A Game-Changer for Subcontractors in Payment Disputes

Though many construction professionals are generally familiar with Florida’s lien law, there is a little-known and little-used provision within the lien statutes that can prove to be a game-changer for subcontractors (or sub-subcontractors) when used correctly and in the proper factual circumstances.

Section 713.346 of the Florida Statutes provides that, where there is a contract between a contractor and subcontractor for construction services, and 1) the subcontractor has performed his work under the contract, 2) said subcontractor is still undisputedly owed all or part of the contractual amount, and 3) the contractor has been paid for the work more than 30 days prior to the filing of the subcontractor’s lawsuit, the subcontractor will be entitled to some extraordinary remedies against the contractor. The subcontractor can receive: an accounting of the contractor’s use of the payment; a temporary injunction against the contractor who received payment[1]; pre-judgment attachment of the contractor’s bank accounts or other property; and, if he prevails in his lawsuit, his attorney’s fees and costs.

The subcontractor can also further expedite his recovery of the sums owed to him, because the statute provides him with the opportunity for an evidentiary hearing no less than 15 days after filing his Complaint pursuant to §713.346. At the evidentiary hearing, the subcontractor can present all of the evidence showing that he is entitled to payment, and, upon the conclusion of the hearing, he can be granted the aforementioned remedies. This is much quicker resolution than where a subcontractor is forced to file a breach of contract or other action relating to recover the payment alleged to be due to him.

However, §713.346 only applies under some very strict circumstances.  First, pursuant to §713.346(6)(b), the subcontractor must not be in material breach of the contract with the contractor, such that the contractor is relieved of his duty to perform under the contract (i.e. make payment to the subcontractor). This is a logical requirement because, if the subcontractor has breached his contract, then he should not be entitled to full payment, let alone the extraordinary remedies offered under the statute.

Secondly, §713.346(6)(a) requires that there must not be any bona fide dispute as to the payment owed to the subcontractor. This is a high hurdle for the plaintiff-subcontractor to clear, because it can be fairly easy for a contractor to establish that the amount owed is in dispute. The contractor might claim, for example, delay in performance by the subcontractor and a related set-off, or a substandard quality of workmanship by the subcontractor. The contractor could also claim that the subcontractor is seeking more than he is entitled to under the terms of their contract. In short, there could be several reasons a contractor would claim that the amount sought by the subcontractor is in dispute, thus preventing the subcontractor’s recovery under §713.346 and his entitlement to the substantial remedies available to him under the statute.

For subcontractors who believe they are undisputedly owed payment for their work when the contractor has received payment for it, it is important to consult with a knowledgeable construction attorney who can assess whether the amount at issue is truly disputed or not, and whether the strict terms of this statute apply to the subcontractor’s claim. While §713.346 can provide the subcontractor with some extraordinary remedies, those remedies will only be available in limited factual circumstances. For contractors facing an action brought against them pursuant to §713.346, it is important to contact an attorney so as to determine whether a bona fide dispute to payment exists and how to best defend against the claim.

[1] Though the statute does not specify the subject matter of such an injunction, it could conceivably include a prohibition against the contractor spending or transferring any of the payment received for the subcontractor’s completed work.