Florida has implemented a rather simple statutory scheme to address claims that a real property owner believes she may have against a contractor, subcontractor, supplier or design professional for construction defects on her property—whether those defects involve construction, repairs, remodeling or alterations to the property.  The law, Florida Statutes Sections 558.001-005, attempts to strike a balance between protecting the rights of property owners and reducing the litigation associated with such claims.

In a nutshell, before a property owner files a lawsuit in court or a demand for arbitration, to the extent arbitration is required, she must first, at least 60 days (120 days if the action involves an association that represents more than 20 parcels) prior to filing that lawsuit or demand for arbitration, serve a written notice of her claim on the contractor, subcontractor, supplier or design professional whom she claims is responsible for the defects.  Defects encompass a number of different deficiencies arising from defective materials, components and products; violations of applicable codes; failure of a design professional to comply with applicable standards; or a failure to build or remodel property consistent with accepted trade standards.

The 60-day pre-suit notice must describe in detail each and every construction defect that the owner believes exists, as well as all known damages resulting from the defects and the location of each defect.  Within 30 days of service of the owner’s notice of claim, the contractor, subcontractor, supplier or design professional to whom the notice is directed is entitled to inspect the property in order to assess each defect.  If the contractor, subcontractor, supplier or design professional determines that destructive testing is necessary to determine the nature of the alleged defects and what caused those defects, there are certain other notice rights and obligations associated with that destructive testing, including the right of the owner to object under Florida Statutes Sec. 558.004.

Within 45 days after service of the property owner’s notice of claim, the contractor, subcontractor, supplier or design professional served with that notice is required to serve a written response which must provide for one of the following:

  • an offer to remedy the defect, at no cost to the owner, with a detailed description of the necessary repairs and the timetable for completion;
  • an offer to settle the claim by a payment of money;
  • a hybrid, for lack of a better term, offer to settle the claim by a combination of repairs and a monetary payment, with, again a description of the required repairs and the timetable to complete those repairs;
  • a statement that the claim is disputed and that there will be no attempt to remedy the alleged defect or settle the claim;
  • a statement that any monetary payment will be determined by the contractor’s, subcontractor’s, supplier’s or design professional’s insurance company within 30 days after the insurance company is notified of the claim. This statement may include an offer under paragraph c.) contingent upon the owner accepting the carrier’s determination whether to make an additional payment of money.

An owner who receives a settlement offer must serve a written notice of acceptance or rejection within 45 days after receiving that offer.  If the contractor, subcontractor, supplier of design professional either disputes the owner’s notice of claim or does not respond to it, the owner can, without any further notice, file a lawsuit or demand for arbitration, where applicable.

If a contractor, subcontractor, supplier or design professional is sued for alleged construction defects without the owner first providing any pre-suit notice, that contractor, subcontractor, supplier or design professional should immediately move to stay the lawsuit under Florida Statutes Sec. 558.003

The Opportunity Zone program enacted as part of the 2017 federal Tax Cuts and Jobs Act is designed to spark long-term capital investment into low-income and urban communities. The 169 Opportunity Zones (or tracts) designated in New Jersey by Governor Murphy are a complete game changer and contain attractive investment incentives for developers and investors.

Via the Opportunity Zone program, developers and investors can tap into and reinvest their unrealized capital gains without paying capital gains for a period of time, if at all. For example, capital gains invested or reinvested in an Opportunity Fund will receive a step up in basis of 10 percent if held for at least five years and by an additional 5 percent if held for at least 7 years, excluding up to 15 percent of the original gain from taxation.

An even greater savings is realized if the investment in the Opportunity Fund is held for at least 10 years. The gain accrued while invested is permanently excluded from taxable income of capital gains upon the sale or exchange of the investment.

With these tax incentives in place, Senator Corey Booker (NJ) believes the barriers between communities and the capital needed to generate economic growth and opportunity will be broken down.

The Opportunity Zones were designated based on key economic indicators in certain neighborhoods and communities such as income, unemployment rate and property values but also consideration was given to accessibility to mass transit and the value of existing investments. The 169 tracts were approved by the US Department of the Treasury on April 9, 2018. You can view the interactive map of designated Opportunity Zones for New Jersey by clicking here.

Home renovations and repairs is big business in Florida, especially in densely populated south Florida where it seems that every available square foot of property is occupied by a residence or commercial building.  That said, it is important to understand the lien rights of contractors, subcontractors and suppliers of materials under Florida law.

First, it is important to understand whether there is a difference between the lien rights of a company that has a contract with the owner of real property as opposed to a company that does not have such a contract.  The prime example of the latter is a subcontractor or supplier of materials for the company that actually does have the contract with the homeowner. One who has a contract with an owner is said to be in privity with the owner, meaning the relationship between the two parties is recognized by law.

The short answer is that both those in privity and those not in privity with owners of real property have lien rights in that Florida Statutes Sec. 713.01 includes in its definition of  lienors, contractors, subcontractors and those who contract with contractors and subcontractors.  The means of perfecting or protecting those lien rights is, however, different.

As an example, let’s say a homeowner contracts with Company A to install a new roof on her property.  The homeowner and Company A sign a clear, definite contract.  Company A, in turn, contracts with Company B to supply it with all of the materials to install the roof.  Company A and Company B have their own separate contracts, but there is no contract between the property owner and Company B.

Once the job is completed the owner refuses to pay the rather substantial balance that is due and owing to Company A.  Company A, in turn, does not pay the balance that it owes to Company B.  How do each of these respective companies perfect its lien rights on the owner’s real property?

For Company A, the process is quite simple.  Under Florida Statutes Sec. 713.08, it must record a document known as a claim of lien in the county where the real property is located within 90 days of the last date that it provided labor, services or materials.  The statute sets forth, in detail, what must be contained in that claim of lien, and the actual form is provided in Florida Statutes Sec. 713.08.   Amongst other things, the claim of lien must include the name and address of Company A; the labor, services and materials that were furnished and the contract price or the value of what was provided; the name of the owner of the real property; a description of that real property; when labor, services and materials were first and last furnished; and the amount unpaid.

Company B’s ability to perfect its lien rights is a bit more involved.   Although it, too, must record a claim of lien and comply with the requirements of Florida Statutes Sec. 713.08, it has an additional step it must take to ensure that its lien rights are protected.  Pursuant to Florida Statutes Sec. 713.06, prior to furnishing materials or within 45 days of first furnishing such materials, it must serve the owner with a document known as a notice to owner.  Again, the statute  sets forth the actual form—which is quite brief and straightforward– that must be provided, and that form will contain Company B’s name and address, the description of the real property and a description of the materials that were supplied or are being supplied.

On June 21, 2018, the U.S. Supreme Court held that internet retailers may be required to collect sales taxes in states where they have no physical presence. The decision, South Dakota v. Wayfair, No. 17-494 (June 21, 2018), overturned a 1992 Supreme Court precedent which held that a retailer must have a physical presence in a state in order to be obligated to collect sales taxes.

Many in the retail industry have argued that the physical presence rule has given out-of-state on-line sellers an unfair advantage over brick-and-mortar competitors. The Court’s decision concurs.  Writing for the majority, Justice Kennedy stated that the rule, “has come to serve as a judicially created tax shelter” for online and out-of-state businesses.  The Court estimated that this “tax shelter” has caused states to lose between $8 and $33 billion in potential tax revenue every year.

The majority grappled with redefining “presence” in light of modern technology.  The opinion states that “a business may be present in a state in a meaningful way without that presence being physical in the traditional sense of the term.” In support, the Supreme Court considered evidence of the necessary presence for taxing purposes to be: a website accessible in the state, a website that leaves cookies saved to the customer’s hard drive, apps available for download, storing data in servers located in the state, and targeted advertisements.

The majority also addressed compliance burdens small businesses may face when selling a small volume to customers in many states. The Court’s majority stated that they expect software developers and congressional legislation to provide assistance and guidance with respect to compliance.

About twenty states are already encouraging uniformity by adopting the Streamlined Sales and Use Tax Agreement. In addition to providing sales tax administration software paid for by the participating states, this agreement requires single, state level tax administration, uniform definitions of products and services, simplified tax rate structures, and other uniform rules.

This high court decision is a major victory for “brick and mortar” retailers as well as State Treasuries.  There will be much to follow as states move to impose and enforce sales tax collection obligations on on-line sellers.  We will also be monitoring any legislation proposed in Congress to address this decision.

The pitfalls of failing to provide statutorily required public notice in the land use context were once again recently addressed by the Appellate Division in Concerned Citizens of Livingston v. Township of Livingston, (A-4171-15T3, decided June 11, 2018).  There, the Appellate Division reversed the trial court decision and found that the underlying zoning amendment, upon which a development applicant relied, was invalid due to notice deficiencies.

In Concerned Citizens, the Township of Livingston sought to amend its zoning ordinance to liberalize the conditions associated with locating an assisted living facility in its R-1 residential district.  Specifically, although an assisted living use was originally permitted as a conditional use in the zone, the amendment permitted such facilities to be of increased density that is, allowing for even more assisted living units on smaller parcels.  In conjunction with this amendment the governing body conducted the necessary hearings and ultimately amended the zoning district.

Acting on the newly adopted zoning amendment, a developer filed an application with the municipal planning board to develop an assisted living facility consistent with the requirements of the newly amended R-1 zone.  As hearings before the board commenced with respect to this assisted living project, a group of concerned citizens filed suit in the trial court seeking to overturn the adoption of the amended zoning district.  Because this action was filed beyond 45-days from the Township’s publication of the newly enacted zoning ordinance, the trial court summarily dismissed the appeal as untimely.  On appeal, the Appellate Division reversed.

Because the increase in permitted density of assisted living facilities in the R-1 district was found to be tantamount to a “change” in the “classification” of a zoning district, the Appellate Division held that the more onerous notice requirements of N.J.S.A. 40:55D-62.1, requiring personal written notice, were triggered.  Under the circumstances, the Appellate Division held that the municipality was required to provide written notice, via personal service or by regular and certified mail, to all property owners entitled to receive notice at least 10 days prior to the hearing at which time the zoning amendment was to be considered.  Specifically, that meant that such personal notice was to have been provided to all property owners located within the affected district in which the classification change was proposed, and also to all property owners located within 200 feet in all directions of the proposed boundaries of the affected district.  Instead, the municipal clerk merely provided notice by publication only, in conflict with the statutory requirements.

Citing to well-established authorities, the appellate court found that “strict compliance with statutory notice requirements is mandatory and jurisdictional, and non-conformity renders the governing body’s resultant action (adoption of the zoning amendment in question) a nullity.”  (See Rockaway Shoprite Assocs., Inc. v. City of Linden, 424 N.J. Super. 337 (App. Div. 2011); Cox & Koenig, New Jersey Land Use Administration, § 10-2.3 at 159 (2018) (citing Robert James Pacilli Homes, LLC v. Township of Woolwich, 394 N.J. Super. 319 at 333 (App. Div. 2007)).  Due to this notice defect, the zoning ordinance amending the R-1 district requirements was deemed invalid.

Consequently, although the complaint of the citizens group was originally dismissed by the trial court as being filed well beyond the typical 45-day prerogative writ action appeal period, as prescribed by Rule 4:69, the Appellate Division held that the failure to file the complaint within this time frame was excusable because of the defective notice.  Moreover, since the greater public good was involved (concerning the interests of property owners located within an entire zoning district and beyond), the relaxation of the 45-day appeal period, as expressly afforded by Rule 4:69, was also held to be appropriate in this instance.

In the end, while Concerned Citizens is unpublished, it remains persuasive as it applies well-established law concerning the requirements of public notice.  It also warrants careful consideration as the court’s holding further signals a championing of due process concerns over the strict construction of the 45-day appeal period where the interests of justice are implicated.