He Who Hesitates is Lost

by Robert E. Ferencik, Jr., Esq.
©Ferencik, Libanoff, Brandt, Bustamante & Willimas, P.A.

Just when you think that enough emphasis has been placed upon the importance of timely action to enforce construction lien and payment bond rights so that everyone knows the dangers inherent in waiting to the last minute, another court decision is published where valuable rights are lost because a claimant waited too long to take action. Delta Fire Sprinklers, Inc. v. Onebeacon Insurance Company 31 Fla Law Weekly D2072b (Fla 5th DCA, August 4, 2006) is a case in point.

Delta Fire was not paid for its work in installing the fire protection system on a private project and filed suit on a payment bond against the general contractor and its surety. Pursuant to the construction lien law, Delta was required to furnish written notice of performance and nonpayment to the contractor and surety not later than 90 days from the “final furnishing of labor, services or materials.” Here, the last pay application submitted by Delta Fire reflected that 100% of the work was complete and that Delta Fire was entitled to payment of the full contract balance including retainage. The previous application also showed that 100% of the work as being complete. The notice of nonpayment was submitted more than 90 days after the date of the last requisition.

Of course, the surety argued the notice was late. To avoid this problem, Delta Fire contended that it’s final furnishing of labor, services or materials did not occur until a later date when it came to the project to participate in the final inspection of the fire protection system by activating the system for the inspection and also completed some punch list and warranty work. Unfortunately, the trial court disagreed and the court of appeals affirmed. It was held that the notice was late and so Delta Fire lost its bond claim.

In this decision, the Court took a hard line concluding that warranty work and even punch list work do not extend the notice period. Only “work done in actual fulfillment of a contract” extends the time. Remedial work, corrective work and work that is “trivial and insubstantial” in relation to the work done on the whole contract do not count. According to this court, punch list work falls into this latter category. Other courts of appeal, notably the Fourth District, take an approach that is potentially friendlier to the claimant at least as to punch list work. That court, whose decisions are binding on trial courts in Broward, Palm Beach, St Lucie, Indian River, Okeechobee and Martin Counties, has stated that the issue is whether the work was done “in good faith, within a reasonable time, and in pursuance of the terms of the contract, and whether it was necessary to a finished job."

Of course, the last thing that a claimant should want is a group of lawyers and judges arguing over whether a lien or notice is late when it is trying to collect a receivable that has remained open for months or years. This consequence is easily avoided by recording liens and sending notices well before the deadlines are reached. Certainly, that may result in taking action in cases when payment might be made in any event. It may also cost money that could potentially be saved by waiting. But, it would only take one loss like the one experienced by Delta Fire in this case to more than make up for any savings realize by waiting when action is required. Since Delta Fire had to bear the expense of this lesson, all would be wise to learn from it. Act early.

Robert E. Ferencik, Jr., Esq. is a Florida Bar Board Certified Construction lawyer and a shareholder in Ferencik, Libanoff, Brandt, Bustamante & Williams P.A., a Fort Lauderdale firm whose members practice exclusively in the areas of construction law and construction litigation.