contractsOver the last year, I have noticed an alarming trend where residential builders, realtors, and sellers enter into contracts for new construction that utilize the “As Is” Residential Contract for Sale and Purchase (commonly referred to as “FARBAR Contract”), which is a standard form contract published by the Florida Realtors and The Florida Bar. The FARBAR Contract is a valuable tool in most residential real estate transactions; it provides standardized terms governing a transaction as well as provides for the basic outline to get to closing.

While immensely valuable in the resale market, the FARBAR Contract is ill-suited for the new construction context. The primary reason for this seems fairly obvious, as the FARBAR Contract assumes that the home exists at the time the contract is entered into. As a result, the FARBAR Contract fails to address many issues that arise during the construction process.

The most common of these issues are construction delays, increases in the price of material, and financing contingencies. These issues combined with external factors such as supply shortages, labor shortages, governmental delays and increasing interest rates have highlighted the inadequacies of the FARBAR Contract in the new construction context in recent months.

Construction Delays

construction delayConstruction delays are simply not accounted for under the FARBAR Contract; again, the assumption underpinning the FARBAR Contract is that the home exists, and the seller’s performance merely requires delivering clear title, possession of the property at closing, and executing the necessary closing documents. Extensions are certainly common with the FARBAR Contract, but they often do not extend for months on end.

With new construction, supply and labor shortages and delays at the permitting office can mean delays that go on for months. This often leaves buyers frustrated and on the hook for alternate housing and storage throughout the duration of the delay. Rising interest rates also pose an issue with new construction projects. Delays in construction could result in a buyer’s interest rate lock expiring or require per diem payments to preserve the interest rate. Significant delays could mean thousands of dollars in per diem charges to avoid large jumps in interest rates.

Continue Reading Inappropriate Contracting: Using FARBAR Form Contracts for Residential New Construction

unlicensed contractors Hurricane Ian made direct landfall in Southwest Florida, destroying thousands of homes and buildings. The destruction will now require the mobilization of hundreds of contractors in the construction industry. Unfortunately, a tragedy like Hurricane Ian will also attract a number of unlicensed contractors who will try and take advantage of desperate victims trying to rebuild their homes and businesses.

As Southwest Florida starts the rebuilding phase, here are a few things residents should be aware of:

Before you hire a contractor, ask to see their state-issued license

Whether you need roof repairs or mold-related services, you want to ensure the person you hire is licensed and insured. The definition of “contractor” under Section 489.105, Florida Statutes, requires that any person who seeks to

construct, repair, alter, remodel, add to, demolish, subtract from, or improve any building or structure” must have a license.

Allowing an unlicensed contractor to perform work on your property puts you at risk of liability and could cost you more in the end. Generally, unlicensed contractors do not have workers’ compensation and liability insurance. As a result, the property owner may be liable for any injuries that occur on site.

You may check your contractor’s license by going to www.myfloridalicense.com.

Unlicensed contracting is a felony

In Florida, unlicensed contracting is generally charged as a first-degree misdemeanor, with penalties of up to one year in jail or 12 months of probation, and a $1,000.00 fine.

Continue Reading Unlicensed Contractors: What You Need to Know

construction defectFlorida’s construction industry has been one of the biggest beneficiaries of the COVID-19 pandemic. Whether it is newly constructed homes or renovations to existing homes, the construction industry has weathered the need for residential construction with surprising strength. However, the boom of new construction projects has accompanied an uptick in litigation concerning construction problems, such as design defects, poor workmanship and code violations.

What is a Chapter 558 Notice?

Florida’s Legislature enacted Chapter 558 (“Ch. 588”), known as the construction defect statute, to promote communication between the parties and potentially resolve disputes without the need for litigation to combat the marked increase in court filings.

A property owner alleging a construction defect must provide the contractor, subcontractor, supplier, design professional, and others with written notification of the alleged defect(s) at least 60 days before filing a lawsuit, describing that defect in “reasonable detail.”

Upon receipt of a Ch. 558 Notice, contractors may forward “downstream” notices to subcontractors, suppliers or design professionals whom it reasonably believes is responsible for each defect specified in the notice of claim, noting the specific defect and party responsible.

What qualifies as a construction defect?

A “construction defect” is defined by Florida Statute 558 as any deficiency arising from the construction of a property from the installation of defective material; the work performed results in building code violations; and/or the property’s design is flawed or deviates from the industry standards.

What happens after a contractor receives a Ch. 558 Notice?


Continue Reading FAQ: Construction Defects and Florida Statute 558

Henderson Franklin was honored to sponsor 2021 Market Trends, which took place on March 9, 2021, with speakers Randy Thibaut, founder of Land Solutions, Inc., Denny Grimes, President of Denny Grimes & Team at Keller Williams Realty, and Stan Stouder, founding partner of CRE Consultants, LLC. The presentation discussed the real estate market over the last year in Southwest Florida. The following provides a summary of the event and what the speakers forecast the market to look like in the coming year. The report focused on three areas of the market: new construction, the resale sector, and commercial real estate.

Overall, 2020 saw sluggish growth in the first part of the year, as the initial stages of the COVID-19 pandemic injected fear into the market. The second half of the year saw tremendous rebounds in the residential sector. These rebounds were largely due to increasingly stringent and long-lasting shutdowns in Northern states, which brought thousands of new homebuyers to Southwest Florida.

New Construction Residential Market

In terms of the new construction market, 2020 saw an initial dip in the early part of the year, but, overall, the total number of new building permits amongst Lee, Collier and Charlotte counties increased an average of 16% across the board. Charlotte County saw the most growth with a 28% increase in new building permits.

Individual communities are also seeing tremendous growth. Leading the way in Southwest Florida was Babcock Ranch with 533 new building permits issued to various builders in 2020. However, prices for new construction, along with rent prices, rose throughout 2020, indicating that supply cannot match demand.

Continue Reading The State of Southwest Florida Real Estate – A Recap of 2021 Market Trends

It is hardly a secret that one of the many draws of Southwest Florida is the accessibility of owning property along the beaches, rivers, and canals that make the area paradise for residents and visitors alike. Waterfront ownership, or littoral ownership, comes with a unique set of rights, such as the right to access and construct improvements on the water. These rights however are not absolute, as various other stakeholders and environmental interests possess similar rights.

What Regulations Apply to Construction of Waterfront Structures?

In terms of constructing improvements such as docks, boatlifts, piers and other artificial structures, the State and County governments have developed legal regimes designed to balance these competing interests and effectively manage the aquatic resources of the State. These statutes and regulations are often difficult to navigate for homeowners and developers unfamiliar with the specific characteristics of waterfront ownership. Careful attention to these statutes and regulations must be paid in order to avoid fines, construction delays, or even being required to remove non-conforming structures.

What Laws Apply to My Property?


Continue Reading Construction of Docks, Piers, and Other Waterfront Structures in Southwest Florida

Construction warranties seem simple enough but often result in a great deal of confusion, particularly when it comes to understanding the amount of time a project owner has to file a lawsuit alleging the breach of such warranties.

The complication arises because an owner’s right to sue for breach of a warranty does not expire on the date the warranty expires.

A Common But Confusing Scenario

Assume a situation in which a contractor has completed construction of a residence on January 1, 2015. The contractor has been fully paid for the work and the owner appears happy with the work. Further assume that the construction contract included a standard two-year warranty on labor and materials.

Now fast forward five years to the year 2020 and the contractor is served with a lawsuit from the same owner who is alleging breach of construction warranties. How can this be? The warranties expired in 2017, right? It would appear that this should be a simple case for the contractor to defend and win. Unfortunately, it is not so simple.

A common misunderstanding in the construction industry lies in the distinction between the concept of a warranty period and the statute of limitations for filing a lawsuit.

Four-Year Statute of Limitations


Continue Reading The Construction Warranty: It Ain’t Over ‘Til It’s Over! When Is It Over?

Most of us in the construction industry are familiar with contractual provisions which require one of the parties to obtain insurance on the project (frequently called “builder’s risk” policies). These provisions are typically accompanied by “waiver of subrogation” provisions. Usually, if everything goes well on a construction project, these provisions don’t ever come up for discussion. However, in the event there is an accident during the course of construction, these provisions can be critical for purposes of allocating risks and potentially protecting a contractor or its subcontractors from liability.

How do these provisions work?

Typically, a construction contract will require the owner (or the contractor) to obtain property insurance to protect the project during the course of construction. For example, the standard AIA General Conditions require the owner to “purchase and maintain property insurance upon the entire work at the site to the full insurable value thereof.” This insurance is to include the interests of the owner, the contractor and all subcontractors. In short, the insurance is intended to protect the project against all “perils” and is generally intended to provide protection for everyone involved in the work.

A “Waiver of Subrogation” provision is typically designed to prevent an insurance company from asserting claims against the party who may have been responsible for causing damage to the property. Thus, if the project is damaged during construction and the insurance company is forced to pay for the damage, the insurance company is prohibited from asserting claims against the contractor or its subcontractors or others who may have been responsible for the damage.

Florida Law


Continue Reading Construction Contracts: Property Insurance and Waiver of Subrogation Provisions

Section 624.1055, Florida Statutes, is part of the recent Omnibus Insurance Bill, HB 301: Contribution Rights Among Insurance Carriers. This new legislation impacts those involved in Florida construction defection litigation and applies to claims, suits or other actions initiated after January 1, 2020.

Old Rule – No Right of Contribution

The longstanding rule in Florida has been that there is no right of contribution among insurance carriers for attorney fees incurred in defending a mutual insured. The rationale has historically been that each carrier owes a complete and independent obligation to provide a defense under the insuring policy, such that, by issuing the policy, the carrier did so without contemplation that it would be entitled to recover payment from another carrier for such defense costs. The Florida Supreme Court described the rationale for the current rule in the case of Argonaut Ins. Co. v. Maryland Cas. Co., 372 So.2d 960, 964 (Fla. 1979), as follows:

The Legislature has not seen fit to allow contribution for costs or attorney’s fees between insurance companies. If contribution for costs were allowed between insurance companies, there would be multiple claims and law suits. The insurance companies would have no incentive to settle and protect the interest of the insured, since another law suit would be forthcoming to resolve the coverage dispute between the insurance companies. This is contrary to public policy, particularly since the insured has been afforded legal protection and has not had to personally pay any attorney’s fees.”

New Legislation and Impact


Continue Reading New Legislation Impacting Florida Construction Defect Litigation

Those involved in construction are likely familiar with a Notice of Commencement (NOC). For those who aren’t familiar, a NOC is a document typically required by Florida’s Construction Lien Law to be recorded in the County land records prior to constructing improvements.

When Not to File a Notice of Commencement

This is typically an innocuous administrative procedure which occurs along with permitting. However, not all construction requires a NOC, and problems can arise when one is erroneously recorded. As such, developers should educate their employees not to automatically record a NOC as a matter of course, or just because a contractor or someone at the permitting office tells them to.

Continue Reading Notices of Commencement for Infrastructure Improvements: Think Twice Before Filing

HB911 is proposed legislation that would substantially revamp Ch. 558, Florida Statutes, by substantially doing away with pre-suit notice requirements and replace those requirements with mandatory non-binding arbitration to take place within 180 days of the lawsuit being filed.

Notably, the new provisions would apply not only to completed projects (like the current version) but also to ongoing projects.

Impact of HB911 on Florida Construction Defect Insurance Claims


Continue Reading Proposed Legislation Would Require Mandatory Non-Binding Arbitration in Florida Construction Defect Lawsuits