Payment
bonds provided pursuant to Florida Statutes section
713.23 are provided by the contractor and exempt the owner's
property from liens by providing a source of recovery that
lienors can look to in the event of nonpayment by the contractor.
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WHAT
ARE THE REQUIREMENTS FOR THE BOND?
To qualify as a 713.23 payment bond and exempt the real
property from liens, the bond must be:
-
In at least the amount of the prime contract, and
- Executed
as surety by a surety company authorized to conduct business
in this state, and
- Conditioned
upon the contractor promptly making payment to all lienors,
and
- Furnished
prior to the commencement of construction, and
- Attached
to and recorded in the official public records along with
the Notice of Commencement.
A bond form sufficient to satisfy the statutory requirements
is provided in Florida Statutes section 713.23(3).
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WHO
IS PROTECTED BY THE BOND?
A
payment bond provided by a contractor pursuant to Florida
Statutes section 713.23 protects the owner's property
from liens, and, therefore, protects the owner from the
contractor's failure to pay lienors. The bond also provides
a potential source of recovery for all persons or entities
who are entitled to a construction lien under Florida
Statutes chapter 713, except for the prime contractor.
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HOW
DO I OBTAIN A COPY OF THE BOND?
Upon request by a lienor, the owner, the contractor and/or
the surety are all required to
furnish a copy of the section 713.23 payment bond at the
cost of reproduction. Any party who fails or refuses to
provide a requesting lienor with a copy of the payment bond,
absent justifiable cause, shall be liable to the lienor
for any damages caused by the refusal or failure. Additionally,
since it is a strict statutory requirement that the payment
bond be attached to and recorded along with the Notice of
Commencement, any person can obtain a copy of the bond from
the official public records of the county in which the real
property is located.
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WHAT
ARE THE NOTICE REQUIREMENTS?
A.
Notice to Contractor
Statutory payment bonds provided pursuant to Florida
Statutes section 713.23 have notice requirements that
are very similar to those for perfecting lien rights. A
claimant, other than a laborer, who does not have a direct
contract with the contractor, as a condition precedent to
recovery on the bond, must serve a Notice to Contractor
that the claimant will look to the payment bond for protection
on the project. The Notice to Contractor must be in writing
and served either prior to, or no later than forty-five
(45) days after the claimant begins to furnish labor or
services or provide materials to the project. The Notice
to Contractor may be in substantially the form provided
by Florida Statutes section 713.23(1)(c). Pursuant
to Florida Statutes section 713.06(2)(c), the Notice
to Contractor can be combined with a Notice to Owner provided
pursuant to section 713.06 and entitled “Notice to
Owner/Notice to Contractor.”
The Notice to Contractor or Notice to Owner/Notice to Contractor
must be served in the same manner as provided for service
of a Notice to Owner under Florida Statutes section
713.18, as discussed more fully above.
If the Notice of Commencement for the project is not recorded,
or if there is no reference to the payment bond in the Notice
of Commencement, and if the claimant is not otherwise notified
in writing of the existence of the payment bond, the claimant
will have forty-five (45) days from the date the claimant
is notified of the existence of the bond within which to
serve the Notice to Contractor.
B.
Notice of Nonpayment
All claimants, regardless of whether or not they have a
direct contract with the contractor, are required to serve
a Notice of Nonpayment on the contractor and the surety
as a condition precedent to recovery under the section 713.23
payment bond. The Notice of Nonpayment must be served no
later than ninety (90) days after the date of last furnishing
labor or services or last providing materials to the project.
The ninety (90) day period is not measured by any other
standards, such as the issuance of a certificate of occupancy
or the issuance of a certificate of substantial completion.
The Notice of Nonpayment may be in substantially
the form provided in Florida Statutes section 713.23(1)(e).
A claimant is not required to serve a Notice of Nonpayment
if the only amount due is retainage of ten percent (10%)
or less of the value of the labor, services, or materials
furnished by the claimant.
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SHOULD
I RECORD A CLAIM OF LIEN ON A PRIVATE BONDED PROJECT?
There is no statutory prohibition against a lienor perfecting
its lien rights against the property, including the recording
of a Claim of Lien against property that is exempted from
the lien by virtue of a section 713.23 payment bond. In
fact, Florida Statutes section 713.23 provides that
every Claim of Lien recorded after the execution and delivery
of the bond shall be transferred to the payment bond with
the same effect as a transfer bond under section 713.24.
The transfer of the subsequently recorded Claim of Lien
to the section 713.23 payment bond is to be effected by
the recording of a verified Notice of Bond in substantially
the form provided in section 713.23(2). The Notice of Bond
can be effected by the contractor or anyone having an interest
in the property. The Notice of Bond is recorded by the Clerk
of the Circuit Court and mailed by the Clerk to the lienor
at the address shown on the Claim of Lien.
It is a prudent practice for a bond claimant to also perfect
lien rights against the property for several reasons. First,
there is case law authority to the effect that a bond claimant
must, in order to recover on the section 713.23 payment
bond, prove compliance with all conditions precedent to
perfection of lien rights against the property. Additionally,
the recording of the Claim of Lien and perfection of lien
rights may provide an alternative means of recovery in the
event that the surety who issues the section 713.23 payment
bond raises defenses as to the validity and enforceability
of the bond based upon claims of owner or contractor fraud
or other misconduct.
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REQUEST
FOR SWORN STATEMENT OF ACCOUNT
The contractor who has provided a payment and performance
bond under Florida Statutes section 713.23, may,
when any payment is made to it or directly to a claimant
by the contracting entity, serve a written demand upon any
claimant for a written statement of account under oath,
stating, as of the date of the response:
- The
nature of the labor or services performed, and yet to
be performed, if any, and
- The
materials furnished, or yet to be furnished, if known,
and
- The
amount paid on account to date, and
- The
amount due, and he amount yet to become due, if known.
The
request must be served upon the claimant at the address
and to the attention of any person designated to receive
the demand in the Notice to Contractor served by the claimant.
A request for sworn statement of account under this section
must be in substantially the form provided in Florida
Statutes section 713.16(3). The failure of a claimant
to furnish the sworn statement within thirty (30) days after
a proper demand, or the furnishing of a false or fraudulent
statement, deprives the claimant of its claim under the
bond, if the request is received by the claimant prior to
the filing of a lawsuit by the claimant on the bond.
The provisions of Florida Statutes section 713.16(4)
differ from the similar provisions under Florida Statutes
section 255.05 for public project bonds in that the contractor
on a private project protected by a section 713.23 payment
bond may serve a request for sworn statement of account
on any lienor or claimant, whereas, a contractor on a public
project protected by a section 255.05 bond may only serve
the request on claimants who do not have a direct contract
with the contractor.
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WAIVERS
OF BOND CLAIMS
Florida Statutes section 713.235(1) provides a Waiver
of Right to Claim Against the Payment Bond (Progress Payment)
form to be executed by a claimant in exchange for or to
induce payment of a progress payment. Although the statute
provides that the waiver and release form “may”
be in substantially the form provided, as opposed to a mandatory
requirement that the form “shall” be in substantially
the form provided, section 713.235(3) provides “a
person may not require a claimant to furnish a waiver that
is different from” the form specified.
Similarly,
section 713.235(2) provides a Waiver of Right to Claim Against
the Payment Bond (Final Payment) form with the same permissive
use language and also subject to the same provision that
a claimant cannot be required to furnish a waiver that is
different from the form specified.
A bond waiver that is not in substantially the form provided
by the statutes, if executed by the claimant is, however,
enforceable in accordance with the terms of the executed
waiver.
A
claimant who receives either a progress payment or final
payment in the form of a check in exchange for providing
a bond waiver may condition the waiver upon payment of the
check.
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ADVANCE
WAIVER OF BOND CLAIMS UNENFORCEABLE
A claimant cannot validly waive its rights to claim against
the section 713.23 payment bond in advance of performing
the labor or services or furnishing the materials for the
project, even if the claimant has executed a contract containing
a provision purporting to be an advance waiver of its rights
to make a claim against the bond. Any such contractual provision
is unenforceable.
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NOTICE
OF CONTEST OF CLAIM AGAINST PAYMENT BOND
Pursuant to a 1998 amendment to the statute, a contractor
may shorten the time period for a claimant to file a lawsuit
on the section 713.23 payment bond if the claimant is no
longer furnishing labor, services, or materials on the project,
by recording a Notice of Contest of Claim Against Payment
Bond, following procedures that are identical to those provided
for service of a Notice of Contest of Lien under Florida
Statutes chapter 713. The form of the Notice of Contest
of Claim Against Payment Bond should be in substantially
the form provided in Florida Statutes section 713.23(1)(e).
If a claimant who is served a Notice of Contest of Claim
Against Payment Bond fails to institute a lawsuit on the
bond within sixty (60) days from the date of mailing of
the Notice of Contest of Claim Against Payment Bond by the
Clerk of the Circuit Court, the claimant’s claim against
the bond shall be automatically extinguished.
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WHAT
IS THE DEADLINE FOR FILING SUIT?
A claimant must file a lawsuit on a section 713.23 payment
bond within one year from the date of last providing labor
or supplying materials for the project. This is different
from the deadline for filing a foreclosure lawsuit on a
Claim of Lien; therefore, the claimant should be cautious
in calendaring the deadline for filing a lawsuit as any
lawsuit filed beyond the deadline will be time barred.
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WHO
ARE THE PROPER PARTIES TO THE BOND SUIT?
Claimants under a section 713.23 payment bond have the right
to file a direct lawsuit against the surety; therefore,
it is not necessary for the claimant to join the contractor
or the owner as parties to the lawsuit, except that the
contractor would have to be made a party in order for the
claimant to pursue any contract remedies against the contractor.
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ARE
ATTORNEY'S FEES RECOVERABLE?
In addition to the bond claim amount, the prevailing party
in a lawsuit on a section 713.23 payment bond is entitled
to recover its reasonable attorney’s fees and costs
incurred in the lawsuit. The Florida Supreme Court has ruled
that the “prevailing party” in such a lawsuit
is not simply the party who recovers a net judgment in its
favor, but is the party who prevails on the “substantial
issues in the litigation.” This determination is made
by the trial court on a case by case basis which injects
uncertainty in the process, even after judgment on the principal
claim has been rendered.
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CHANGES
TO THE PAYMENT BOND
Any
party claiming an interest in the section 713.23 payment
bond, or in the real property from which the Claim of Lien
was transferred, may at any time, and any number of times,
file a complaint in the circuit court of the county where
the conditional payment bond is recorded, to seek an order
of the court requiring an increase in the bond amount, reducing
the bond amount, changing or substituting the surety on
the conditional payment bond, compelling payment or discharge
of the bond, or any other matter relating to the bond. If
a lawsuit is already pending seeking to impose a claim upon
the section 713.23 payment bond, the request can be made
in the form of a motion filed in the pending lawsuit.
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