How to Read a Construction Contract in Florida

Most homeowners spend more time reading a car rental agreement than a construction contract. A construction contract governs a project that will run $50,000–$500,000 and affect your home for 3–6 months. The car rental governs a three-day $200 transaction.

Florida construction contracts are not standard documents. Unlike real estate purchase agreements, which follow a relatively uniform Florida Realtors form, construction contracts are drafted by the contractor and reflect the contractor's interests. That is not inherently bad — it just means you need to read them with that context in mind.

This guide walks through every section of a Florida construction contract that matters, in the order you should read it.

Step 1: Identify the Contract Type

The first clause in any construction contract should state the compensation structure. If it does not, ask before signing.

The four main contract types:

Fixed-price (lump sum): Contractor agrees to complete the defined scope for a set price. Best for owners — cost overruns on defined scope are the contractor's problem.

Time and materials (T&M): You pay the contractor's actual labor hours (at a stated rate) plus actual material costs plus a markup. No ceiling unless negotiated. Appropriate only for projects with genuinely undefined scope.

Cost-plus with a Guaranteed Maximum Price (GMP): You pay actual costs plus a fee, but the contractor guarantees the total will not exceed a stated maximum. The GMP is only as good as its scope exclusions — read those carefully.

Cost-plus with no maximum: You pay actual costs plus a percentage or fee with no ceiling. This is the highest-risk contract type for owners. Avoid it unless the scope truly cannot be defined.

The contract type is the frame for everything else you read. A fixed-price contract with a poorly defined scope is not meaningfully different from a T&M contract in terms of cost risk. Scope clarity is what makes fixed-price actually fixed.

Step 2: Read the Scope of Work Section — What Is Excluded Matters As Much As What Is Included

The scope of work section is the most important section in the contract. Read it twice. Then read the exclusions list.

The inclusions list tells you what the contractor has priced. The exclusions list tells you what you will pay for separately — either to this contractor as a change order, or to another contractor. In residential projects, exclusions commonly include:

• Permit fees (sometimes listed as "billed at cost, not included in contract price")
• Painting or finish coats
• Appliances or appliance installation
• Debris hauling beyond a certain volume
• Landscaping restoration
• Temporary utilities
• Design fees

Add up every exclusion. This is money you will spend on the project. Add it to the contract price and compare that total to the number you budgeted.

Look for vague scope language: "all work necessary to complete the project" sounds comprehensive but is legally weak. Specific scope language — "supply and install 12mm stone countertops on 22 linear feet of base cabinetry, including cutout for undermount sink, as shown on Exhibit B" — is enforceable.

Step 3: Understand Allowances — Placeholder Amounts That Can Change

Allowances are line items in the contract for items not yet selected — tile, cabinetry, fixtures, appliances. The allowance amount is the contractor's placeholder for that item. If your selections exceed the allowance, you owe the difference as a change order. If your selections come in under, you receive a credit.

Every allowance in the contract is a variable in your total project cost. Read each one:

• Is the allowance amount realistic for the product tier you intend to select?
• What happens when selections exceed the allowance — is the process documented in the change order clause?
• Is the allowance for materials only, or does it include labor for installation?

Cabinet allowances are the most common source of budget surprises. A $15,000 cabinet allowance sounds reasonable until you discover that the semi-custom line your designer specified costs $26,000 installed. The $11,000 difference appears as a change order. This is not fraud — it is what happens when allowances do not match selections.

Before signing, price out every allowance item at the product tier you actually intend to use. Replace any allowance that does not match your actual selections.

Step 4: Check the Change Order Clause

The change order clause defines what triggers a change, how changes are priced, and what authorizes additional work to begin. This clause protects you from being billed for work you did not explicitly approve.

A properly written change order clause specifies:

• No additional work shall be performed without a written change order signed by the owner
• Change orders shall include a description of the additional scope, the cost impact (itemized), and the schedule impact
• Verbal authorizations do not obligate the owner
• Work on the additional scope does not begin until the signed change order is returned to the contractor

If the change order clause in your contract does not include these elements, negotiate them in before signing. The absence of a written authorization requirement is the most common path to unexpected charges.

Florida's Construction Lien Law (Chapter 713) is relevant here: work performed by a contractor is lienable even without a written change order if the owner knew about and acquiesced to the work. "I said it was okay verbally" can constitute acquiescence. Written change orders are not bureaucracy — they are your protection.

Read about how JK Prestige documents change orders on fixed-price projects.

Step 5: Review Payment Schedule and Retainage

The payment schedule should list specific milestone payments tied to verifiable work completion events — not calendar dates.

Read each milestone carefully. Ask: "What proves this milestone is complete?" A milestone like "25% at framing complete" should mean rough framing inspected by the county. A milestone like "25% at the end of week 4" is a calendar payment — it gives the contractor access to your money regardless of how much work has been done.

Retainage: look for a line specifying what percentage of each draw is held back until project completion. Ten percent is standard in Florida residential construction. If the contract has no retainage clause, negotiate one in. Without retainage, your leverage on the punch list evaporates as soon as you have paid 100% of the contract price.

Also check: is there a late payment provision that charges you interest if you miss a payment deadline? This is normal. Is there a late completion provision that compensates you if the contractor misses the substantial completion date? This is less common but worth negotiating in for projects with a critical end date (lease expiration, holiday deadline, etc.).

Step 6: Read the Dispute Resolution Clause — Arbitration vs. Litigation

Florida construction contracts typically include one of three dispute resolution frameworks:

1. Litigation: Disputes go to Florida circuit court. Slower, more expensive, but allows jury trials and full discovery.

1. Arbitration: Disputes go to a private arbitrator (American Arbitration Association is common). Faster, less expensive, but decisions are binding and difficult to appeal.

1. Mediation first, then arbitration or litigation: A required mediation step before either party can escalate. Usually the most reasonable structure.

Read the clause and understand where your dispute would go. Note: arbitration clauses in consumer contracts are sometimes unconscionable under Florida law if they are buried in fine print and heavily favor the drafter. A construction law attorney in Jacksonville can review this clause for $200–$400 if the contract value is significant.

Also check: does the clause include attorney's fees for the prevailing party? In Florida, the construction contract can create a two-way attorney's fee provision even where one does not exist by statute. This changes the risk calculus for both parties.

Step 7: Check Insurance Requirements in the Contract

The contract should specify minimum insurance requirements for the contractor. Verify these match or exceed what the contractor's COI (Certificate of Insurance) shows.

Standard requirements in Florida residential construction:

• General Liability: $1,000,000 per occurrence
• Workers' Compensation: statutory limits (Florida has no minimum employee count threshold in construction)
• Auto liability if contractor vehicles operate on or adjacent to the property: $500,000 minimum

The contract should also require that you (the owner) be listed as an additional insured on the contractor's general liability policy. If this is not in the contract, request it. It provides you direct coverage for claims arising from the contractor's operations.

Check whether the contract requires the contractor to maintain insurance through the entire project period, including the punch-list phase. Some policies allow cancellation during the policy period — you want the contract to require notice to you within 30 days of any cancellation.

Step 8: Look for Lien Waiver Language

Florida's Construction Lien Law (Chapter 713) allows subcontractors and suppliers to lien your property for unpaid work, even if you paid your general contractor in full. This is not a hypothetical risk — it happens in Florida more than most states because the GC-to-sub payment chain is poorly regulated.

The contract should require your contractor to deliver lien waivers with each payment application. A conditional lien waiver from a subcontractor states that the sub waives lien rights upon receipt of payment. Upon your payment clearing, the conditional waiver becomes effective.

Look for this language in the payment provisions section: "Contractor shall deliver to Owner executed conditional lien waivers from all subcontractors and material suppliers as a condition of each payment." If this language is absent, add it.

Also ask your contractor to serve a Notice to Owner (NTO) compliance log — Florida requires contractors to give owners a list of all subs and suppliers who have served NTOs at the beginning of the project. This lets you know who has lien rights before you make your first payment.

Pro tip: Florida Chapter 713 lien law means that unsigned work can still result in a lien if the owner knew about and accepted the work. Scope clarity in the contract is the first layer of protection. Lien waivers are the second.

See JK Prestige's renovation contract approach for how a properly structured contract protects Jacksonville homeowners.

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