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Preventing Misappropriation of Construction Funds

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Misappropriation of construction funds is a serious offense that can significantly impact construction projects and the parties involved, including contractors, subcontractors, and property owners. Florida Statute 713.345 addresses this problem within the construction industry, providing legal guidelines and consequences for those found guilty of the offense.

Overview of Florida Statute 713.345

Misappropriation of funds occurs when there has been an intentional and wrongful application of a payment meant for a specific construction project. Using construction funds for purposes other than paying for labor, materials, and services is prohibited. Florida Statute 713.345 explicitly requires that any person or company receiving payment for improving real property must apply that payment to all outstanding amounts for services and labor performed on the project before receiving the payment. Intentionally and knowingly failing to properly apply the payment constitutes a felony. The severity of the felony depends on the amount of money misappropriated.

Preventive Measures and Best Practices for Misappropriation of Construction Funds

Property owners should closely monitor payments to contractors to avoid the misappropriation of construction funds. Several preventive measures and best practices should be adopted in a construction contract to protect the property owner, including:

Transparent Accounting Practices:

The contract should require the contractor to maintain transparent and detailed accounting practices to help track the flow of funds and ensure they are used appropriately. Requiring regular audits and financial reviews can also help detect any discrepancies early in the project.

Clear Contract Terms:

Clearly defining the terms of the construction contract can prevent misunderstandings about the use of payments. Contracts should specify the allocation of funds and the responsibilities of each party.

Proper Documentation:

The property owner should maintain thorough documentation of all financial transactions related to the construction project. The construction contract should require that the contractor do the same. Such documentation includes invoices, receipts, and payment records, which can serve as evidence in case of disputes or allegations of misappropriation.

Regular Monitoring:

Regularly monitoring the progress of the project and the use of funds can help identify any potential issues before they escalate. The construction contract should allow for site visits and financial reviews by the property owner, as well as requiring progress reports from the contractor.

Partial Lien Releases: 

The construction contract should require partial lien releases at the time of each payment. Such lien releases should be obtained from the contractor and all subcontractors, materialmen, and laborers who provided the property owner with a Notice to Owner.


Florida Statute 713.345 serves as a critical legal tool in preventing the misappropriation of construction funds. A clear and concise construction contract requiring transparent accounting practices, proper documentation, regular monitoring, and partial lien releases can further safeguard against the misappropriation of funds, fostering a more trustworthy and efficient construction process. Protect yourself by contacting your local real estate attorney before entering into a construction contract.

Picture of T.R. Smith, Esq.

T.R. Smith, Esq.

T.R. Smith is an experienced attorney who has been practicing law since his admission to the Florida Bar in 2013. He focuses primarily on real estate transactions but has experience in civil litigation, probate, estate planning, and business law.

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