Construction Financing and Payment Issues

Construction Loans

Construction financing usually comes in the form of a construction loan. A construction loan is short-term financing that can be used to cover the costs associated with buying land, drafting plans, paying for labor and materials, and paying for permits. Once the lien-free construction of the project is completed, sometimes the construction loan becomes a permanent term loan. This change usually depends on the type of project being built. These are usually available in projects where the borrower/developer is intending to hold the collateral and stabilize the project rather than build and sell the project.

For lending institutions, a construction loan is one of the riskier loans they can make, as it is based on the value of improvements not yet constructed. As such, the institution may take certain precautions that are contained in a “construction loan agreement.” The agreement might contain provision such as if work on the project is discontinued before the project is fully completed, any funds in the loan account not due or payable as progress payments to the contractor will revert to the lending institution and will be credited for repayment of the entire construction loan. Due to the precautions, it is a good idea to have an attorney look over the construction loan agreement to protect your rights.

Construction loans are usually advanced monthly or bi-monthly based on draw requests made by the borrower. But the borrower must prove that the requests are based on the budget and must provide supporting documentation for expenses including receipts, invoices, and other miscellaneous costs.

Depending on the counties and local agencies, construction financing might be available under the Industrial Development Financing Act Fla. Stat. §159.25-159.431, which authorizes tax exempt revenue bonds for the purpose of financing various kinds of projects.

Our attorneys at RAK Law Firm specialize in construction financing and will provide the best legal advice given the scenario. If you have any questions or concerns arising from construction loans, please do not hesitate to contact us at (407)-437-0319.

How to Receive Compensation for Your Services

Subcontractors and other contractors or materialmen might have difficulty receiving compensation for performing there services. Whether it be cash flow problems, or the general contractor is unhappy with the quality, contractors still deserve their payment. As such, it can cause financial problems for the employee, but the legislature has provided options for seeking payment.


A construction/mechanics lien is a viable option when demanding payment from rendered services. When a construction lien is placed on a property, it makes it difficult or impossible to sell or refinance a property because it makes the title on the property unmarketable. This gives an incentive to the owner or general contractor to issue payments to the lienor to get ride of the encumbrance. Florida construction lien law is riddled with tedious requirements and notices which makes it difficult for the average person to transverse the process. The Florida attorneys at RAK Law Firm specialize in construction lien law and fight for their client’s rights. For more information on construction lien law visit here.

Payment Bonds

Payment bonds guarantee that the contractor can provide payment to subcontractors, laborers, and suppliers. A payment bond is a type of surety bond purchased by a contractor to protect the property owner by guaranteeing payment to all the subcontractors and materialmen on the project. In Florida, all government jobs are on public property and general contractors are required to secure payment bonds for government jobs because a subcontractor cannot file a lien on public property. Fla. Stat. §255.05(1). If payment bonds weren’t required on government jobs, the subcontractor would perform their work and then the general contractor could refuse to pay them. Because a lien cannot be placed on public property, the subcontractor would have no leverage to request payment. However, payment bonds aren’t exclusive to public property jobs and can be made on private jobs as well.

How to Make a Payment Bond Claim

The first thing a subcontractor should do to begin to file a payment bond claim is to get a copy of the payment bond. The payment bond document will provide essential information that will become necessary throughout the process. People can request the document through the general contractor but most of the time they aren’t cooperative. The foolproof solution is to apply to the governmental entity in charge of the work for copies of the bond and shall be furnished with a copy on request. Fla. Stat. 255.05(1)(c).

The next step depends on whether the claimant has a direct contract with the general contractor or not. If the claimant did not contract directly with the general contractor, then a Notice of Non-payment is required to be sent. This Notice of Non-payment shall be served to the general contractor and the surety company after 45 days of first furnishing, but not later than 90 days after the last date of construction. Fla. Stat. §255.05(2).

Once the Notice of Non-payment has been sent, this is usually enough provocation to get the general contractor to submit the payment. If not, then the deadline to file a lawsuit against the bond is one year after the claimant last furnished labor or materials to the jobsite. However, the general contractor can elect to file a Notice of Contest of Claim Against Payment Bond Contractor, which shortens the time from one year to only 60 days after the notice has been served to file a lawsuit, or else the claim will be extinguished automatically. Fla. Stat. §255.05(2)(a)(1).

Our attorneys at RAK Law Firm specialize in construction financing agreements and payment issues, as well as offering a myriad of other legal services. If you have any questions or concerns arising from construction financing, please do not hesitate to contact us at (407)-437-0319.

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