Contractor Rights Against Construction Lender

Contractor Rights Against Construction Lender

When does a contractor have rights against a construction lender where the lender stops funding a project without fully disbursing all funds?

In Jax Utilities Management, Inc. v. Hancock Bank, the First District Court of Appeal held that a contractor only has rights against the lender for statutory claims under section 713.3471 for failing to provide the required notices to the contractor and not for common law claims.  40 Fla. L. Weekly D948 (1st DCA 2015).

Jax, the general contractor, sued Hancock Bank, the construction lender for equitable lien and unjust enrichment.  Hancock was the assignee of the construction lender on a failed housing development project.  When the project’s developer defaulted on the construction loan, Hancock Bank stopped funding the loan and foreclosed on the project.  In the litigation filed by Jax, the trial court entered summary judgment in favor of Hancock Bank on both claims.  The court held that the equitable lien claim was barred by the one year statute of limitations.  Additionally, the court held that the equitable lien claim and unjust enrichment claim were precluded by section 713.3471, Florida Statutes.

On appeal, the First District affirmed.  The one year statute of limitations on equitable lien claims ran from the last date Jax furnished labor, services or materials to the project and expired prior to Jax filing the lawsuit.  Additionally, the court held that 713.3471 precludes common law causes of action by a contractor against a construction lender for failing to make advances for construction work prior to distribution of all construction loan funds.  This statute requires that the lender provide certain notices to a contractor after it decides to stop making advances under the construction loan.  The statute also defines the lender’s liability when it fails to provide the notices.  If the lender provides the notices it has no liability to the contractor or lienor.  If it fails to provide the notices, the damages are those provided by the statute (actual value of work + 15% for overhead and profit for all work performed after the date the lender’s notice should have been served).  The court held that common law remedies are not permitted because the statute is clear and is “so repugnant to the existence of common law relief that they cannot exist.”


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