Prompt Payment Law – Recent Amendments Increase Penalties And Interest Owed
Sep 9, 2021 - Blog by Moorhead Law Group
Recent amendments to Florida’s “Prompt Payment” law governing construction contracts increase the penalties and interest owed by non-paying customers by increasing the interest owed by 12% per annum simple interest. The Prompt Payment law is contained in Section 715.12, Florida Statutes.
Previously, the Prompt Payment law provided (assuming satisfaction of all statutory preconditions for payment) that amounts owed for contracting services on real property were subject to the statutory interest rate set forth in Section 55.03, Florida Statutes.
Section 55.03 establishes the statutory rate of interest applied to judgments—currently set at 4.25%. The Chief Financial Officer of Florida sets the rate of interest pursuant to Section 55.03 on a quarterly basis.
The recent amendment to the Prompt Payment law adds a stout 12% percent on top of the statutory interest rate per the following operative language: “Any payment due…shall bear interest at the rate specified in s. 55.03 plus an additional 12 percent per annum, computed beginning on the 14th day after payment is due…” Fla. Stat. § 715.12(5)(a) (emphasis added).
Under the current statutory rate of 4.25%, the amendment to the Prompt Payment law now sets interest on amounts owed under construction contracts subject to the rule at a whopping 16.25%. The amendment, however, only applies to contracts executed on or after July 1, 2021. See 2021 Fla. Sess. Law Serv. Ch. 2021-124 (C.S.C.S.S.B. 378) (WEST). While close, this new penalty/rate of interest does not surpass Florida’s maximum rate of interest (18%) above which contracts are considered usurious and unenforceable. See Fla. Stat. § 687.02(1) (declaring 18% per annum simple interest usurious for debts/obligations not in excess of $500,000).
Matt Couch is an attorney in the Pensacola office at Moorhead Law Group.
His practice areas include real estate and construction disputes, business litigation, and employment law.
To learn more about Matt and his areas of practice, click here.