Tackling Financial Risks Associated With Construction Projects Part 2
In Part 1 of this two-part series we introduced you to two financial risks that are encountered on construction projects. We will continue our discussion below with two more risks and tips for handling them.
If a contractor fails to complete work by the deadline or they receive funds with the intent to defraud an owner, they may be subject to criminal charges under Florida Statute 489.126. This law states that any contractor that receives more than a 10 percent deposit on a contract with an owner for the repair, restoration, improvement, or construction of a residential property, but fails to meet deadlines under the statute will be in violation of the law and can face theft charges. As Sarasota construction attorneys, we strongly encourage construction professionals to familiarize themselves with the Florida Statutes that could impact their business. Furthermore, every professional should honor their contract timelines and approach projects with financial integrity.
Misappropriation of Funds:
If an owner pays a contractor for completed work and that contractor uses the money for other means instead of paying their subcontractors, suppliers, or any others that have participated in the project, the contractor is guilty of misappropriation of funds. This can result in liens being placed on a property which affects the bottom line of the entire project.
How to Deal With the Risk
A prudent manager will be able to assess risks and work diligently to reduce and eliminate those risks wherever possible. A well thought out plan will include ways to:
Avoid the risk by choosing projects you know you can handle financially or avoiding performing work in risky regions.
Transfer the risk by connecting with a Sarasota construction attorney to help draft legal documents that shifts financial risks among contract parties.
Mitigate the risk by securing lien rights or performing credit checks and monitoring.
Accept the risk that are inevitable such as weather and find ways to work around unexpected events that threaten the completion of the project within planned timelines.
Any steps that construction professionals can take to minimize financial risks will reduce the impact of those same risks. Whether through insurance premiums, safety training, or guarding against fraud, understanding risks, implementing best practices, and being proactive will keep the project on the right track.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.