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It's The Law: Qualifying Contractor Has No Liability

Q: We are building a home and some of the work is defective. The contracting companying stopped construction without paying all of the subs. It will cost us a lot to finish the home and we will probably have to pay the subcontractors too. The company looks like it is broke so we want to sue the qualifying contractor. Can we do that in Florida?

A: Construction contractors must be licensed in Florida. Licenses can be obtained on a statewide basis through the Department of Business and Professional Regulation or, in some cases, on a local level for work limited to city or county. To obtain a license, an individual must usually pass a test or prove other competence in the licensed area.

Since a company cannot take a test or prove competence, it qualifies for licensing by employing a licensed contractor as the qualifying agent.

The qualifying agent is supposed to oversee construction activities and be sure the company operates in compliance with law, building code and good construction practices. Nevertheless, the qualifying agent is generally exempt from liability to third parties. That means you will not have any luck suing the qualifying agent if the contracting company fails to complete construction or completes construction in a defective manner.

The directors and officers of the construction company are also going to be insulated from liability, because the contract is with the company. The primary reason for creating a corporation or similar entity is for limited liability. Monies placed in the entity might be lost, but the shareholders, directors and officers will not face personal liability for debts of the company.

The sole exception to the freedom from liability of a qualifying agent is where defects in construction cause personal injury. The Florida Supreme Court has confirmed qualifying agents are liable for personal injury damages resulting from their negligence in overseeing construction activities.

All may not be lost even if the construction company is broke and the qualifying agent is also unreachable. Chapter 489 of Florida Statutes deals with construction contracting. Section 140 of that statute creates the Florida Homeowners Construction Recovery Fund. The fund is financed by a one-half cent per square foot surcharge on building permits.

The fund is available to those who have been harmed by a contractor who:

1) commits mismanagement or misconduct causing financial harm to a customer. Financial mismanagement or misconduct occurs when valid liens are recorded, the contractor has received payment from the customer but does not pay the liens;
2) the contractor abandons the customer’s job and the percentage of completion is less than the percentage of contract price paid to the contractor or the customer has had to pay more for the contracted job than the original price;
3) when the contractor abandons a construction project or;
4) the contractor signs a statement falsely indicating the work is bonded, that payment has been made for all subcontracted work or falsely indicating workers compensation and liability insurance are provided.

To proceed against the fund, a claimant must first obtain a judgment against the contractor or an arbitration award from the Construction Industry Licensing Board. The claim must be filed within 1 year after conclusion of any civil, criminal or administrative action or arbitration proceeding. The Construction Industry Licensing Board processes the claim and can award up to $25,000.00, per claim. Payments for claims against any one contractor may not exceed $100,000.00 annually and a lifetime total of $250,000.00.

You can also file an administrative complaint against the qualifying agent and company with the state or local licensing board. Although that is not likely to help you financially, the board can impose penalties on the qualifying agent and company, including fines, mandated continuing education costs associated with the investigation or place the wrongdoer on probation.

The specific circumstances of each case will affect the outcome. You may have a claim against the qualifying agent or others that is not really apparent from your question. You should discuss the specifics of your case with an experienced attorney and you should do so without delay.

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