How to comply with Chapter 558 Florida Statutes: current challenges and future changes.

• Author: Leiby, Larry R.

F.S. Ch. 558, otherwise known as the Florida Construction Defect Statute, requires owners to send a "notice of claim" to developers, contractors, subcontractors, suppliers, and/or design professionals identifying any alleged construction and/or design defects in "reasonable detail" before any litigation or arbitration for construction defects may be initiated. (1) In other words, before an owner may sue someone for a defect, a very specific set of rules must be followed or legal rights may be delayed or lost. Since the introduction of Ch. 558 in 2003, participating parties to design and construction along with construction lawyers, courts, and arbitrators have wrestled with how to inject practicality into the process. Recently reported episodes prove convincing that some change is necessary. In one unreported decision, a circuit court judge interpreted a secondary notice sent to a subcontractor as an admission of liability against a developer. (2) In another case, a federal trial court declined to dismiss or abate for failure of a claimant to serve the notice of claim. (3) Instead, the court allowed the case to proceed but required the parties to comply with the procedures of Ch. 558 during the early stages of litigation. (4)

In a landscape of uncertainty surrounding various provisions, only four appellate decisions exist, none of which have addressed substantive issues that frequently cause construction practitioners heartburn when unsettled issues arise during this presuit process. (5) More decisions challenging the various provisions will likely be on the horizon because in 2006, the Florida Legislature expanded the statute to apply beyond residential dwellings to commercial real property, such as businesses, schools, hospitals, office condominiums, hotels, and all other structures except for those involving public transportation. (6) As businesses struggle to stay afloat in this economy, many cannot afford to interrupt the daily routine to allow parties to herd inspectors through the structures, during normal working hours, to ponder repairs to be performed at a later date. Business owners may be hard-pressed to hold off fixing their leaking roof for a period of 45 days to enable a contractor to respond with an offer to fix the leak. The statute does provide some express relief from compliance if the repairs performed constitute an "emergency."7 Although this term is not defined under the statute except to describe a repair to "protect the health, safety, and welfare of the claimant," a judge may be hard-pressed to understand why an unsightly condition in a business setting such as a restaurant gives rise to an emergency situation to relieve the business owner from following the statute. The result of all of these developments will create challenges to be sorted out by lawyers and fact finders. Many of these issues may also stall repairs being made, with some business owners electing to ignore the statute only to be later delayed from pursuing relief against responsible parties. (8)

While the statute expressly authorizes prenotice emergency repairs, it is silent as to whether the owner is precluded from making the repairs before the notice procedure is satisfied. One view of the effect of prenotice repairs would be that, by implication, the owner is barred from relief due to the inability to inspect, conduct destructive testing, or make a settlement offer (which seems rather harsh, particularly since this result would be only by implication and not express language). Another view would be that the potential defendants could argue that performing non-emergency repairs without satisfying the presuit notice requirements has prejudiced their statutory rights, giving rise to defenses, such as a) "it cost too much," i.e., "it could have been done cheaper or I would have done it for nothing"; and b) "it wasn't my fault and you didn't let me see the condition before you spent money that you now seek to recover."

For the last five years, some lessons have been learned about complying with the statute, and this article will provide some suggestions to achieve compliance from the standpoint of both the owner and contractor. (9)

F.S. Ch. 558 requires an owner (claimant) to give notice and an opportunity to cure with respect to a building defect(s). The statute sets forth its purpose as to create "an alternative method to resolve construction disputes that would reduce the need for litigation as well as protect the rights of property owners." (10) In more practical terms, it is intended to allow both claimants and participants to design and construction to resolve alleged defects before both sides run to the courthouse and spend a pile of money on lawyers.

Owners and contractors have some basic decisions to make with respect to this statute before a dispute hits the courthouse:

1) Should the parties elect to opt out of the procedure (11) (which the parties have the right to do at the time of making the contract or by later agreement)?

2) If you are a contractor, once you receive a notice of claim pursuant to the statute, how should you address downstream subcontractors and suppliers who may have involvement with the alleged defect?

3) Should the contractor serve a response to the notice of claim; and if so, what should it say?

The questions posed should be addressed before the matter hits the courthouse. Because of the implications and requirements to exchange documents and/or perform destructive testing, clients should involve legal counsel in such decisions. Although many clients may hesitate to involve counsel at the early stage of defect discovery, clients should be educated that significant legal fees may be avoided by following the statutory process in an effort to achieve an economical presuit resolution.

Should the Contractor Opt Out in the Contract? Remember that the purpose of this statute is to resolve construction defect claims by affording an opportunity to inspect, including destructive testing if appropriate, and correct the defect or offer a settlement before...