In Florida’s ever-shifting landscape of real estate and home construction, a persistent issue remains—homeowners facing the risk of fraud from builders or contractors. Recent data highlights a troubling trend, indicating an uptick in Florida homeowners falling victim to contractor fraud, resulting in significant financial hardships. Contractor fraud has even led to some families losing their homes.
Amidst this challenging scenario, a source of relief emerges—the Homeowners Construction Recovery Fund (HCRF). Established by the Florida Legislature in 1993, this fund is crucial in supporting homeowners defrauded by licensed contractors. Over the years, the HCRF has proven to be a vital lifeline for affected homeowners. However, facing the reality of escalating construction costs, the limits on what homeowners can recover from the fund have remained stagnant since 2004, presenting an inadequacy that places many homeowners on the precipice of financial ruin. That is why Opportunity For All Floridians supports Senate Bill 414, which modernizes the fund caps to better align with current costs to keep homeowners from losing their homes.
The Florida Department of Business and Professional Regulation oversees the Homeowner Construction Recovery Fund (HCRF). In fiscal year 2021-2022, the fund awarded 141 claims totaling $2,736,747. In the first 5 months of 2022-2023, the fund had already approved 122 claims totaling $2,017,763. The escalating number of claims against licensed contractors suggests a rise in construction problems and means more homeowners face financial challenges.
How does the fund work?
Florida divides contractors into two categories: Division 1 and Division 2. Division 1 includes general and building contractors. Division 2 contractors cover a variety of specialties, including roofing, air-conditioning, pool/spa, and septic, among others. The specific list can be found in Florida statute chapter 489.105(3)(d)-(p).
Why do the two different divisions matter? Because the amounts available in the recovery fund are capped at different levels depending on which type of contract was not properly honored. See the graph below for further details and how Senate Bill 414 would increase the caps to meet current and future cost increases.
Current funding caps of the HCRF:
Proposed Changes in Senate Bill 414:
The Harsh Reality: Florida Homeowners Are Being Defrauded With Little Recourse
Unfortunately, our searches found no shortage of headlines across Florida highlighting contractor fraud. In one of the largest scams in the state’s history, Miami real estate developer Doug Cox faces allegations of fraud, leaving dozens of buyers and investors on the hook for more than $72 million. Cox is accused of not fulfilling promises to build multiple houses. He’s even failed to pull building permits on eight lots, leaving buyers waiting for years. According to the Miami Herald, the real estate contracts were valued between $1.2 million and $1.8 million, with deposits ranging from $300,000 to $550,000. This highlights the inadequacy of the current $500,000 aggregate cap on the Homeowner Construction Recovery Fund, which would only cover one claimant.
In another recent headline-making case, a Florida pool contractor has been sentenced to 30 years for orchestrating a fraudulent pool contracting scheme, swindling millions from unsuspecting clients. Brian Washburn faced charges of orchestrating a scheme to defraud and two counts of money laundering exceeding $100,000. Mr. Washburn accepted upfront deposits but consistently failed to fulfill his commitments. The current individual claim cap of $15,000 and aggregate cap of $150,000 will not help the dozens of victims.
Florida homeowners face both legal and financial lasting months or even years after cotracting with unscrupulous contractors. Homeowners in Orlando are alleging a scam by local contractor Nationwide Roofing, who reportedly vanished after taking down payments for stalled home renovations. Franzetta Thomas paid an $8,000 deposit for roof repairs nine months ago but hasn’t seen any progress. Jeff Oar financed $34,000 for new windows a year ago, with no installation in sight.
The Case for Increasing Fund Caps:
Florida needs to increase the caps on the Homeowners Construction Recovery Fund, and Senate Bill 414 is a good way to do this. It’s not just about modernizing the fund caps; it’s about aligning our priorities to ensure Florida homeowners receive a fair resolution and a financial safety net, preventing them from facing the dire consequences of bankruptcy and foreclosure.
For more information on the Homeowners Construction Recovery Fund, please visit this page of Frequently Asked Questions at the Department of Business and Professional Regulation.