Florida Contractor Fraud Red Flags: Deposits, Liens and Notice of Commencement

Common Red Flags for Contractor Scams

Homeowners in Florida should watch for contractors who appear unsolicited, demand full payment upfront or cash only, promise to waive insurance deductibles, or offer gifts for inspections. These behaviors are highlighted in consumer guidance from the Office of the Insurance Consumer Advocate.

Demolish Contractor Fraud red flags (https://myfloridacfo.com/division/ica/demolish) from the Florida Department of Financial Services list additional warnings, such as unwillingness to provide references, proof of insurance, or a valid license.

Additional signs include contractors who show up at your door pointing out damage you had not noticed before, pressure you to file an insurance claim right away, claim their price is available for one day only, provide a lump sum estimate without itemized details, or prefer all communication in person while avoiding written documents, email, or text. They may lack an established business location and instead use a post office box, motel, or work truck as their contact point. Estimates that are notably lower or higher than others you receive can also signal problems. Contractors who emphasize that neighbors have had the same work done or refuse to let you review a full contract before signing raise further concerns.

Practical checklist for spotting red flags:

1. Note whether the contractor arrived without an appointment or invitation.
2. Ask immediately for proof of an active Florida license and certificates of insurance for general liability and workers compensation.
3. Request recent references from jobs completed in the past twelve months and verify them.
4. Compare at least three written, itemized estimates before agreeing to anything.
5. Refuse any offer to waive deductibles, provide gift cards for inspections, or handle insurance claims on your behalf.
6. Insist on all agreements and communications in writing.

Homeowners can review the full list of red flags and consumer tips directly on the official Demolish Contractor Fraud pages maintained by the Department of Financial Services.

Verifying a Contractor License and Insurance

Before any work begins, confirm the contractor holds a current, active license through the official DBPR lookup at MyFloridaLicense.com. Unlicensed work is illegal and can leave homeowners without standard protections. Check for complaints or disciplinary actions on the same site. Separately verify workers compensation coverage through the Division of Workers Compensation resources on MyFloridaCFO.com.

Examples of what to look for during verification include confirming the license matches the exact name and business details on the contract, ensuring the license classification covers the scope of work such as roofing or general contracting, and noting any recent complaints involving financial mismanagement or abandonment.

Deposit Rules and Protections

Under s. 489.126, F.S. (https://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0400-0499/0489/Sections/0489.126.html), a contractor who receives as initial payment money totaling more than 10 percent of the contract price for repair, restoration, improvement, or construction to residential real property must apply for permits within 30 days after the date payment is made and start the work within 90 days after all necessary permits are issued, unless the contractor has just cause or the parties agree otherwise in writing.

Failing to meet these timelines without agreement can indicate misapplication of funds. Contractors who receive payments exceeding the value of work performed may not fail or refuse to perform any work for any ninety day period or for any period that is mutually agreed upon and specified in the contract. If a contractor fails to comply, the homeowner must send a written demand via certified mail, return receipt requested, to the address in the contract. Violations can result in criminal charges depending on the amount involved.

Practical payment checklist:

1. Limit the initial deposit to no more than 10 percent unless the contract specifies otherwise in writing.
2. Tie subsequent payments to completed milestones documented in writing.
3. Never pay the full amount upfront.
4. Obtain dated receipts for every payment.
5. Avoid cash transactions and use checks, credit cards, or electronic transfers that create a record.
6. Confirm in the contract that the contractor will not stop work for more than ninety days without justification if payments exceed work completed.

Understanding Construction Liens

Florida's construction lien law allows certain unpaid parties to place liens on property. Homeowners can protect themselves by ensuring proper payments and documentation.

A key protection is the Contractor’s Final Payment Affidavit required by s. 713.06(3)(d), F.S. (https://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0713/Sections/0713.06.html) before final payment. This affidavit confirms subcontractors and suppliers have been paid.

Fraudulent liens are addressed in s. 713.31, F.S. (https://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0713/Sections/0713.31.html), which provides remedies including court declarations that the lien is unenforceable.

Subcontractors and suppliers not in direct contract with the owner must generally serve a notice to owner within forty five days of starting work. The owner can then require lien waivers or releases before making payments. Claims of lien must be recorded within ninety days of the lienor’s final work.

Examples of documentation to request include copies of all notices to owner received, lien waivers with each progress payment, and the final affidavit listing all payments made to subs and suppliers.

The Notice of Commencement

Before most improvements begin, owners must record a Notice of Commencement in the county clerk’s office and post a copy on the property, as required by s. 713.13, F.S. (https://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0713/Sections/0713.13.html).

The notice provides constructive notice to potential lienors and includes details like property description, owner information, contractor name, lender if any, and expiration date (one year).

Payments made after expiration may be considered improper and expose the owner to double payment risk. The notice must be recorded before commencing the improvement.

If the improvement described in the notice of commencement is not actually commenced within 90 days after recording, the notice is void and of no further effect.

Practical checklist for the Notice of Commencement:

1. Record the notice with the county clerk before work or the first permitted inspection.
2. Post a certified copy or notarized statement at the job site.
3. Include all required elements such as the legal property description and expiration date.
4. Monitor the one year effective period and record a new notice if work extends beyond that.
5. Keep copies of the recorded notice and proof of posting.

What to Include in a Written Contract

A detailed written contract protects both parties. Include the full scope of work with itemized costs, start and completion dates, payment schedule tied to milestones, permit responsibilities, change order procedures, and warranty information. Specify that the contractor will pull all necessary permits and provide copies of licenses and insurance certificates. Require the contractor to maintain workers compensation and liability insurance throughout the project.

Review the contract carefully before signing and obtain a copy of every page. Avoid agreements that scroll directly to the signature line or pressure immediate signing.

Steps to Protect Your Project

1. Verify the contractor holds an active license through the official DBPR lookup.
2. Obtain multiple written bids and references from recent jobs.
3. Review and sign a detailed contract specifying scope, timeline, payment schedule, and permit responsibilities.
4. Record and post the Notice of Commencement before work starts.
5. Request the final payment affidavit before releasing final funds.
6. Keep records of all payments and communications.

Expanded guidance for each step appears in the sections above. Homeowners should also request lien waivers with every payment and confirm insurance coverage remains in force.

Additional Legal Safeguards

Misapplication of construction funds is a crime under s. 713.345, F.S. (https://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0713/Sections/713.345.html), with penalties depending on the amount involved.

Homeowners facing issues may explore remedies through the Florida Homeowners’ Construction Recovery Fund administered by DBPR for certain licensed contractor losses. The fund serves as a last resort for eligible claims involving financial mismanagement, abandonment, or false statements by a licensed contractor on a residence project. Claimants generally need a final judgment, board restitution order, or arbitration award. Eligibility requires the contractor to have been licensed at the time of the violation, and the claim must arise from a covered transaction.

Always confirm current requirements with official county clerk and permitting offices, as procedures can vary slightly by location. Homeowners should also review the full statutes on the Florida Legislature website for the most current text.