Substantial Completion Doctrine in Florida
Under contract law principles, payment for performance is due when there is complete performance. In the area of construction, the substantial completion doctrine has been adopted to cure the woes of achieving what would otherwise be deemed perfect performance. Substantial completion affects parties’ payments, obligations, and time limitations in an attempt to limit unnecessary financial risks or other obligations.
The Doctrine of Substantial Completion
Substantial completion occurs in a construction project, in accordance with the contract terms, when the owner can make use of the building or occupy the building or portion thereof, where only minor work remains. This measure of completion in a construction contract, “means that the owner can use the property for the use for which it is intended.” See Lazovitz, Inc. v. Saxon Constr., Inc., 911 F.2d 588, 592 (11th Cir.1990).
This satisfaction of the agreement allows parties to be paid even though precise terms of the contract have not been met. The conditions can be determined as being satisfied if a good faith attempt at performance was made that does not amount to a material breach of the contract.
Substantial completion has been met, when only minor, corrective, or warranty work remains for the construction project. As discussed in Jeffrey M. Brown Associates, Inc. v. Rockville Ctr. Inc., “final completion” is typically defined in a construction contract as “full completion” of the work including punch-list items that require correction of minor defects and deficiencies. See Jeffrey M. Brown Associates, Inc. v. Rockville Ctr. Inc., 7 F. App’x 197, 200 (4th Cir. 2001).
The court opinion in J.M. Beeson Co. v. Sartori stated that substantial completion can be similar to the doctrine of substantial performance in certain cases. Further, “substantial performance is so nearly equivalent to what was bargained for that it would be unreasonable to deny” the contractor the full contract price, however it must take into account the client’s right to recover any damages from the contractor’s failure to render full performance. See J.M. Beeson Co. v. Sartori, 553 So. 2d 180, 182 (Fla. Dist. Ct. App. 1989).
Contractors are entitled to prompt payment for any remaining payment of the contract price, less any retainage, once substantial completion is reached. Retainage is money held as assurance that the contractor correctly completes the project. See Fla. Stat. § 255.077. There could be amounts, however, that are withheld due to defective repairs or punch list work. If a contractor does not receive payment after substantial completion, the contractor can cease work and file an action to recover the contract price from the client for a material breach of contract by the owner.
It is the at the point of substantial completion that the statute of limitations, the statue of repose for claims, and warranties all commence. The statute of limitations time limit for Florida construction claims for defects due to negligence is four years. Fla. Stat. § 95.11(3)(c). Under the same statute, § 95.11, is the statute of repose. This places limits on claims for latent construction defects to ten years in order to avoid indefinite liability for contractors. Warranty periods hold contractors liable for a period of time to repair any latent defective work.
Liabilities such as the assessment of construction delay claims, liquidated damages, and material breach claims usually cannot be enforced past substantial completion.
Penalties or claims of damages arise when substantial completion is not reached by the contract completion date. The client also has the right to claim damages caused by the contractor’s lack of full performance. The amount awarded may be the reasonable cost of construction and completion of the project. As such, the damages to the client can oftentimes exceed the contractor’s contract price.
The contractor is entitled to a construction lien for past due payments after substantial completion in Florida. In Langley v. Knowles, the two parties entered into a written contract, whereby Langley agreed to perform construction work on Langley’s property. The work that was performed was not as to the specifications in the plans which Langley refused to redo. Knowleses employed a new contractor, thereby terminating the contract. Langley then filed a lien against the Knowleses’ property and a complaint in the circuit court for enforcement of the lien and for breach of contract. It was found by the court that Langley did not substantially perform the terms of the contract and that whether or not it was excused or waived by Knowleses was in dispute. See Langley v. Knowles, 958 So. 2d 1149 (Fla. 5th DCA 2007). If substantial performance is waived or excused by the property owner, a contractor may still be entitled to enforce lien rights.
In the Contract
In order to reduce risk in a construction contract, it is important to define terms and set clear parameters concerning timeframes, payments, and liability in the initial contract. When the project completion date is specified in the contract, it sets the expectations for the project schedule and payment to the contractor. The project completion date can be written into the contract in various ways. The issuance date of the certificate of occupancy, date of owner occupancy, or the date certified by the project architect or engineer are some of the options in a construction contract. Terms of the contract, especially when defining substantial completion, need to be carefully defined by the parties because of the way it can affect ambiguity concerning payments, liability, and any potential damages.
Brendan A. Sweeney, Esq., LL.M., of Sweeney Law, P.A., a boutique firm in Fort Lauderdale, Florida, regularly handles complex transactional and litigation construction matters throughout Florida. Brendan A. Sweeney, Esq., LL.M. is an AV Preeminent Martindale Rated Attorney, that has been recognized as a Florida Super Lawyer in 2020 and 2019, Florida Legal Elite in 2020 and 2019, and as a Florida Super Lawyer Rising Star in 2018, 2017, 2016, 2015, and 2014. If you have any questions and/or issues regarding substantial completion of a construction contract, contact Sweeney Law, P.A. at (954) 440-3993 immediately to protect your rights. www.sweeneylawpa.com.