How fast must a private owner or contractor pay down the construction chain in Florida, and what does late payment cost?
Under the Construction Contract Prompt Payment Law, Fla. Stat. § 715.12, which applies to written contracts to improve real property entered into after December 31, 1992 for which a construction lien is authorised, an obligor must pay its obligee once the obligee is entitled to payment under the contract and has made a written request, the obligor (other than an owner) has itself been paid for that work by the person above it in the chain of contracts, and the obligee has furnished the affidavits or waivers § 713.06 requires. The section names its own actors: § 715.12(3) makes an 'obligor' an owner, contractor, subcontractor or sub-subcontractor who owes payment under a covered contract, an 'obligee' a contractor, subcontractor, sub-subcontractor or materialman entitled to payment under one, and the 'chain of contracts' the links from owner down to materialman, with every other term taking the s. 713.01 definitions. Payment due and unpaid, excluding anything withheld under the retainage subsection, § 715.12(7), bears interest at the rate specified in s. 55.03 PLUS an additional 12 percent per annum, running from the 14th day after payment is due; an obligor has 14 days to return an incomplete or erroneous payment request with written reasons, failing which interest runs anyway. Two things in § 715.12(6)(a) qualify that rate: while interest is accruing the rate is the statutory rate OR the contract rate, whichever is greater, and a person is not entitled to both; and the interest right is not an exclusive remedy and does not displace a contract remedy, another statute, or prejudgment interest awarded to a prevailing party.
The trap
The statute writes a pay-when-paid condition into the default rule for everyone below the owner (§ 715.12(4)(b) makes the obligor's own receipt of payment a condition of its duty), yet it will not let the obligor use a dispute as a reason to hold up unrelated money: unless the contract specifically provides otherwise, a dispute does not permit the obligor to withhold payment for work not subject to or affected by the dispute. And the interest right cannot be given away in the contract: § 715.12(6)(d) says an obligee may not waive the right to receive interest BEFORE a payment is due, though it may waive interest on a late payment on or after the due date. Both of those sit inside § 715.12(6), which also provides in (6)(b) that the section creates no separate cause of action other than for collecting the interest subsection (5) allows, so late payment under this law buys an interest claim, not a new claim on the contract. One more thing a reader should weigh before relying on any of it: no Florida decision at any level was found mentioning § 715.12, on either the run-together or the spaced spelling of the section number, so nothing here has been construed by a court.
6 authorities
- statuteFla. Stat. § 715.12enactment date not established
The words that state the rule
(2) This section applies only to written contracts to improve real property entered into after December 31, 1992, and for which a construction lien is authorized under part I of chapter 713.
- statuteFla. Stat. § 715.12enactment date not established
The words that state the rule
(4) An obligor must pay an obligee with whom the obligor has a contract when all of the following events have occurred:(a) The obligee is entitled to a payment at the time and under the terms specified in the contract between the obligor and the obligee, and the obligee has furnished the obligor with a written request for payment; and (b) The obligor, except an owner, has been paid for the obligee’s labor, services, or materials described in the obligee’s request for payment by the person immediately above the obligor in the chain of contracts; and (c) The obligee has furnished the obligor with all affidavits or waivers required for the owner to make proper payments under s. 713.06.
- statuteFla. Stat. § 715.12enactment date not established
The words that state the rule
(5)(a) Any payment due under the provisions of subsection (4), excluding any amounts withheld pursuant to subsection (7), shall bear interest at the rate specified in s. 55.03 plus an additional 12 percent per annum, computed beginning on the 14th day after payment is due pursuant to subsection (4). (b) If the request for payment is incomplete or contains an error, the obligor has 14 days within which to return the request for payment to the obligee for completion or correction. The obligor must specify in writing the reasons for the return of the request for payment. If the obligor does not return the request for payment, together with the specified reasons within the time provided in paragraph (a), the obligor must pay interest as provided in paragraph (a). If the obligor does return the request for payment within the time provided in paragraph (a), the time period for computing interest begins to run on the 14th day after the request for payment is completed or corrected and payment is otherwise due pursuant to subsection (4).
- statuteFla. Stat. § 715.12enactment date not established
The words that state the rule
(6)(a) The right to receive interest on a payment under this section is not an exclusive remedy. This section does not modify the remedies available to any person under the terms of a contract or under any other statute. This section does not modify the rights of any person to recover prejudgment interest awarded to the prevailing party in any civil action or arbitration case. During the period that interest accrues under this section, the interest rate shall be the rate specified in s. 55.03 plus an additional 12 percent per annum or the rate specified in the contract, whichever is greater. A person shall not be entitled to receive both the contract interest and the statutory interest specified in this section. (b) This section does not create a separate cause of action other than for the collection of interest due pursuant to subsection (5). (c) If an obligor pays an amount less than the full amount due under the contract between the obligor and the obligee, the obligor may designate the portion of the labor, services, or materials to which the payment applies. In the absence of such a designation by the obligor, the obligee may apply the payment in any manner the obligee deems appropriate. This paragraph does not modify the obligation to make or demand a designation under the provisions of s. 713.14. (d) An obligee may not waive the right to receive interest before a payment is due under a contract subject to this section. An obligee may waive the interest due on any late payment on or after the date the payment is due under subsection (4). (e) Unless the contract specifically provides to the contrary, a dispute between an obligor and obligee does not permit the obligor to withhold payment from the obligee or from any other obligee for labor, services, or materials provided to the obligor and which are not subject to or affected by the dispute.
- statuteFla. Stat. § 715.12enactment date not established
The words that state the rule
715.12 Construction Contract Prompt Payment Law.— (1) This section may be cited as the “Construction Contract Prompt Payment Law.”
- statuteFla. Stat. § 715.12enactment date not established
The words that state the rule
(3) The terms used in this section have the same definitions as the terms defined in s. 713.01. As used in this section, the term:(a) “Obligor” means an owner, contractor, subcontractor, or sub-subcontractor who has an obligation to make payments under a contract that is subject to this section. (b) “Obligee” means a contractor, subcontractor, sub-subcontractor, or materialman who is entitled to receive payments under a contract that is subject to this section. (c) “Chain of contracts” means the contracts between the owner and the contractor, the contractor and any subcontractor or materialman, the subcontractor and any sub-subcontractor or materialman, and the sub-subcontractor and any materialman.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.