Florida Enacts Contractor Notice Bill

Under a new law effective May 27, 2003, owners of dwellings in Florida must give contractors notice and an opportunity to cure construction defects before filing suit.¹ The new statute also requires contracts for the sale, design, construction or remodeling of residential property to contain special language. The law only applies to residential dwellings, and to certain kinds of defects. It establishes a rigid timeframe that both parties must follow to preserve their rights. In theory, the law should reduce litigation by requiring the parties to try to resolve their differences before heading to court. In practice, it may not be that simple.

The new law applies only to dwellings. "Dwellings" include single-family homes, multi-family buildings, and condominiums, including common areas, but not commercial structures. "Claimants" required to give notice of defects under the law include original purchasers, subsequent purchasers, renters and associations, but not contractors. "Contractors" entitled to receive notice of defects include general contractors, subcontractors, design professionals, developers, and anyone else "legally engaged in the business of designing, developing, constructing, manufacturing, selling, or remodeling dwellings." By specifying that contractors be "legally engaged" in business, the legislature apparently intended not to require claimants to give notice to unlicensed contractors.

The law covers defects in new construction and remodeling, but apparently not repairs. Moreover, only certain kinds of defects are covered. The claimant need only give notice of defects involving defective materials, violation of applicable building codes, design malpractice, or failure to employ workmanlike construction methods. The legislative staff report makes clear that defects not meeting the statutory definition are not subject to the notice provisions of the law. An example of a defect not subject to the notice provisions of the act might be an erroneous, but workmanlike installation of galvanized downspouts when aluminum was specified. Finally, the law applies only to claims for damage or loss to the dwelling or to personal property, but not to personal injuries.

In a case that meets all of these statutory definitions, here is how the law works. The claimant must give any contractor believed responsible at least 60 days’ written notice of the claimed defects before filing suit against the contractor. The notice must be either hand delivered or sent by certified mail and must specify the defect or defects in reasonable detail. Serving the notice tolls the running of the statute of limitations. The law encourages the claimant to "endeavor to serve the notice of claim within 15 days" after discovering the defect, but a failure to do so does not bar the claimant’s right to sue. If the claimant sues before giving any notice, however, or without complying with the other terms of the law, the contractor can have the suit abated (i.e., suspended) until the claimant fully complies with the law.

Once the contractor receives notice of a claimed defect, the contractor has five business days to conduct an inspection of the dwelling, although inspection is not mandatory. The inspection may include destructive testing by agreement with the claimant. Within 10 business days after receiving notice, the contractor must forward the notice to any subcontractor, supplier, or design professional who the contractor believes is responsible for the defects. These parties then have five business days to conduct their own inspection of the dwelling. In addition, within the same five business days, these parties must provide the contractor with a written report describing the results of their inspection and stating whether they accept responsibility for the defects and what they will do to repair them.

Within 25 days after receiving the claimant’s notice of defects, each contractor receiving notice must serve a written response on the claimant. The response must either:

(a) offer to remedy the defect at no cost to the owner, including a detailed report on the contractor’s inspection and findings, the work to be performed, and the timetable for completion of the work;

(b) offer to settle the claim for a monetary payment to be paid within 30 days of the claimant’s acceptance of the offer; or

(c) state that the contractor disputes the claim and will neither remedy the defect nor settle the claim.

If the contractor disputes the claim, the claimant may sue without further notice. On the other hand, if the contractor’s response offers to repair the defects or settle the claim, the response must include a statement advising the claimant that the contractor’s offer will be deemed accepted if not rejected in writing within 15 days (or 45 days for an association). In order to properly reject the contractor’s offer, the claimant must serve the contractor with written notice of rejection that includes the contractor’s offer with the word "rejected" printed on the offer. After rejecting the offer, the claimant may sue without further notice.

If the claimant accepts the contractor’s offer to repair the defects or settle the claim, and the contractor complies with the terms of the offer, then the claimant is barred from suing on the claim. On the other hand, if the contractor does not meet the terms of its offer, either by not paying the settlement money or by not making the repairs promised within the agreed time or in the agreed manner, then the claimant may sue without further notice. The failure of any party to comply with the law is admissible in any subsequent suit.

The procedures of the act supercede any contrary provisions of an arbitration clause in the contract between the parties. Moreover, the notice requirements must now be conspicuously included in or with any contract for the sale, construction, or remodeling of a dwelling.

In theory, these procedures should lead to mutually beneficial out-of-court resolutions of dwelling defect claims. In practice, however, the law is likely to create problems for both claimants and contractors.

In the first place, the law only gives contractors and subcontractors five business days after receiving notice to conduct an inspection of the dwelling. That is simply not enough time. A busy contractor may not be able to schedule a meaningful inspection that quickly. If the contractor cannot inspect the dwelling, the contractor is not likely to be in a position to agree to make repairs, much less specify the details and timetable for the repairs. Nor is the contractor likely to agree to a monetary settlement without an inspection. As a result, a contractor who cannot make an inspection within five days will simply deny the claim. Then the parties are off to court. Presumably, the parties could agree to extend the inspection time, but doing so without the advice of counsel could result in a waiver of rights.

Similarly, the law places the strict requirement on the claimant to properly reject the contractor’s offer to repair the defect or settle the claim within 15 days, or the offer is deemed accepted. Even though the contractor’s offer must advise the claimant of this burden, many unsophisticated claimants will likely miss the required deadline or fail to serve a statutorily adequate rejection, and thereby lose their right to sue. Furthermore, for all but the simplest of defects, the claimant may not be able, in 15 days, to obtain the independent advice needed to evaluate the adequacy of the contractor’s offer. If the contractor’s offer is inadequate, and the claimant either accepts the offer or fails to timely and properly reject it, the claimant has no other recourse and will have to settle for whatever the contractor offered.

Another problem for contractors is that, in order to make an offer to repair the defect, the contractor must provide the claimant with a written report setting forth the details of the contractor’s inspection and findings. This kind of information would ordinarily be protected from disclosure as work product. Even though the law provides that a contractor’s offer is not admissible as an admission of liability, it apparently leaves the claimant free to introduce the offer’s description of the contractor’s inspection and findings as an admission of the existence of the claimed defects (even if liability for those defects is not admitted). If the claimant finds the contractor’s offer the least bit lacking, the claimant will be tempted to reject it and sue, then introduce the contractor’s own report as proof of the defects.

Chapter 558.005 also requires that upon entering into a contract for the sale, design, construction, or remodeling of a dwelling, the construction professional shall provide notice to the owner of the dwelling of the construction professional’s right to offer to repair construction defects or pay to settle alleged construction defects before a claimant may file suit against a construction professional. Such notice must be conspicuous, may be included as part of the contract, and must be in substantially the following form:

FLORIDA LAW CONTAINS IMPORTANT REQUIREMENTS YOU MUST FOLLOW BEFORE YOU MAY FILE A LAWSUIT FOR DEFECTIVE CONSTRUCTION AGAINST A CONTRACTOR, SUBCONTRACTOR, SUPPLIER, OR DESIGN PROFESSIONAL FOR AN ALLEGED CONSTRUCTION DEFECT IN YOUR HOME. SIXTY DAYS BEFORE YOU FILE YOUR LAWSUIT, YOU MUST DELIVER TO THE CONTRACTOR, SUBCONTRACTOR, SUPPLIER, OR DESIGN PROFESSIONAL A WRITTEN NOTICE OF ANY CONSTRUCTION CONDITIONS YOU ALLEGE ARE DEFECTIVE AND PROVIDE YOUR CONTRACTOR AND ANY SUBCONTRACTORS, SUPPLIERS, OR DESIGN PROFESSIONALS THE OPPORTUNITY TO INSPECT THE ALLEGED CONSTRUCTION DEFECTS AND MAKE AN OFFER TO REPAIR OR PAY FOR THE ALLEGED CONSTRUCTION DEFECTS. YOU ARE NOT OBLIGATED TO ACCEPT ANY OFFER MADE BY THE CONTRACTOR OR ANY SUBCONTRACTORS, SUPPLIERS, OR DESIGN PROFESSIONALS. THERE ARE STRICT DEADLINES AND PROCEDURES UNDER FLORIDA LAW.

These and perhaps other terms of the new law will likely generate some controversy in the courts. Moreover, all parties will almost certainly need legal counsel to assist them in navigating these new waters, a fact that cuts against the bill’s purpose of avoiding legal entanglement. On the whole, however, this new act will have the salutary effect of protecting contractors from the expense of litigation and the risk of excessive damage awards where the contractor is willing to satisfy the owner through a monetary payment or by repairing defects at no cost to the owner.

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1. The new law has been assigned to Chapter 558.001-558.007 of the Florida Statutes. Text of the bill, designated CS/CS/SB 1286, may be viewed at www.flsenate.gov.