The Complete Guide to Construction Contracts in Florida

The most consequential decision on any construction project is not the architect, not the contractor, and not the finishes — it is the contract type. Your contract determines who absorbs cost overruns, who controls the schedule, and what remedies are available when one party fails to perform. In Florida, contract law intersects with the Florida Building Code, Chapter 713 lien statutes, and Florida's construction-specific consumer protection rules in ways that make a generic national contract template an inadequate foundation.

This guide covers the four main contract types used in Florida construction, how to structure each key provision, and what to negotiate before you sign. It applies to homeowners contracting for custom homes and renovations, developers contracting for commercial projects, and anyone who has ever received a one-page proposal and been asked to initial and write a check.

JK Prestige Construction uses fixed-price contracts on all projects. The founder reviews every contract before it is signed. Understanding why we prefer fixed-price — and what the alternatives cost you — is a useful starting point.

Contract Types: Fixed-Price, Cost-Plus, T&M, and GMP

Fixed-Price (Lump Sum)

A fixed-price contract specifies the total amount the contractor will receive to complete a defined scope of work. The contractor absorbs cost overruns; the owner benefits if the contractor is efficient. Fixed-price contracts require a complete scope of work at signing — you cannot have a fixed price for an undefined scope.

Fixed-price is the most owner-favorable contract type for well-defined projects. It provides cost certainty, limits change order exposure (because everything is defined up front), and removes the owner from the daily management of labor and material costs.

Cost-Plus

A cost-plus contract reimburses the contractor for all project costs (labor, materials, subcontractors, equipment) plus a fee — either a fixed fee or a percentage of costs. The owner carries all cost risk. If framing takes longer than estimated, the owner pays. If lumber prices spike, the owner pays.

Cost-plus is appropriate for fast-moving projects where the scope cannot be fully defined before construction starts, or for renovation work where unknown conditions make a fixed-price estimate unreliable. It requires the owner to audit costs actively throughout the project — payroll records, material invoices, subcontractor bids — which most homeowners are not equipped to do.

Time and Materials (T&M)

T&M contracts pay the contractor for actual hours worked at agreed rates plus materials at cost (or cost plus a markup). It is the simplest contract to write and the most owner-unfavorable for anything beyond small punch-list items. There is no incentive for the contractor to be efficient.

T&M is appropriate for true unknowns — remediation work, exploratory demolition, or emergency repairs where the scope cannot be determined until work begins.

Guaranteed Maximum Price (GMP)

A GMP contract is a hybrid: the contractor works on a cost-plus basis but agrees that the total will not exceed a specified maximum. If costs come in under the GMP, the savings may go to the owner, split between owner and contractor, or stay with the contractor — depending on what is negotiated. GMP contracts are common in commercial construction and design-build delivery.

The critical risk in a GMP is scope definition. A GMP with a vague scope is not a meaningful guarantee — the contractor can add change orders for anything not explicitly included.

Why Contract Type Matters More Than Any Other Project Decision

Homeowners frequently focus on comparing labor rates, materials specifications, and warranty terms when selecting a contractor. These are meaningful considerations. But none of them matters as much as whether you have cost certainty going into a project.

A contractor offering cost-plus with a 15 percent fee sounds conservative until the project runs 40 percent over estimate because of undisclosed subcontractor markups, inefficient scheduling, and extended overhead. A contractor offering a fixed price at a higher base number has accepted all of that risk. Over a $400,000 renovation, the difference between a 40 percent overrun on cost-plus and a well-managed fixed-price project can be $80,000–$160,000.

At JK Prestige, we use fixed-price contracts because it forces discipline on our end: we must fully scope the project, identify all unknowns through pre-construction investigation, and build a complete estimate before signing. The owner gets certainty. See how this approach works at scale in our project delivery model.

The Scope of Work: How to Write It So It Holds Up

The scope of work (SOW) is the most litigated section of any construction contract in Florida. Disputes about what was and was not included are the primary driver of construction claims.

A SOW that holds up in arbitration or litigation has these characteristics:

Specificity. "Kitchen renovation" is not a scope. "Removal of existing kitchen cabinets and countertops, supply and installation of owner-selected cabinets per specification sheet attached as Exhibit A, supply and installation of quartz countertops (owner color selection, owner allowance: $85/sqft installed), installation of owner-supplied appliances" is a scope.

Inclusions and exclusions. Every SOW should list what is explicitly excluded. If the contractor is responsible for framing but not electrical rough-in, say so. If the permit fee is the owner's responsibility, say so. If hazardous material abatement is excluded pending inspection findings, say so.

Reference documents. Attach the architectural drawings, specifications, and finish schedules to the contract and reference them in the SOW. If drawings are revised after signing, the change order process governs the revision — not informal emails.

Interface responsibility. On multi-contractor projects (owner-direct subs, separate contracts for different trades), define who is responsible for the interface between scopes. If the general contractor is not responsible for coordinating the owner's A/V contractor, that must be stated.

Allowances: The Most Misunderstood Contract Element

An allowance is a dollar amount included in the contract price to cover an item whose specification is not yet determined at signing. Common allowances: tile ($8/sqft), plumbing fixtures ($2,500/bathroom), kitchen appliances ($15,000), lighting ($4,000).

Allowances are essential for fixed-price contracts on projects where finish selections are not complete at signing. But they are widely misused and frequently cause disputes.

The allowance trap. Allowances are often set artificially low to make a contract price look competitive. A $8/sqft tile allowance sounds reasonable until you select tile that costs $22/sqft installed — and you owe the contractor the difference plus markup on the delta.

What allowances should cover. An allowance should include material, delivery, and installation (labor plus subcontractor markup). Allowances that cover only materials are a common source of disputes — the owner thinks the $15,000 appliance allowance covers everything, and the contractor charges separately for delivery, uncrating, and connection.

How to protect yourself. Before signing, ask the contractor to provide example products at each allowance level so you can calibrate whether the allowance is realistic for your taste. Get the allowance definition in writing: does it include installation? Sales tax? Delivery? Contractor markup on overages?

Change Order Clause: The Exact Language to Require

Every fixed-price contract should contain a change order provision that requires written authorization before the contractor performs any work outside the original scope. Verbal change orders are unenforceable in most Florida construction disputes — but the work still gets done, and the dispute starts when the bill arrives.

The change order clause should specify:

1. No additional work will be performed without a written change order signed by the owner.
2. Each change order must state the additional cost (or credit), the impact on the project schedule, and the revised completion date.
3. Changes that are not signed before work begins are not compensable.

In Florida, Florida Statute 489.126 governs payment requirements for residential contractors and sets requirements around deposit limits and payment schedules. Change orders on residential contracts exceeding certain thresholds also have notice requirements. Your attorney can confirm current thresholds.

Payment Schedule Structure: Milestone vs. Calendar vs. Percentage Complete

Florida law prohibits residential contractors from receiving more than 10 percent of the contract price as an initial deposit, unless the contractor is properly licensed and has certain waivers in place. Beyond that, payment schedules can be structured three ways:

Milestone payments. Payments are triggered by the completion of defined milestones: permit issued, foundation poured, framing complete, rough MEP complete, drywall complete, substantial completion. This is the most owner-favorable structure because payment follows verified progress.

Calendar payments. Payments are due on specified dates (e.g., monthly on the 15th). Calendar payments are typical in commercial construction where large crews are mobilized continuously. For residential projects, calendar payments can result in the owner paying ahead of progress.

Percentage complete. Payments are made as a percentage of work completed, typically verified by a draw request with supporting documentation (invoices, labor records, site inspection). This structure is common in cost-plus and GMP contracts.

For most residential projects in Jacksonville, milestone-based payment is the appropriate structure. JK Prestige uses milestone-based payment on all fixed-price contracts.

Retainage: What It Is and How to Protect It

Retainage is a percentage of each payment (typically 10 percent on residential, 5–10 percent on commercial) withheld by the owner until project completion or substantial completion. It is a performance incentive — the contractor is not paid the full amount until the work is done.

On a $500,000 contract with 10 percent retainage, the contractor effectively lends the owner $50,000 until project completion. In Florida, Florida Statute 715.12 governs retainage on private construction contracts and limits the owner's ability to withhold retainage beyond substantial completion for reasons unrelated to actual deficiencies.

As an owner, retainage is your primary leverage for ensuring punch list completion. A contractor who has received full payment has limited financial incentive to return for minor items. Structure retainage so that at least 5 percent of the contract price is held until you sign a completion certificate or punch list sign-off.

Florida Lien Law and How It Intersects with Contracts

Florida Chapter 713 gives contractors, subcontractors, and material suppliers the right to place a lien on your property if they are not paid for work performed on it — even if you paid your general contractor in full. The lien attaches to the real property, not to the party who failed to pay.

Your contract should address lien exposure through:

1. Lien waiver requirements. Require the GC to provide partial lien waivers (from itself and all subs over a threshold amount) with each payment application.
2. Joint check provisions. For high-value subcontractors or suppliers, include a joint check clause requiring checks to be made payable to both the GC and the sub.
3. Notice of Commencement. File one before construction starts. It establishes your rights in the lien chain.

For a full treatment of Florida lien law as it affects homeowners, see our guide to Florida lien law for homeowners.

Insurance Requirements in the Contract

Your contract should specify minimum insurance coverage the contractor must maintain and provide certificates of insurance before mobilizing. Required coverages for a Florida residential GC:

General Liability (GL). Minimum $1,000,000 per occurrence, $2,000,000 aggregate. You should be named as an additional insured.

Workers' Compensation (WC). Required under Florida law for any contractor with four or more employees. The contract should require WC for all subcontractors as well, and the GC should provide sub certificates.

Builder's Risk. Covers the structure under construction against fire, wind, theft, and vandalism. Verify who is responsible for obtaining builder's risk and that the coverage amount equals the full replacement value of the completed project.

Verify that certificates of insurance are current before any crew arrives on site. Expired certificates are common. The owner's homeowner's insurance policy typically does not cover construction losses.

Warranty Terms: What's Standard and What to Negotiate

Florida Statute 553.84 provides a statutory remedy for violations of the Florida Building Code but is not a warranty. The Florida New Home Warranty Act (Florida Statute 553.82) governs warranties on new residential construction:

• 1 year: workmanship and materials
• 2 years: major systems (plumbing, electrical, HVAC, mechanical)
• 10 years: major structural defects

These are minimums. On renovation work, which the New Home Warranty Act does not cover, warranty terms are entirely contractual. Negotiate:

• Duration. One year on workmanship is standard. Two years on mechanical systems is reasonable.
• Coverage. Define what is covered: contractor-supplied materials and labor, but not owner-supplied materials or equipment failure unrelated to installation.
• Exclusion of consequential damages. Florida courts have generally upheld consequential damage exclusions in commercial construction contracts. For residential, these are more scrutinized.

Dispute Resolution: Arbitration vs. Litigation in Florida

Most construction contracts in Florida include a dispute resolution clause specifying either arbitration or litigation. Each has trade-offs.

Arbitration. Faster and less expensive than litigation for most construction disputes. The American Arbitration Association (AAA) Construction Arbitration Rules are the standard reference. Awards are generally final and binding with very limited appeal rights.

Litigation. Provides full discovery rights and appellate review. Appropriate for complex fraud claims or large-dollar disputes where the full discovery process is needed to establish facts.

For residential projects under $500,000, mandatory arbitration clauses are common and generally appropriate. For commercial projects, arbitration is standard in the industry. Ensure the arbitration clause specifies a venue (Jacksonville, Florida), a governing body (AAA), and that attorney's fees are recoverable by the prevailing party under the Florida Contractor Licensing Law if applicable.

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