What Is The Length Of Time A Contractor Can Collect For Services In Texas
Structure CONTRACTS: Tin can Interest Exist Collected IF AN OWNER OR CONTRACTOR FAILS TO TIMELY MAKE A DOWNSTREAM PAYMENT UNDER A Construction CONTRACT
By: Christopher L. Pope, Esq., Board Certified by the Florida Bar in both Structure Law and Condominium and Planned Development Law
We often go asked by contractors, subcontractors, or materialmen whether they are likewise entitled to recover interest when a payment is late from the owner or upstream contractor. The reply is normally yes, just the question of how much interest tin can be more difficult to determine. Below is an abbreviated explanation of how interest can be collected when a payment is late or not made.
Involvement is a class of damages that volition compensate a party for the loss of utilise of funds. Nether the doctrine of the loss theory, the purpose of awarding pre-judgment interest is to brand the plaintiff whole.
With respect to the appointment interest begins to accumulate, mostly, interest awarded as damages in a contract activity runs from the appointment when the right to recover on the merits became vested or accrued. This is commonly the appointment of the breach or the appointment when payment was due under the contract. For progress payments on a construction contract, the interest accrues one time each progress payment is due.
As for the rate of interest, the parties tin specify the interest rate in their contract upward to the maximum legal rate. For obligations under $500,000.00, the maximum interest charge per unit is uncomplicated interest of eighteen% per annum. As such, it is not uncommon for a construction contract to specify the involvement rate "every bit the highest interest rate allowed by police", 1.v% per month, or xviii% per annum. Note that if a construction contract does non specifically provide that the agreed upon charge per unit applies post-judgment, the interest volition accrue later on the judgment at the statutory rate (see below).
If the contract does non specify the interest charge per unit, pre-judgment interest will exist collected at the statutory charge per unit of involvement. Pursuant to Section 55.03, Florida Statutes, the Main Financial Officer for the State of Florida sets the rate of interest on December ane, March 1, June ane, and September 1 of each year that shall exist payable on judgments or decrees for the calendar quarter beginning January ane, and adapt the rate quarterly on Apr one, July 1, and October i by averaging the discount rate of the Federal Reserve Bank of
New York for the preceding 12 months, then calculation 400 basis points to the averaged federal discount rate.
Interest on Structure Liens: With respect to a construction lien, there are a few additional items to exist considered. For contractors in privity with the owner, the interest does non accrue until the Final Payment Affidavit is delivered pursuant to Section 713.06, Florida Statutes. For contractors and materialmen not in privity with the owner, Section 713.08, Florida Statutes, authorizes the inclusion of unpaid finance charges, which does not include interest. See Fernandez v. Manning Building Supplies, Inc., 279 Then. 3d 349 (Fla. 1st DCA 2019) (where the court ruled that a "finance charge," for purposes of the statute authorizing a lien on real property for a materialman or laborer not in privity with the owner of real belongings for unpaid services or materials and for any unpaid finance charges due under the lien holder's contract, is the toll of credit, not the cost of paying late). Accordingly, for those lienors not in privity pre-judgment interest will be at the statutory charge per unit.
Involvement under Florida'southward Prompt Payment Laws: Constructive July 1, 2021, new legislation substantially increased the minimum involvement recoverable under Florida's public and private prompt payment statutes. For public construction projects that qualify under Department 218.735, Florida Statutes, of the Local Government Prompt Payment Human action and Department 255.073, Florida Statutes, of the Florida Prompt Payment Act, the minimum interest rate was increased from 1% per month to 2% per calendar month and it applies to both disputed and undisputed funds. For private construction contracts, the involvement charge per unit recoverable under Department 715.12, Florida Statutes (the Construction Contract Prompt Payment Law), was increased from the statutory charge per unit to the statutory charge per unit plus 12% per annum. These increases will generally merely apply to contracts entered into afterward July ane, 2021.
In summary, contractors, subcontractors, and materialmen should non overlook the ability to charge and collect interest on belatedly or missed payments. Contractors should consider specifying the involvement rate in all of their contracts and including any involvement owed on all invoices submitted. In add-on, the statutory increase in interest for overdue payments is also another tool that can be used to force per unit area a runaway contractor or owner to pay its debts, especially where there is no involvement in the contract.
If y'all are in a payment dispute, the deadline to practice all of your rights can be a matter of days so you should not delay contacting an experienced attorney familiar with construction payment disputes to avoid missing deadlines or waiving your rights.
A note to the reader: This article is intended to provide general information and is not intended to be a substitute for competent legal advice. Competent legal counsel should be consulted if you lot have questions regarding compliance with the law.
Questions regarding the content of this article may be emailed to Christopher Pope at chrispope@paveselaw.com. To view past articles, delight click "Publications" on our firm website. Mr. Pope is one of merely two attorneys in Florida that is Florida Bar Board Certified in both Construction Police and Condominium and Planned Development Police. He is a partner and an experienced construction and real estate attorney with the Pavese Police force Firm, 1833 Hendry Street, Fort Myers, FL 33901; Telephone: (239) 334-2195; Fax: (239) 332-2243.
What Is The Length Of Time A Contractor Can Collect For Services In Texas,
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