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Changes to Florida Law: Contractor Criminal Fraud Regarding Monies Received From Homeowners Brandon J. Camilleri and Bruce E. Loren | Jan 31 2020

Florida Governor Ron Desantis signed in a new law, which became effective on October 1, 2019, regarding disputes that arise after contractors receive money from homeowners. The changes make it easier for homeowners and prosecutors to bring criminal charges against contractors who accept monies and delay performing the work.

Contractor Fraud prior to change in law:

Before the revisions to Fla. Stat. 489.126, contractor fraud was prosecuted as theft under Fla. Stat. 812.014. Prosecuting under the theft statute required proof that the contractor, at the time of taking payment or entering into the contract with the homeowner, intended to take the money without performing the work. That is a very high burden for prosecutors. The changes to the law lower the threshold for prosecuting contractors when they fail to begin work or complete work in accordance with a contract.

The Revised Law - Failing to Begin Work:

Under the new statute, if a contractor receives an initial payment of ten percent or more of a contract price for repair, restoration, improvement or construction work for a residential real property, then the contractor must:

  • apply for permits within 30 days, unless the homeowner agreed in writing to a longer period; and
  • start work within 90 days after receiving all necessary permits, unless the homeowner agreed in writing to a longer period.

A contractor who has "just cause" for failing to apply for the permits, refund the homeowners payment or start work will be excused from complying with the requirements. However, it is important to note that it will be inferred a contractor did not have just cause if:

  • the homeowner demands in writing that the contractor apply for the permits or start work after failing to do so as prescribed above; and
  • the contractor fails to comply with the demand within 30 days of receipt.

Failing to Complete Work:

The new law also provides that, if a contractor has been paid an amount which exceeds the value of the work to be performed, that they cannot stop work during any 90 day period (or any period mutually agreed upon and specified in the contract) unless the homeowner terminated or materially breached the contract.

Similarly, a contractor who has "just cause" for failing to perform work in a 90-day period will be excused from complying with the requirements. However, once again it will be inferred a contractor did not have just cause if:

  • the homeowner demands in writing that the contractor apply for the permits or start work after failing to do so as prescribed above; and
  • the contractor fails to comply with the demand within 30 days of receipt.

Inferring Criminal Intent:

The new law also allows courts to infer a contractor’s criminal intent to misappropriate money where the contractor fails to refund a homeowner’s money after 30 days of written notice.

Unlike the previous law, now it provides that the required intent to prove a criminal violation may be shown at the time of appropriating the money and is not required to be proven at the time the homeowner makes a payment to the contractor. This is an important distinction as it is much easier for a prosecutor to prove than the previous threshold under the theft statute. Importantly, the revised law also provides that, even if the contractor intended to return the money, it will not be a defense to this inference. It must have actually returned the monies.

Penalties:

A contractor who violates the law will be committing:

  • a misdemeanor, if the amount exceeding the value of the work performed is less than $1,000;
  • a felony of the third degree, if the amount exceeding the value of the work performed is more than $1,000 but less than $20,000;
  • a felony of the second degree, if the amount exceeding the value of the work performed is more than $20,000 but less than $200,000; or
  • a felony of the first degree, if the amount exceeding the value of the work performed is more than $200,000.

How contractors can protect themselves:

Contractors should always timely reply to demand letters, as the inference created under the new statute could be fatal to an otherwise valid defense that the contractor might have. Most important, send responses in writing and with proof of delivery. Verbal discussions often become irrelevant. If a dispute arises with a homeowner, make sure you protect yourself and immediately contact an attorney who specializes in construction law to determine the best course of action and preserve your rights.

Bruce E. Loren and Brandon J. Camilleri of the Loren & Kean Law Firm are based in Palm Beach Gardens and Fort Lauderdale. Loren & Kean Law is a boutique law firm concentrating in construction law, employment law, and complex commercial litigation. Mr. Loren has been certified in construction law by the Florida Bar since 2004 and has focused his practice on construction law for the last 30 years. The firm represents construction clients through a wide range of issues, including project delays, scope of work disputes, and surety bond claims. The firm’s clients include owners/developers, general contractors, specialty contractors, suppliers, professional architects and engineers. Mr. Loren and Mr. Camilleri can be reached at?bloren@lorenkeanlaw.com, bcamilleri@lorenkeanlaw.com or 561-615-5701.