Unpaid Pay Application, Defective Backcharge, and a Lien Deadline
You own a 22-employee roofing company and are its qualified licensee. On February 3 you began a $148,000 tear-off and modified-bitumen re-roof on a three-story 1972 condominium in unincorporated Broward County, working as a subcontractor to a general contractor. You served your Notice to Owner on February 14. Pay Application #1, for $72,000, was approved and paid at $64,800, with 10% retainage. Pay Application #2, for $24,000, was approved March 15 but is still unpaid. On March 18 the GC faxed notice of $18,000 in backcharges for membrane damage caused by your crew, with no photos, no itemization, and no chance for you to inspect. Your last day of furnishing was March 20. You hold $9,000 cash and a $15,000 line of credit.
1. Quantify your position. How much did you earn, how much is legitimately withheld as retainage, and how much is wrongfully unpaid? Then state the exact deadline and procedure for securing your lien rights, showing the arithmetic.
Read the worked answer
Earned and unpaid
- Earned: $72,000 + $24,000 = $96,000
- 10% retainage: $9,600; net due: $86,400
- Received: $64,800
- Open balance: $21,600, of which $2,400 is App #2 retainage
Retainage is not due yet - it is released at final completion and after you furnish the contractor's final payment affidavit (F.S. 713.06). So the amount withheld against the contract terms right now is $19,200, not $21,600. Claim the full $21,600 in your lien, but negotiate from $19,200.
Lien mechanics
- Notice to Owner: due within 45 days of first furnishing. First furnishing Feb 3, served Feb 14 - valid.
- Claim of Lien: record within 90 days of last furnishing. Mar 20 + 30 = Apr 19; + 30 = May 19; + 30 = June 18. Record by June 18, then serve a copy on the owner and the GC within 15 days of recording.
- Enforcement: file suit to foreclose within one year of recording, unless the owner serves and records a Notice to Contest, which shortens your deadline to 60 days from service. A delay in serving the Notice to Contest copy is itself a defense the other side will raise.
Judgment point: do not wait for the backcharge argument to resolve before recording. A recorded lien is leverage and can be bonded off by the owner; a missed 90-day deadline is malpractice territory and your only remaining remedy is a slower contract claim.
2. Analyze the $18,000 backcharge. What is your realistic exposure, what statutory or contractual notice did the GC owe you, and what is your next action?
Read the worked answer
The notice is defective on its face. A backcharge is a deduction from your contract balance, and to be enforceable it needs (a) identification of the specific contract provision breached, (b) itemization and proof of cost, (c) notice within the period your subcontract requires - commonly 24 to 48 hours after discovery, and (d) a reasonable opportunity to inspect and cure. A fax with a number and a conclusion supplies none of these.
Chapter 558. If the GC frames it as defective work, it owes you a written notice of claim describing the alleged defect and giving you at least 60 days to inspect and offer a repair before it sues. You should invoke that.
Withholding notice. F.S. 713.06 requires a party withholding payment to state in writing the amount withheld and the specific reason. Silence is not a withholding.
Exposure. $18,000 against a $21,600 receivable - this is roughly one pay application. Litigating it costs more than it is worth in fees alone, so the answer is a firm, fast, documented response, not a lawsuit:
- Respond in writing within 5 business days: deny, demand itemization, photographs, and the contract basis, reserve all rights.
- Offer a joint inspection date on the record.
- State plainly that your Claim of Lien will include the disputed amount.
- Do not sign a release, a final pay application, or a joint check that nets the backcharge. Strike the deduction line if one appears.
- If they later produce credible proof that your crew, and not another trade or the RTU curb work, caused the damage, negotiate a documented split - a paid $14,000 beats a disputed $18,000 for two years.
3. Two weeks after last furnishing you are offered a $190,000 job that requires $42,000 of material purchased up front and a second crew for eight weeks. Should you take it? Lay out the cash-flow analysis and the conditions you would attach.
Read the worked answer
Available capital
- Cash $9,000 + line of credit $15,000 = $24,000
- Material need: $42,000 before mobilization - a $18,000 shortfall before you pay a single payroll
- Second crew, eight weeks, at roughly $9,000–$11,000 per week loaded = $72,000–$88,000 of payroll you must meet for 45–60 days before the first draw arrives
You are being asked to finance a $42,000 material package and two months of payroll while a $21,600 receivable sits unpaid and $9,600 of retainage is frozen on a job where the GC has already tried an unsubstantiated deduction. That is how roofing companies fail while showing a full backlog.
Conditional yes, not an unconditional yes. Take it only if:
- The condo receivable is collected, or secured by a recorded lien and a written payment agreement, first.
- The new owner pays a material deposit, or the supplier extends a job account in your name - and you serve your Notice to Owner in the first 45 days so the supplier's lien position does not leapfrog yours.
- You do not pull your A-crew off the condo until punch-out and final payment are closed; the second crew must be genuinely staffed, and you must confirm workers comp and general liability certificates will cover the added payroll exposure.
- You run a credit check on the new owner and confirm the GC or owner is not the same entity that is sitting on your money.
If those conditions cannot be met, the correct answer is no. A $190,000 contract with no working capital behind it is a $42,000 loss with extra steps.