The Florida homeowners construction recovery fund: how to collect from an uncollectible contractor.

• Author: Perera, Diane S.
• Position: Administrative Law

The Florida Homeowners' Construction Recovery Fund (Fund) was established in 1993 in order "to compensate consumers who suffer monetary damages as a result of certain violations by licensed contractors." (1) The Fund's legislative purpose is to "compensate an aggrieved claimant who contracted for the construction or improvement of the homeowner's residence (2) located within this state and who has obtained a final judgment in a court of competent jurisdiction, was awarded restitution by the Florida Construction Industry Licensing Board (CILB), or received an award in arbitration against a licensee based on specified acts." (3) The CILB is a professional licensing board within the Department of Business and Professional Regulation (DBPR). (4) The Fund provides a remedy for claimants that becomes available once the claimant has exhausted diligent efforts to seek reimbursement from the contractor. (5)

What is the Florida Homeowners' Construction Fund?

The Fund is a special account within the State of Florida's Professional Regulation Trust Fund funded by the allocation of 0.675 percent of all permit fees assessed by local governments with Florida Building Code enforcement authority. (6) It provides financial assistance to Florida homeowners (7) who meet certain requirements. Today, the Fund covers contracts for residential work with Division I and Division II contractors licensed by the CILB. Division I con tractors consist of general, residential, and building contractor licensees. Division II contractors consist of sheet metal, roofing, air conditioning, mechanical, pool and spa, plumbing, underground utility and excavation, solar, pollutant storage systems, and specialty contractors. (8) However, contracts with Division II contractors entered into between July 1, 2004, and July 1, 2016, are not covered by the Fund. (9)

How Do Homeowners Access the Fund?

There are only three ways for homeowners to gain access to the Fund: 1) obtaining a final judgment against a contractor in a civil proceeding that is based upon a specific violation of the licensing law or the lien law; 2) obtaining an arbitration award (which is typically confirmed and becomes a final judgment) against a contractor that is based upon a specific violation of the licensing law or the lien law; or 3) obtaining an order of restitution from the CILB through the disciplinary administrative process that is based upon a specific violation of the licensing law. (10) The final judgment, arbitration award, or CILB final order of restitution must directly arise from events or transactions that occurred when the contractor was licensed, must be based on acts set forth in F.S. [section] 489.129(1)(g), (j), or (k), or F.S. [section] 713.35, (11) and must specify the actual damages (12) that arose from the violation. Applications for recovery that meet the above criteria must be filed with the CILB within one year of the conclusion of any civil action, administrative action, or award in arbitration. (13)

The licensing violations upon which the final judgment, arbitration award, or order of restitution must be based on one of the following: 1) failing to remove construction liens on property for labor, services, or materials for which the contractor has been paid; 2) abandoning a project when the value of work is less than the amount paid; 3) cost overruns on the project that are not attributable to the owner; 4) abandoning a project without just cause or notice to the owner; or 5) issuing false lien releases or false statements regarding the existence of bonds or insurance. (14)

The CILB is charged with and authorized to administer the Fund. (15) Once a homeowner has obtained a judgment, arbitration award, or order of restitution, the homeowner submits a claim, and the Fund is accessed through an administrative procedure governed by the Florida Administrative Procedure Act (APA), codified in F.S. Ch. 120. (16) The administrative laws and rules that govern the Fund process will be discussed later in this article.

Accessing the Fund with a Civil Final Judgment

It is well established in Florida that the contractor licensing law, codified in F.S. Ch. 489, does not create a private right of action for a litigant. (17) Obtaining a civil final judgment that includes findings related to violations of the contractor licensing law that enables access to the Fund can be complicated. Many times, the acts or omissions that constitute a breach of contract claim against a contractor will also constitute the type of licensing violation that allows a claimant to access the Fund.

When evaluating a homeowner's civil case against a contractor, the evaluation should include whether the same facts support any of the violations that allow access to the Fund as identified in F.S. Ch. 489. For example, if there is an unjustified cessation of work, there may be an abandonment under F.S. [section] 489.129(1) (j). If liens have been recorded and the contractor has been paid, there may be financial mismanagement consistent with F.S. [section] 489.129(1)(g)(1). If work stopped and the contractor was overpaid, there may be financial mismanagement consistent with F.S. [section] 489.129(1)(g)(2). If there were cost overruns not attributable to the homeowner, there may be financial mismanagement consistent with F.S. [section] 489.129(1)(g)(3). If the contractor has signed false releases or misrepresented the existence of bonds or insurance, there may be a violation consistent with F.S. [section] 489.129(1)(k) and F.S. [section] 713.35.

If any facts are present that are consistent with the specified licensing violations, they should be pled by framing the allegations to correspond to the statutory language, but there should not be a citation to the statute in the civil claim. If the statutory provision is cited, the risk arises that it may be considered an attempt to pursue a private cause of action against the contractor, which the law prohibits. If the facts are pled in the complaint as a basis for a breach of contract claim, and the case concludes with the entry of a final judgment, the facts that supported the civil claim and the licensing violation should be included in the final judgment. Further, the actual damages the homeowner suffered that directly arose from the violation, must be specified in the final judgment. (18)

Even though the Fund is a remedial act that should be liberally construed in favor of the claimant, (19) accessing the Fund can be a cumbersome...