Left in the Lurch

Cynthia Barnett | 8/1/2007

In the past two years, as the housing market has stalled, Florida has seen an unprecedented number of so-called contractor-abandonment cases. In addition to the Great Bay Homes case in Port St. Lucie, contractors left hundreds of consumers hanging in the Brooksville area and more than 50 in a Jacksonville case. A pair of Sarasota projects left about 125 consumers with unfinished homes, and nearly 500 new-home buyers are on the hook in the case of St. Petersburg-based Construction Compliance Inc. “Unfortunately,” says Brad Hunter with the south Florida office of Metrostudy, “I think you’re going to see a lot more abandonment in the months to come.”

If a home has defects, home buyers and contractors can use Florida’s construction-defect law, Florida Statute 558, to try to work out disputes in courts. But when contractors get overextended and fail to pay their subcontractors or suppliers, they sometimes simply go out of business. In that case, Florida’s Construction Lien Law protects the subcontractors at the consumer’s expense. The law makes the consumer responsible for paying off all tradesmen and suppliers who’ve worked on a home — even if the consumer already paid the general contractor for the same work.

Lien laws, or so-called mechanic’s lien rights, are long-respected protections for people who provide labor, materials and services. Industry officials say the lien law is important because it puts the ultimate responsibility for payment on the person benefiting from the work — the homeowner. State law requires notice of the lien law in all new-home contracts.

Still, consumers like Wong are often dumbfounded to learn that they can be made to pay twice for the same work or supplies if a contractor fails to pay the subcontractors — or risk losing their homes.

» “We’re going to continue to see a lot of fallout” as a result of Florida’s deflating real estate bubble, says Steven B. Lesser of Fort Lauderdale, shareholder and chairman of Becker & Poliakoff’s statewide construction law practice.“I think the contractors and the consumers had both better hold onto their chairs.”

In Hernando and Pasco counties, some 200 families were stuck with liens after three builders failed to pay subcontractors and suppliers. The builders took on more work than they could handle during the boom, then got hit with rising costs of materials and labor. “Believe it or not, ‘too much work’ is one of the top reasons home builders go out of business,” says John Wiseman, president of the Florida Home Builders Association and president of CORE Construction in Florida. “With the big run-up, some people tried to do too much with too little.”

Tags: North Central, Housing/Construction