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Construction Law Authority / Lender Liability  / Lender Liability to Contractors Extended by Court

Lender Liability to Contractors Extended by Court

A recent Florida appellate court decision extended a lender’s liability to contractors for failure to fully fund a construction loan on a project. §713.3471 of the Florida Statutes makes construction lenders liable to contractors and lienors who served a notice to owner if the lender ceases funding a construction loan without first notifying the contractor and lienors. In that situation, the lender could be liable for the actual construction costs incurred plus 15% for overhead and profit from the date on which the notice should have been provided until the date it actually is provided, if at all.

In an opinion not yet reported, Whitehead v. Tyndall Federal Credit Union, the court liberally interpreted this statute to make a lender liable to the original contractor when the lender failed to pay that contractor, but instead paid a replacement contractor. The lender denied liability, saying it fully funded the construction loan as required by the statute, even though the funding went to a subsequent contractor. The court held that, since the construction loan funds didn’t all go to the original contractor, the lender was required to provide statutory notice to the contractor that loan proceeds would no longer be funded to that contractor, even though they would later be paid to the subsequent contractor. The court reversed summary judgment in the lender’s favor, paving the way to the lender’s potential liability to the contractor for actual costs plus 15% overhead and profit.

Therefore, in this environment where non-payment of contractors has proliferated, consideration should be given to whether claims against the construction lender are available
 

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Lee Weintraub

Lee Weintraub

lweintraub@bplegal.com

At age 46, Lee Weintraub was the youngest recipient ever of the Lifetime Achievement Award from the Florida Bar’s Construction Law Committee. Mr. Weintraub is also an adjunct professor of law at Nova Southeastern University Shepard Broad College of Law teaching construction law. Mr. Weintraub has been recognized by Chambers USA – America’s Leading Business Lawyers every year since 2003. Chambers USA noted he focuses on licensing and construction defect litigation, but is particularly renowned for his expertise in the Construction Lien Law. He was also selected in the The Best Lawyers in America© every year from 2006 through 2018.

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