, make sure you stay in regular contact with the customer to ensure things are progressing properly. Identifying issues as early as possible will help ensure they can be worked out with little cost or inconvenience. In most cases, frequent communication will also build up trust between parties so litigation is less likely.

Negotiate & Mediate Conflict

Even with the best of efforts, there will eventually be some type of conflict between you and a client. When this happens, it can be tempted to dig your heels in and push back when you are right. The reality, however, is that it is almost always best to try to talk through conflict with the goal of finding a solution that everyone can be happy with. Even if you lose a little bit in the negotiations, it will often be far less than the cost (in both time and money) that even winning litigation will cost.

Have an Attorney at Your Side

Whenever performing work for another party, it is important to have access to a good Florida construction law attorney. An attorney can write and review all your contracts to ensure they are properly written and enforceable. In addition, they can help to negotiate compromises and try to resolve conflicts that can keep you out of court. If all else fails, an attorney will be there to represent you in court to protect your interests. Contact FCLG to learn how we can help protect you and your business today.

20Feb 2018

When a home or other building is being built or renovated, there will typically be a loan involved to fund the project. Just like with a traditional mortgage, if the parties involved fail to make their payment as agreed, the property can enter foreclosure. When learning about situations in which a construction loan can be foreclosed, it is important to know what type of loan is involved. For construction projects, there are two main options, which are:

  • Construction to Permanent – A construction-to-permanent loan starts off as a construction loan, but as soon as the project is completed, it transitions into a traditional mortgage loan, with the home being the collateral. This is commonly used by individuals who are having their new home custom built.
  • Construction Only – As the name implies, construction only loans need to be paid back either during the construction process, or shortly after it has been completed. In most cases, this type of loan is used by builders who are building spec homes specifically to sell.

When Can a Construction Loan Be Foreclosed?

Just like a traditional loan, a construction loan can be foreclosed upon at any point when the borrower fails to make their payments according to the contract for a sufficient amount of time. The following are some of the different scenarios when a construction loan will likely enter the foreclosure process:

  • Missed Draw Requests – Most construction loans are funded incrementally as milestones in the project are met. If the milestones can’t be met for some reason, then additional funding will not be provided. This can cause the construction project to come to a halt, and the borrower unable to pay as agreed, which can lead to foreclosure.
  • Conflicts Resulting in Non-Payment – Conflicts between the borrower and the construction company can result in a work stoppage. If a project with a construction loan is not progressing as needed, the lender will begin demanding payments. If the borrower does not have sufficient capital to make payments, the foreclosure process will begin.
  • Non-Payment Due to Being Unable to Sell – After a construction project with a construction only loan is completed, payments (or possibly payment in full) will be needed. If the builder is unable to sell the property, the lender may initiate the foreclosure process.
  • Failure to Pay Traditional Mortgage – If a construction to permanent loan enters the traditional mortgage phase, and the borrower is unable to pay, the mortgage will soon go through foreclosure.

Working with an Attorney

If you are facing foreclosure on a construction loan, it is important to take the appropriate steps to protect your legal and financial interests. Contact FCLG to discuss your situation, and come up with an effective plan of action on how to proceed. We have helped many people in Florida avoid foreclosure, and we would be honored to help you too.

20Dec 2017

For many contractors, remodeling jobs are their “bread and butter.” These jobs can range from redoing a small room to huge renovations and can account for a large percentage of your annual income. While the vast majority of these types of jobs will go off without a hitch, it is important to have a legal contract in place that will protect you should something go wrong. A good remodeling contract doesn’t have to be overly complicated, but it should include all the essential elements.

Essential Parts of a Remodeling Contract

The following are the key elements of a good remodeling contract. While this blog should cover the most common aspects of any job, there may be additional components that should be included (or not included) in your specific case, which is why it is always important to have an experienced construction law attorney write or review a contract before it is signed.

  • Description of the Project – Including a description of the project is critical as it will make sure all parties know exactly what to expect. This description doesn’t have to include every detail of every step, but should include more information than, “remodeling kitchen.”
  • How Changes are Handled – It is almost inevitable that sometime during the project, changes will need to be made. Including a section in the contract that explains how changes will be made will help to avoid misunderstandings or conflict.
  • Project Completion Dates – Identifying the target completion dates in the contract can help to set reasonable expectations. This can include milestones as well, such as setting the date for when the project will start, when the demolition steps will be done, and when the final completion date will be. These dates should be listed as an approximate timeline.
  • Payment Information – Just like the customer is going to want a good timeline on when the job is to be completed, you need to identify when and how payments are expected. This can be payments that are required up front, or at certain milestones, or once the job is complete. Regardless, whatever you agree upon should be identified in the contract.
  • Lien Waivers – Offering lien waivers provides customers with good peace of mind. A lien waiver simply shows that as payments are made, you no longer have the right to file a lien on their property for that amount. As you get paid, you will need to issue a simple waiver along with the receipt.
  • Cancellation Details – In the event that either party needs to cancel the job, instructions for how this is to be done should be included in the contract. This will cover things like cancellation fees, refunds, and valid reason for stopping the job.

We’re Here to Help

Having a good contract in place before starting any remodeling job is absolutely essential. We can write up custom contracts for each job, or provide you with a good contract template that can be used for a variety of different jobs. Contact us to go over your specific needs, and see how we can help protect your business.

20Sep 2017

A surety bond is a common tool used in construction contracts to help protect the interests of construction companies and others involved in the project(s). When a construction company hires a subcontractor to complete a certain task, they may also require a surety bond to be in place. This way, if the subcontractor does not complete their obligations as laid out in the contract, the construction company can file a surety bond claim. If successful in their claim, the construction company can recover the amount of money that was provided on the surety bond.

This will help to protect the company against losses caused by a party that is outside of their scope of control. While most contracts are completed successfully, it is important to understand what a surety bond claim is and how it works.

Making a Claim

If a construction company finds that the principal on the bond has not fulfilled the obligations that are listed in the contract and the bond itself, then it will be necessary to make a claim against the bond. Depending on the details of the bond and what type of work was supposed to be done, it may be necessary to prove to the surety bond company that the obligations were not met. If there is a dispute on this matter, it can be necessary to take the issue to court.

Potential for Partial Payment

When filing a surety bond claim, it is important to be aware that you may not always get full payment for the amount of the bond. If it is determined that 50% of the work was completed successfully, for example, you may receive 50% of the bond payment. The amount that is paid out will be determined by a number of factors in addition to just how much work is done.

Types of Surety Bonds

When hiring a contractor or other party to complete tasks, it is important to be aware of the different types of surety bonds available. The most common options are performance bonds and payment bonds, both of which can apply to a given job. The performance bond is more common for construction companies as it is used to guarantee that work is done, and done properly. A payment bond, on the other hand, is a guarantee that a party will pay for the services once they are completed. In both cases, the purpose of these bonds is to mitigate the risks of common events in construction projects. Our earlier blog explains more about the differences here.

Getting a Custom Surety Bond

A surety bond is a type of contract that will involve your company, the other party, and the surety bond company. While some surety bond companies offer fairly generic contracts for these bonds, it is better and safer to make sure that the contract is customized to your needs. Contact FCLG to have the details of the bond written up by an attorney who is experienced in all areas of construction law.

22Jun 2017

Whenever taking on a large construction project, it will be necessary to negotiate a draw schedule with the lender. A draw schedule takes the full amount of the construction loan and splits it up into multiple payments that are made as work is completed. This helps to limit the risk that the bank takes on, while also ensuring the construction company has the money they need, when it is needed.

In most projects, the draw requests are completed without any significant issues, and the project is able to flow along efficiently. In some cases, however, disputes can occur between the construction company and the bank. These disputes can cause delays and other costly problems, which should be avoided whenever possible. The following tips can help you to avoid draw request disputes and keep your construction project moving forward:

Start with a Realistic Agreement

The best thing you can do to avoid draw request disputes is to start with a realistic agreement. Some construction companies are tempted to just agree to a draw request schedule to get the financing settled, without really taking the time to determine whether it is going to work for their project. This is really setting themselves up for a dispute down the road. Negotiating a good agreement from the beginning may take a little extra time, but it will be well worth it in the end.

Communicate Frequently  

If you think that the draw schedule is not going to work, or you need some type of modification, it is a good idea to begin communicating with the financial institution as soon as possible. Lenders have a vested interest in seeing your projects succeed, so if they are able, they will likely work with you. When you fail to communicate, however, it makes it much more difficult for the lenders to be willing, or able, to make the necessary adjustments.

Look at Compromise Options

In some cases, it may be in your best interest to compromise in certain areas in order to avoid a more serious dispute. If you can adjust your schedule to meet the demands of the lenders, or work with them to find a solution that makes everyone happy, that’s preferable. Each situation is unique, so don’t be afraid to think outside the box when trying to come up with solutions to problems.

Get Legal Help

While it may seem counterproductive, getting an attorney is often one of the best ways to avoid serious conflicts. An attorney can look at a situation dispassionately, and provide advice that is objective based only on the facts. Experienced attorneys also have ideas that you may not have considered, which could resolve the conflict quite amicably. If you’re facing any type of draw request dispute, please call Florida Construction Law Group to get the legal help you need.

20May 2017

A claim of lien is a specific type of legal claim against property to secure a debt. The claim can be for any amount of money, or the specific value of services rendered. In most cases, the claims of lien are handled when the debt is taken out and agreed upon by all parties involved. A common mortgage, for example, has the mortgage lender putting a claim of lien against the property so they can claim it if the borrower fails to make their payments as agreed.

The party that is owed money can place a claim of lien on a property, even if the person owing the money doesn’t approve it. To get a claim of lien applied to a property, the party owed the money will need to work through the courts to get it approved. There are certain requirements that must be met in order to successfully make a claim of lien.

Prove the Debt

The first thing that must be done is you need to have proof that there is a valid debt that needs to be paid. This is easy enough to do as a contractor or construction company as the work agreements, purchased materials, and other expenses should be clearly documented. It is also necessary to show that these debts have not been paid already.

File the Documents

Next, you need to file the correct documents with the courts and county clerk office. This process must be done correctly to avoid delays or potential disputes against the claim of lien. Filing this type of document may require that you present evidence with the court, or even make arguments against the other party. If the debt is undisputed, however, it can be possible to simply file the necessary paperwork along with the proof.

Serve Notification

It is necessary to serve the debtor with proper notification that a claim of lien has been made against their property, what the claim is for, and other details surrounding the situation. When you file the proper documents with the courts, the notifications will typically be sent out as part of this process. You may need to pay to have the debtor served these documents, especially if there will be a court case.

Avoid Potential Problems – We Can Help

The best way to make a claim of lien is to have an experienced attorney help you along the way.  Here at Florida Construction Law Group, we have helped contractors, construction companies, and more prepare and file claim of liens before, during, and after the work is done to help protect their financial interests. Contact us to see whether now is the time for you or your business to seek a claim of lien, and what needs to be done to accomplish that goal.

24Apr 2017

When planning a new construction project, getting the needed financing is one of the most important steps. Most lenders aren’t going to want to simply ‘write a check’ for the full amount of the entire project before it has even begun, however. This is where a document known as a draw schedule comes in.

A draw schedule is an agreed upon schedule of when money will be released to the construction company (or contractor), to complete the work. As the job progresses, the needed finances are provided to keep everything progressing forward. Lenders may have someone inspecting the project along the way as well, to ensure there aren’t any problems. Some things to consider when drafting up a draw schedule with the lender include the following:

Schedule of Values

One key document to use while creating a draw schedule is commonly called the schedule of values. This will list off all the major steps that need to be completed for the project, their approximate cost, and the approximate percent of the total cost of the project that makes up. These items will then typically be combined into ‘groups,’ which will be when each draw is made.

Number of Draws

A draw schedule can have any number of draws that is appropriate for a project, and is agreed upon by the relevant parties. A typical new home construction project, for example, will usually have 5 to 7 draws. Larger projects may have more, and each one will be for a higher dollar amount. When determining the number of draws, it is important to balance the convenience of having the cash that is needed on hand, with the risk being taken on by the lender.

Inspections

If the lender is going to require inspections of the work that has been completed prior to releasing funds for a draw, that should be agreed upon while making the draw schedule. When working on large construction jobs, unexpected delays can cause serious complications. Being aware of the need for inspections, and knowing who to contact to schedule them, can help ensure progress can continue on schedule.

What to Do with Changes in the Job

Another challenge that should be addressed is what to do should there be significant changes in the cost of a job. For example, if a contractor is hired to build a new home, they will make up all the plans and cost estimates with the owners, and present it to the lender when making the draw schedule. In many cases, the people who are having the home built, may change their minds on certain aspects of the project. If, for example, they decide to move from a traditional bathtub, to a high-end whirlpool style tub, it can add many thousands of dollars on to the project. The added costs either need to be paid for by the people who want the project, the contractors, or the financers. Knowing where the money will come from up front is something that should be settled along with the draw schedule.

Contact Us

If you need assistance negotiating a draw schedule with a lender, or you would like to have a draw schedule written up to present to a lender, please contact Florida Construction Law Group. We can go over your options, and help ensure you have an effective draw schedule that will meet all your needs.

21Feb 2017

Major building projects typically cost millions of dollars to complete and they won’t start making any money until sometime after the construction has been finished. In order to finance these large-scale projects, a funding agreement needs to be in place between the people or company who needs the construction done and the financial institution(s) who will be providing the capital for the project.

These agreements are necessary to get the loan because of the complexity of the work being done and the amount of money involved. A good funding agreement will include many different elements, including the following essential details.

Purpose Clause

The purpose clause will identify what the money is going to be used for. It is not enough to simply say that the financing is to be used for ‘an office building located at X location.’ Instead, financial institutions will need to know how much is used for each major area. Some examples of what can be identified in this clause would include payments for licensing, architect fees, equipment costs, employment costs, and more.

Drawdown Requirements

For many funding agreements, the funds will only be made available as they are needed. Financial institutions may approve a total loan for $100 million, for example, but release it in phases. The drawdown requirements list out these phases and any requirements that need to be met in order to get the funds. A simple example of this is requiring proof that all licensing, inspections, and regulatory approvals must be met before the financiers will release the funds to purchase the supplies needed to begin the actual construction.

Repayment Information

While all loans have detailed instructions on how and when the money must be paid back, large construction loans will often have much more complex repayment details. Since the project won’t generate any revenue until it is completed, there might not be any payments necessary until that point. The agreement may also dramatically reduce the payment amounts up to a certain date, and then have them increase once revenue is being generated.

Events of Default

While most construction projects get completed without issue, there are times when it becomes impossible to continue with the construction. This typically leads to a default on the financing. The funding agreement will lay out how this will be dealt with based on the cause of the default.

Some examples of things that should be covered under this element of the funding agreement would include what happens if the project is not completed on time, if the project sponsors or investors fail to meet their obligations, if government action is taken that disrupts the construction, if there is an employment strike, or if there is a terrorist attack. These are just a few examples, and the specifics in an agreement should be tailored to the risks of a project.

Get Help with Your Funding Agreement

Funding agreements can get very complicated. Making sure they are written up properly so that all the necessary information is in them is very important. Having an attorney available to write up the agreement, or review a proposed agreement, can help avoid issues with the project. Contact Florida Construction Law Group to speak with an attorney with experience in this area.

20Dec 2016

Getting a construction loan can be more complex than most other types of loans, even for construction companies. Financial institutions often require a lot of information and requirements because of the fact that their collateral is often not in existence until after the construction project has been completed (a building, home, ect). One important part of most construction loans are the ancillary agreements, which identify how certain things must be done throughout the course of the construction project. The following are some common examples of ancillary agreements for construction loans.

Construction Loan Agreement

This agreement will go over the main details of the construction loan, including what the loan will be used for, how much it will be for, and other common details. Providing the lender with information about where the construction is taking place, what type of project it is, what its purpose will be, and other relevant information will help them evaluate risk. In addition, it will give them a timeline and other information on how to measure progress on the project, which is important for ensuring repayment.

Funding Agreement

Many construction loans are issued in small amounts as things progress. A loan for $1 million, for example, may be spread out over the course of the project. The first installment of the loan could be received for paying for the initial materials and labor, the second installment for completing the infrastructure of the project, and so on. This type of ancillary agreement helps the lender understand the timeline better, and also reduces further risk.

Construction Supervision Agreement

Many lenders will require that a construction company has a trusted supervisor on site to ensure things are progressing as planned. This supervisor may be an employee of the lender or a trusted third party. The supervision ancillary agreement will identify who will be doing the supervising, what role they will have, and any other relevant details.

Design Certification Agreement

If the full design of the project has not yet been completed, there may be an ancillary agreement related to this important aspect of the project. A loan may be contingent on having the project design approved by an assigned design certifier.

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Ancillary agreements are an important, but often complex, part of a construction project. Having an attorney write up or review the agreements can help ensure everything is set up properly before any documents are signed. Contact Florida Construction Law Group to go over your construction loan needs and get everything handled properly.

20Oct 2016

When beginning most types of construction projects, it is a good idea (if not a requirement) to have assurances in place that the job will be completed properly, and that everyone involved with the project will get paid properly. There are a variety of ways to do this, the most common of which are to use performance and/or payment bonds. These bonds are issued by a Surety Company prior to the start of any job.

Understanding what each of these two types of bonds are, what protections they offer, and which ones should be used in a given situation is important for all construction companies, and those who hire construction companies.

What is a Performance Bond?

A performance bond acts as a guarantee that the project in question will be completed properly, according to the details laid out in the construction contract. In the event that the construction teams (the Principal listed in the bond) fails to complete the project according to the agreements, the Surety Company that issued the bond will need to step in to have the job completed.

What is a Payment Bond?

A payment bond is issued as a guarantee that those who are involved with the construction project will receive their payment from the principal. This protection extends to any workers, subcontractors, equipment or supply providers, and others who are directly or indirectly involved with the project. Should the principal named in the bond fail to pay, the Surety Company will issue the payment.

Which One is Needed?

While some jobs will only need either a performance bond or a payment bond, the majority of them actually have both. Having both types of bonds in place offers the stability needed to ensure the job gets done properly. Due to the fact that many construction projects are not paid in full prior to the start of the project, these types of bonds are necessary for the different companies involved in the project to be able to finance the work being done.

A construction company being asked to build a bridge, for example, will need to invest potentially millions of dollars in labor, equipment, materials and more. Depending on the job, they will typically only receive a fairly small percentage of the payment for the job up front, which means they will be financing these expenses. Having both a performance and a payment bond in place helps to significantly reduce the risk involved, so the construction companies can get the financing they need without any trouble.

Avoid Problems with Surety Bonds

Performance and payment bonds are an important part of most construction projects. If these bonds aren’t handled properly, however, it can lead to many issues that can be very costly and time consuming. Contact the Florida Construction Law Group and will help ensure everything is set up and handled properly throughout the project.

20Sep 2016

Should you enter into a construction contract if you’re uncertain about the terms? You might prefer to trust that everything will go smoothly, but in reality, any number of things can go wrong when you start a new construction project. It’s worth checking your contract for any possible error or flaw. If you do, you could save yourself a great deal of legal trouble in the long run.

  1. Time frame

Make sure the contract provides a time frame that works for both parties. As the property owner (or person receiving construction services), you may have a strict deadline in mind, with other scheduled tasks that depend upon timely project completion. For example, you may be a homeowner looking to finish an addition before you can list the property for sale. In turn, the contractor should only accept if the proposed time frame is feasible.

  1. Prices and pricing scheme

While it may seem obvious to agree upon a price for the construction services, contractors sometimes include additional charges that were not initially discussed. You should ask about the possibility of extra fees and request an estimate. These details can be included in the contract to help you avoid any financial surprises. You should also specify the pricing scheme—in other words, whether the cost will be paid in a lump sum, a rate per unit, or another pricing method.

  1. Payment terms

The contract should specify whether you will be paying a lump sum or in monthly installments. If you are making monthly payments, make sure the payment dates are practical for you, and decide whether the contractor should be able to issue late penalties.

  1. Construction lien law protection

Florida law requires certain types of residential contracts to include a visible lien law notice. If you are engaging in a project that exceeds $2,500 and relates to the improvements of real property, your contract should include the lien notice. It essentially states that if your contractor fails to pay subcontractors, sub-subcontractors, or material suppliers, those parties are legally entitled to file a lien on your property. This means your property can be sold against your will to make sure everyone—including the original contractor, if you failed to pay them—is adequately compensated for unpaid labor, materials, or other services. You can add a stipulation to your contract in order to protect yourself from Florida lien law, but it’s best to consult an attorney to ensure that you understand every aspect of this provision.

  1. Recovery fund disclosure

Most types of construction contracts that must include a lien notice must also include a recovery fund disclosure. It must be visibly placed within the contract. This disclosure outlines your right to seek compensation when a contractor’s unlawful actions result in losses on your end.

  1. License number

The lien law notice, the recovery fund disclosure, and the contractor’s license number are all required by Florida statute. Make sure all of these elements are clearly visible on your construction contract, if applicable, before signing. Any violation could result in a hefty fine.

  1. Disputes and termination

Your contract should also include specific methods that you and your contractor will use to resolve disputes or problems. For example, you may include an arbitration clause to avoid having to settle disputes in court. Contracts can be dissolved if one or more parties breaches the contractual terms. Mistakes in the contract can also lead to termination, so make sure all the information is correct. If you both mutually decide to terminate the contract for any reason, you can draft a document stating the contract has been voided.

A qualified lawyer can ensure that the terms of your construction contract benefit you as much as they benefit the other party. Call the Florida Construction Law Group to discuss your upcoming construction project and see how we can help protect your legal rights in the form of a contract.

20Aug 2016

The most important decision you’ll make during the renovation or home-building process is which contractor you choose to hire.

This decision can be as difficult as it is important. Choose the wrong contractor, and your project could be delayed and poorly executed. The work may even have to be redone entirely. Choose the right contractor, and ideally the work will be finished on time and done right, the first time. But how are you supposed to know how good a contractor is before they’ve even started working for you?

The following tips will help you find a contractor who can do the job right.

  1. Don’t Stop After the First Interview

You might feel the urge to end your search immediately if your first interview goes well, but don’t give in to that temptation.

See multiple contractors and give yourself multiple bids to choose from. The first contractor might seem like a good option, but the second or third contractor that walks in the door might be just as skilled and even more affordable. There’s no way to know if you don’t look.

A good rule of thumb is to check out at least three contractors before you choose one.

  1. Go Local

If you’re choosing between a contractor who works for a local company and one who works for someplace like Home Depot and all other factors are equal, go for the one from the local company. Companies that are more involved with the local community are more likely to go above and beyond for their local customers (that’s you!).

  1. Make Sure They Are Licensed and Insured

Licenses confirm that a contractor can actually do what they say they can do (from both a practical and legal perspective), and proof of insurance gives you the peace of mind of knowing you won’t be financially responsible if some scaffolding falls on neighbor’s new Porsche.

  1. Get Everything in Writing

Before the contractor starts working, you want to get everything in writing first so that there are no misunderstandings in the middle of the project, and there is documented evidence of your agreement and expectations should a lawsuit become necessary.

  1. Pick A Contractor Experienced in What You Want to Do

Just because a contractor has a lot of experience doesn’t mean they have a lot of experience in the specific project that you’re working on. Make sure that they have that specific experience.

  1. Take a Look at Work Samples

Of course, contractors are biased. They want the job. If you ask them how skilled they are in the kind of project you need them to do, many of them will reply “very” even if that’s not an entirely true answer.

So get proof. Ask to see images of projects they’ve completed in the past and judge their work yourself. If they’re not able or willing to provide examples of previous projects they’ve worked on, that’s a huge red flag and you should move on to another option.

If you have any questions about choosing a contractor, or you are having issues with a contractor you’ve already hired, contact the Florida Construction Law Group today and let’s talk!

25Jul 2016

As we have discussed in a previous blog, there are a number of pros and cons to utilizing arbitration as a means of resolving a construction-related dispute. In many circumstances, this type of Alternative Dispute Resolution (ADR) can be a highly effective means of achieving an efficient and effective resolution which is beneficial for all parties involved.

But how exactly does arbitration work? It is always useful to have a clear understanding of how the process will play out prior to invoking an Arbitration Agreement or suggesting arbitration as a potential option to an opposing party. Thus, we have provided a brief, step-by-step overview of what you can expect. Please be aware that this is just a simplified outline, and is not necessarily precisely how your unique case will play out. The terms detailed in an arbitration agreement may serve to modify the procedure followed.

Step 1 – Set the stage

In Florida, even if there is no arbitration agreement in place that legally necessitates the use of arbitration to resolve a dispute, the parties involved in a dispute can voluntarily agree to participate in binding arbitration.

Once it is established, either voluntarily or through contractual obligation, that arbitration is to be utilized, the parties may need to agree to certain aspects of procedure. For example, they may choose to utilize a single neutral arbitrator or a tribunal of arbitrators. They may decide to adhere to the standard American Arbitration Association rules of procedure, or they may choose to customize the procedure and rules to suit their unique dispute and circumstances.

Once all procedural elements are defined and agreed upon, the case can proceed to arbitrator selection.

Step 2 – Arbitrator selection

One of the key benefits of arbitration is the ability to select a neutral arbitrator who is knowledgeable about the subject matter at hand in your dispute. In a litigated case, there is no guarantee your judge will have a solid understanding of the unique nuances and issues inherent in construction. With arbitration, you can select someone who specializes in the area to help ensure a fair judgment. Generally speaking, arbitrators will be selected from a pre-approved list of neutral candidates. Once they are selected, a preliminary hearing will be held to finalize the procedural elements of the case and facilitate what can and cannot be included in the arbitration hearing (witnesses, evidence, etc).

Additionally, there may or may not be a discovery period prior to the hearing where all parties involved will be required to share their evidence and other information with opposing parties. The extent and rules of the discovery period will likely depend on your arbitration agreement or the terms you settled upon when you voluntarily agreed to arbitrate.

Step 3 – The hearing

Arbitration hearings are much less formal than litigation hearings, meaning their location and scheduling are much more flexible. Not unlike a trial, however, each party will have opportunities to present their case to the arbitrator(s). They may call witness to offer testimony and present whatever evidence they may have. Conversely, the opposing parties will be able to question and challenge the witnesses and evidence presented.  

Once the hearing is complete, the arbitrator(s) will retire in order to deliberate. In some cases, attorneys for either party may be allowed to submit post-hearing documentation to further support their case or challenge actions taken by the opposing party.

Step 4 – The award

Finally, the arbitrator(s) will issue a decision and dictate an award. Unlike mediation, the decision will be considered binding with very limited recourse for any sort of appeal. The parties will be required by law to adhere to the terms of the arbitrators’ decision, since Florida courts recognize a presumption of enforcement of arbitration. The courts will, however, review the case to ensure there was no fraud or misconduct at play.

If you are involved in a construction dispute, and you are either legally bound to utilize arbitration or you wish to voluntarily pursue this option, please do not hesitate to contact the Florida Construction Law Group today and let us fight to protect your best interests.

23Jun 2016

We live in a highly litigious society, and the complex nature of construction projects all but ensures a high probability that a dispute and potential litigation may occur. However, there are a number of different factors you should consider before jumping into a potential detrimental legal battle.

No matter your relationship to the construction project, if you are considering filing a lawsuit over some sort of dispute with others involved in the project, be sure to ask yourself the following five questions:

1) What is the cost/benefit?

The first thing you need to do when weighing the possibility of pursuing litigation over a construction dispute is conduct a cost/benefit analysis of the situation. Simply put, does the potential benefit you could possibly receive if you win a lawsuit outweigh both the potential detriments that would occur if you lose the case as well as the certain costs that will occur if you pursue the case. Generally speaking, the potential benefit of pursuing litigation should significantly outweigh the costs, including things like remobilization costs, potential damage to your reputation, interest, penalties, and legal fees. Thus, litigation is usually not worth it if your dispute—and the potential benefit should you win the case—is relatively insignificant.

2) Can you win?

This is going to be a major question to ask your attorney, but it is important to consider nonetheless. Based on the circumstances of your dispute and the evidence available, can you actually win the case? Even if you know you are in the right, if you do not have the evidence to prove it, the litigation is probably going to be a waste of time and money. Have your attorney analyze the facts of your case and advise you on your chances of winning a judgment should you pursue a lawsuit.

3) Do you want the attention?

Construction lawsuits usually draw significant public attention. Additionally, court proceedings are usually a matter of public record. Do you really want the details of your dispute being made available for anyone who wants to find them? Can you afford the potential negative attention that comes with being caught up in a public legal battle?

4) Can the dispute be resolved by other means?

Depending on the circumstances of your disagreement, litigation may be a necessary tool, but oftentimes the dispute can be resolved using some other means such as negotiations or even some form of alternative dispute resolution such as mediation or arbitration. Keeping your dispute out of court is particularly important if you want to maintain a working relationship with the opposing party after the issue is resolved, or you want to continue and finish the construction project.

5) If you win, can you actually collect?

When contemplating a potential lawsuit, especially in the construction industry, it is always important to assess your potential for actually collecting a judgment. If your dispute is over nonpayment of funding for the project, and the investor or owner did not pay because they are bankrupt, there may be nothing for you to collect even if you win the case.

Whether you are a lender, contractor, or homeowner, if you are considering pursuing litigation over a construction project, please contact the attorneys at the Florida Construction Law Group today and let us analyze your unique circumstances and advise you on the best course of action.