Miles Jolley (left) and Brian Wolf (right) with Smith Currie & Hancock.

Payment bonds guarantee payment for construction labor, services and materials. Payment bonds are mandatory for public projects with few exceptions. Section 255.05, Florida Statutes, requires the general contractor to post a payment bond on each public project for the benefit of subcontractors, suppliers and laborers who work on the project. Public projects require bonds as substitutes for lien rights because public property cannot be subjected to liens and lien foreclosure. Private property owners have the option to render their property immune from construction liens by nonprivity contractors, suppliers and laborers by requiring their general contractor to post a statutory payment bond per Section 713.24, Florida Statutes.

Both the public and private payment bond statutes require bond claimants to timely serve notices that preserve bond-claim rights. The initial notice is generally known as a notice to contractor and must be timely served when a claimant commences work. The second notice is called a notice of nonpayment and it must be timely served after the claimant completes contractual performance. Since notices of nonpayment are not liens or encumbrances on real property there was never a requirement to sign each notice of nonpayment under oath. Now that has changed.

The state of Florida instituted changes to the statutes governing public-project payment bonds (Section 255.05, Florida Statutes) and private-project payment bonds (Section 713.23, Florida Statutes). The changes went into effect on Oct. 1. Previously, notices of nonpayment were not required to be signed under oath. Now, the law requires the use of specific statutory notice forms that claimants must sign under oath. Previously, there were no statutory penalties for claimants who exaggerated the amount claimed against a payment bond. Now there are specific statutory penalties against a claimant who willfully or negligently signs a notice of nonpayment that includes a claim for work not performed or materials not furnished, or who is guilty of signing a notice prepared with willful or gross negligence.

Public construction payment bonds are governed by section 255.05, Florida Statutes, also known as Florida's Little Miller Act. This statute requires all payment bond claimants who don't have a direct contract with the general contractor to serve both the bonding company and the general contractor with a notice of nonpayment no later than 90 days after their last date of work or last delivery of materials. The amended statute now requires that the claimant use the statutory notice form and sign the form under oath. If the claimant includes exaggerated claims, or intentionally makes a claim for work or materials not provided, or otherwise prepares a notice with gross negligence, then the bonding company and the general contractor will be able to use such as a complete defense to an otherwise valid bond claim.

Private construction payment bonds posted by the general contractor are governed by Section 713.23, Florida statutes. This statute requires all payment bond claimants including those contracting directly with the general contractor to serve both the bonding company and the general contractor with a notice of nonpayment no later than 90 days after their last date of work or last delivery of materials. The amended statute now requires that the claimant use the statutory notice form and sign the form under oath. If the claimant includes exaggerated claims, or intentionally makes a claim for work or materials not provided, or otherwise prepares a notice with gross negligence, then the bonding company and the general contractor will be able to use such as a complete defense to an otherwise valid bond claim. Another important change to section 713.23 is the new requirement that payment bond claimants specify the portion of their bond claim that represents retainage. Previously, the requirement to specify the amount claimed for retainage only applied to public projects—now it applies to both public and private projects.

The changes to Florida's payment bond statutes are intended to deter and penalize claimants who make exaggerated or fraudulent bond claims. It should be anticipated that the courts will apply the revised statutes in the same manner as established law regarding fraudulent liens since the statutory changes are modeled after Florida's fraudulent lien statute, Section 713.31, Florida Statutes. Claimants who previously used lien notice services or nonattorney collection companies to prepare their bond-claim notices should strongly consider using an experienced construction attorney to advise them regarding both liens and bond notices since the penalties for serving a false, exaggerated or negligently prepared notice are severe, and advice of legal counsel is a recognized defense to a fraudulent lien claim.

This article is not intended to cover all bond-claim requirements, nor is this article intended to provide legal advice. Every bond claim is different and parties should seek the advice and counsel of a Florida Bar Board Certified construction specialist to obtain legal advice regarding any bond claim.

Brian A. Wolf is a partner in the Fort Lauderdale office of Smith Currie and he is a Florida Bar board certified expert in construction law. Wolf is a former chairman of the construction law committee of the real property section of the Florida Bar, and a member of the Board of Directors of the Associated Builders and Contractors Florida East Coast Chapter.

Miles D. Jolley is an associate in the Fort Lauderdale offices of the firm and devotes his practice to construction law and government contracts.