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20May 2016

Our law firm works hard to keep construction contractors well-informed of the various steps they can take to mitigate the numerous legal risks inherent in the construction process. On this blog we often write about the contracts and other types of documentation you should use as well as the various potential mistakes and pitfalls you  must work to avoid. However, there is one key risk management element that far too many construction contractors overlook. It is one that does not get talked about enough, and it is perhaps the simplest measure of all: good customer service.

The fact of the matter is, reasonable people do not seek to sue people whom they like. Of course, there are many unreasonable people in the world, and there is nothing you can do to 100% guarantee you will not get sued, but working hard to keep your customers happy is a great place to start.

Below are five easy things every construction contractor can and should do to improve their customer service, improve their customer morale, and help minimize the risk of litigation by an angry and vindictive client.

Listen – Take the time to truly listen to the wishes and needs of your customers. Hear what they have to say and never assume. If your customer is unhappy, most of them will tell you so, giving you the chance to remedy problems before they get out of control.

Understand – Not only do you need to listen to your customer, but you should try to understand where they are coming from. You may recognize that their request is unreasonable, but that does not mean they do. Take the time to ensure that all communication between you and the customer is clear and that everyone involved truly understands what was said.

Be Responsive – Make yourself available to the client. Give them your personal number if possible, and be sure to respond in a timely fashion when they contact you. Few things frustrate a customer more than an ability to communicate or get in touch with their contractor.

Be Friendly – A little kindness goes a long way. Make an effort to get to know the clients as people. Be polite and friendly. As we mentioned before, the simple truth is that if they like you they will be far less likely to sue you.

Try to Accommodate – Do your best to give your clients what they ask for. It can be frustrating when a customer tries to change things at the last minute or makes difficult requests, but when you go above and beyond to make their vision a reality, you are also insulating yourself and your business from potential legal issues brought on by a dissatisfied customer.

For all of your construction and real estate-related legal needs and more, contact the Florida Construction Law Group today.

22Apr 2016

If you work in construction, there is no doubt that you probably have a massive workload. And no matter your profession, no one likes to exacerbate their workload with extra paperwork. However, when it comes to construction contracting, whether you are a prime or subcontractor, there are certain field documents that are absolutely vital to maintain.

Keeping a thorough record of your work and other important information is the most important thing you can do to mitigate your risk of losing a lawsuit, aside from utilizing strong contracts to begin with. Below we have outlined a few of necessities when it comes to your construction field documents. Please keep in mind that this blog is not intended as legal advice for your specific situation. Every project is unique and you should always have a skilled attorney review your project and advise you on the steps you should take to protect your business and your best interests.

Daily Logs

No prime contractor or subcontractor should ever conduct work without keeping meticulous daily logs. Your daily logs are one of the most important protections you can utilize to mitigate your risk of lawsuits. They should be thorough and accurate. Every day, your log should provide details of any and all activities that occurred at the construction site that day. This means detailing things like the location, the number of personnel, who was managing the personnel, tests and inspections that were performed, important meetings and conversations that occurred between key players in the construction process (owners, engineers, subcontractors, etc), and of course, the work that was actually completed that day.

Keeping track of all of this information every day may seem daunting, but you will be grateful that you have all of this information on record when a legal challenge inevitably arises.

Field Reports

You may be thinking, “You already said I have to fill out extensive daily logs, and now you want reports on top of that?” Unfortunately, field reports are nearly as important as daily logs. While the daily log is your big picture record of the work being conducted, your field reports are detailed records of specific things that require more in depth record-keeping than a daily log would include. For example, any time an accident occurs you should create an incident report. You should maintain periodic progress reports that help keep the property owner informed of how things are proceeding without all the superfluous extra information included in the daily logs. You will also want to write up inspection reports to record the results of any tests or inspections that were performed.

Force Account Records

If you have to procure parts and materials outside of the scope of costs included in the prime contract, you may need to utilize a force account. It is vital that you keep meticulous field documentation of all information relevant to your force account costs such as labor, parts, overhead, etc.

Change Orders

As a construction contractor, if you need to propose a change order you will likely need solid documentation to back up you claim that the contract should be amended. You cannot obtain a change order without the agreement of the other party to the contract which you wish to change. Keep field records identifying the exact change you are requesting, why you are requesting the change, and relevant details such as the impact on costs or deadlines. These records will be important in order to have a chance of succeeding in achieving a change order.

Proper field documentation can help you mitigate your risk and hopefully avoid legal challenges as a construction contractor. Our firm can help you with the necessities of risk management such as contract drafting and review. However, if you’re facing legal challenges relating to any construction or real estate matter, we are here to help. Contact the Florida Construction Law Group today.

23Feb 2016

Getting funding for a construction project, residential or commercial, is quite a different process than obtaining a standard mortgage on an existing property. That’s because funding a construction project is much more complex than a relatively cut and dry purchase of property.

A construction project will have its own requirements and needs for financing—which is usually disbursed on a draw schedule—based on sometimes difficult to predict costs for materials, labor, etc. Then, once the construction is completed, the project will usually be subject to a mortgage.

Generally speaking, there are two main types of construction loans which owners, lenders, and contractors can choose to utilize: One-Time-Close loans or Two-Time-Close loans.

As the name indicates, the main difference between these two construction loans is the number of closings that will have to occur. A closing is the final step in a real estate transaction.

Thus, one-time-close loans will only involve one closing. What this means is that the financing for both the construction and the mortgage on the completed project will be wrapped into one loan.

The terms of the loan, though not necessarily the final rate, will be decided upon before any construction begins. Once the loan is settled with the lender and closed, the construction can begin. Usually, one-time-close loans allow for a period of 12 months for the construction to be completed. Most owners will either pay interest on funds as they are released in accordance with the construction draw schedule, though some may begin making mortgage payments right away.

Once construction is completed, the loan will usually convert into a 29 year mortgage (accounting for one year of construction out of a standard 30 year mortgage). Depending on the lender, the rate may remain the same as it was during the construction period, or you may be able to pay to have the interest rate reduced.

A two-time-close construction loan is actually two separate loans. It involves obtaining financing for the construction project, and separately obtaining financing for the mortgage on the finished project. Since you will be seeking out two loans, there will be two closings as well which will mean you will have to pay closing costs twice instead of just once. The first closing will occur prior to the construction and it will detail the terms and draw schedule of the construction project. Owners will only have to make interest payments that will increase as construction progresses.

Once the project is completed, the loan will be refinanced with the lender into a permanent mortgage. Doing so usually allows the owner to obtain a better interest rate on the final mortgage compared to the construction interest rate. Two-time-close loans benefit from increased flexibility compared to one-time-close loans. If there are construction cost overruns, you can account for them in the second phase of financing.

If you are interested in obtaining a construction loan, or you are facing a construction loan dispute or foreclosure, please contact the Florida Construction Law Group today.

27Jan 2016

Arbitration is increasingly being adopted and accepted in the construction industry as the go-to for settling disputes due to perceptions regarding the benefits of arbitration over litigation.

Chapter 682 of the Florida Statutes governs the state’s Arbitration Code, and it grants authority to voluntary binding arbitration. Generally speaking, this means that if two or more parties in a construction dispute agreed to arbitrate any disputes in their construction contract (known as an Arbitration Agreement), then the courts will likely enforce mandatory arbitration if and when a dispute arises.

In case you are not aware, arbitration is a form of alternative dispute resolution in which the dispute will be heard by a certified, neutral arbitrator or tribunal of neutral arbitrators. Arbitrators will hear evidence from all parties involved in a relatively informal hearing, and they will then make a binding decision to resolve the case.

Below we have detailed some of the pros and cons of arbitrating a construction dispute as opposed to litigating the case.

Pros

Cost – This is likely the most frequently cited benefit of arbitration over litigation. The perception is that, due to a lack of court fees and a full discovery period, as well as an expedited procedure, arbitration tends to be far less expensive than litigation. However, this is often disputed. We will keep cost as an arbitration pro, but keep in mind that arbitration costs can soar for more complex cases.

Timeliness – The second most frequently cited benefit of arbitration is that it tends to be much faster than litigation. Hearings do not have to be fit into a crowded court docket, arbitrators are generally juggling far fewer cases than judges, rules of procedure are simplified, and there is usually no appeal. Thus, arbitration is usually much faster than litigation.

Privacy – While litigated cases are public record, arbitration is a private process. You can generally resolve your disputes without the details of the case becoming public knowledge.

Expert decision-maker – While it is unlikely that a judge or jury deciding a litigated case will have any expert knowledge of the construction industry, arbitrators will be selected who are best suited to understand the case, meaning they will likely have a great deal of experience with construction and be better suited to resolve the dispute.  

Schedule flexibility – As previously stated, arbitration hearings tend to be much less formal than litigation, and they can essentially be scheduled to occur at any time in any place to better suit your availability to attend.

Finality – Arbitration decisions are binding and there is usually no potential for an appeal. This means the arbitrator’s decision will usually be enforceable by a court, and you won’t have to spend time and money dealing with a lengthy appeals process.

Cons

Finality – No, you are not seeing double. The finality of arbitration can also be a detriment if you lose the case. There are very limited grounds in which a court will overturn an arbitrator’s decision—usually only based on corruption or fraud. A legal error made by the arbitrator or counsel will not qualify you for an appeal when it comes to arbitration, as it would in litigation.

Lack of transparency – While the privacy may be nice, it also means there will be no oversight or transparency in the process, and therefore less incentive to ensure that the arbitration is fairly handled.

All-or-nothing – Oftentimes arbitration is an all-or-nothing system, meaning there is no middle ground between winning and losing the case. In litigation, there is a full discovery process and perhaps even mediation before the actual trial in which parties can assess the strength or weakness of the opposing party’s case and may have an opportunity to settle based on that evaluation. This is usually not the case in arbitration, and parties will likely see evidence for the first time during the hearing. The case becomes black and white, with a complete win in the case being the only chance for a positive outcome.

Evidence – In litigation, there are very strict rules regarding the presentation of evidence. Evidentiary requirements in arbitration do not adhere to most of these legal principles, meaning evidence may be prejudicial or misleading in nature, and there is little the opposing party can do to combat such issues.

Subpoenas – While arbitrators may issue subpoenas in order to force a witness to participate in a hearing, they tend to be much more difficult and laborious to enforce than a judge’s subpoena in litigation since arbitration occurs physically outside the court system.

If you are considering adding an arbitration agreement to your construction contracts, or if you are facing arbitration, please contact the Florida Construction Law Group today.

22Dec 2015

When it comes to getting everyone paid on a construction project, there can oftentimes be a significant amount of risk and potential for nonpayment. In general, there is a hierarchy of who is most likely to get paid, and subcontractors are usually at the bottom of the totem poll.

This is especially true if the contract signed by the subcontractor includes a “Pay-if-Paid” or a “Pay-When-Paid” clause.

These clauses are stipulation in construction contracts that protect the contractor in case of nonpayment by the property owner by shifting the risk to the subcontractor.

The pay-if-paid clause expressly states that the contractor will only owe payment for services to the subcontractor if the contractor gets paid by the owner of the property. If the contractor does not get paid, then they have no obligation to pay the subcontractor for the services he or she provided on the project.

Similarly, the pay-when-paid clause states that the subcontractor will be entitled to payment for the work performed, but only in a specific period of time following the receipt of payment by the contractor from the owner.

These are oftentimes contentious clauses between contractors and subcontractors, and the enforceability of these type of clauses has been challenged on numerous occasions. As it stands, the enforceability varies from state to state.

In Florida, pay-if-paid clauses have been found to be enforceable through case law, but ONLY if they are clear and unambiguous. As long as the contract makes it clear that a pay-if-paid clause sets the precedent for payment, and does not attempt to mislead, then there is very little potential for a subcontractor to challenge the contract once signed.

Pay-when-paid clauses are generally always enforceable in Florida.

If you are a contractor and you want to include either a pay-if-paid or a pay-when-paid clause in your subcontractor agreements, you should always consult with an attorney to ensure that the wording is very obvious, and be clear in negotiating with the subcontractor about these terms for payment.

If you are a subcontractor, it is important to always make sure you completely understand the terms of the agreement you are signing with the contractor. If you overlook a clear pay-if-paid or pay-when-paid clause, you could potentially be waiting for a very long time before you receive payment for the work you did, if at all. Subcontractors should also seek out the services of a skilled and knowledgeable construction law attorney to ensure that their interests are protected.

In either case, please contact the Florida Construction Law Group today to learn more.

23Nov 2015

Whether you own a construction company that has been contracted to perform a job, or you are a property owner who has hired a contractor, there may come a time where you need to terminate your relationship with the other.

Construction projects can go bad for a number of reasons. There may be financial difficulties, there could be disagreements over the nature, quality, and timing of the work, or you simply may not get along with the other party.

However, there are numerous risks involved in terminating a construction contract, and it should only be used as a last resort when all other remedial measures have failed. When a termination becomes necessary, you also need to follow the termination provisions set forth in your contract to the letter.

A termination will end the contractual rights and obligations of one or both parties prior to the completion of the project, and any construction contract should include detailed provisions that describe the circumstances under which either party can terminate the contractual relationship.

There are two different kinds of construction contract terminations that can be executed by either party: “for cause” and “for convenience.”

A termination for cause can only occur when one party fails to adequately fulfill their contractual duties with regard to the project. For example, the property owner could conceivably terminate a construction contract for cause if the contractor was failing to perform the work in accordance with an agreed upon timeline. Alternately, the contractor could terminate a contract for cause if the owner failed to pay on time. Potential material breaches could be explicitly defined in the contract, or one could also terminate for cause based on general contract law.

If an owner terminates a contract for cause, he or she generally has a right to seize the building materials for use to complete the work, and the contractor could be held liable for any costs that it takes to complete the project above the original contract costs. The party that is responsible for the default will almost always have some sort of financial penalty or liability if the termination for cause is found to be valid.

Alternately, a termination for convenience is when a contract is terminated when there is no default or breach of obligations by the other party. A termination for convenience can be lawful only when defined explicitly in the contract. They are usually included in contracts as a way to allow each party to end their obligations in a manner which does not significantly harm either of them. In a termination for convenience, the contractor will usually be able to collect payment for work already completed as well as any demobilizing costs, while the owner will be able to avoid paying damages or anticipatory costs for cancelling the work.

However, if a party terminates for cause, but the cause is not found to be valid, then the termination will likely be considered one of convenience. If the factors that led to the termination for convenience are not allowable by the contract, then whoever instigated the termination would likely be liable for considerable damages to the other party.

Terminating a construction contract is an incredibly complex and risky proposition. It is vital that you utilize the services of an attorney who is well versed in construction law to guide you and ensure you are complying with all terms of your contract and your legal obligations. If you are considering terminating a construction contract, whether you are the owner or the contractor, please contact the Florida Construction Law Group today.

29Oct 2015

When a construction material supplier’s has not been paid for the work done on a construction project, the material supplier may seek remedies through lien rights under Florida’s Construction Lien Law, Section 713.001-37, Florida Statues.  The purpose of the Florida Construction Lien Law is to protect construction material suppliers from nonpayment, but strict compliance with the statutory law is required.

The first thing to understand is that a Notice to Owner is a prerequisite to perfecting a lien, unless you are in direct privity with the Owner.  However, if you are furnishing materials under an order by someone other than the Owner such as a general contractor or subcontractor then a Notice to Owner must be served.  Failure to properly and timely serve a Notice to Owner is an absolute bar to your lien.The second thing to understand is that a Notice to Owner is not a lien. The Owner can prevent paying twice for work by verifying pursuant to a lien waiver that money paid to the contractor ends up paid. The third thing you must understand is that the Notice to Owner must be served timely.  The Notice to Owner must be served within 45 days of first delivering materials to the jobsite.

The fourth thing you must understand is that the Notice to Owner must be served properly.  The Notice itself must be proper, and the service must be proper.  For the Notice to Owner to be proper, it must be in substantially the form, and include the information and warning, set forth in Fla. Stat. §713.06(2)(c). To prepare the Notice, you should use the information contained in the recorded Notice of Commencement.  If there is no recorded Notice of Commencement, then you should use the information contained in the building permit application.  Make sure to properly describe the services or materials that you are supplying; make it broad enough to cover all materials that you may supply for the project.

 

As to proper service, you must make sure to send the Notice to all required recipients and use the proper method of delivery.  The Notice must be sent to the Owner at the address stated on the Notice of Commencement.  If you are aware of additional addresses for the Owner, send the Notice to those addresses as well. The proper method of delivery is set forth in Fla. Stat. §713.18.  Always keep evidence of delivery of Notice whether through certified mail or photos of posting Notice to the jobsite.

 

Ray Garcia, Esq.

Board Certified in Real Estate Law

by the Florida Bar

www.floridaconstructionlawgroup.com

20Oct 2015

Typically, when a general contractor is approved for a construction loan, that does not mean the lender is going to disburse the entirety of the loan at once. The loan disbursement process for construction loans is incredibly involved, and will usually follow a predetermined scheduled based on milestones in the construction project.

Contractors will be required to submit a draw request to the lender for review and approval each time they need to receive a progress payment to fund various stages of the construction.

Any experienced general contractor knows how important it is to receive the money you need for your project when you need it in order to stay on track, on time, and on budget with your schedule.

Thus, a draw request dispute can derail the timing and efficiency of your project as quickly as any issue. You need the money you’ve been promised, and when a lender tries to withhold that money for any reason, it can be ruinous.

In this blog, we have detailed five potential negative impacts that a draw request dispute with your lender can have on your construction project.

1) Timeliness

It will always be a constant struggle to stay on schedule with your construction projects. There is a practically endless list of things that can throw off your timing, and draw request disputes are extremely high on that list. If you don’t have the money you are expecting from the lender on time, most other aspects of your plans will have to be pushed back as well until the dispute is resolved. This not only impacts your reputation, but it can also severely hurt your bottom line when it comes to other costs associated with falling behind schedule, including the following…

2) More interest payments

Delays caused by draw request disputes will force you to pay more interest payments on your loan. That’s more money out of your pocket the longer you have to wait to resolve a dispute.

3) Loss of labor

A lack of funds will prevent you from moving forward with your project, which will directly lead to a costly loss of labor productivity. An unexpected loss in labor productivity can cause your labor costs to skyrocket well beyond what you anticipated.

4) Remobilization costs

There will be unexpected costs involved both in having to cease construction, as well as remobilizing once your draw request dispute is resolved.

5) Failure to continue funding the project

The worst case scenario of a draw request dispute is that the lender will refuse to continue funding the project. Obviously, the weight of this negative impact is pretty clear. No more funding means no more construction, at least until you can find someone else to fund the project.

If you are in the process of negotiating a draw request schedule with your lender, or if you are already facing a draw request dispute, you need an experienced and knowledgeable attorney representing your interests and protecting you from the severe costs and issues associated with a lender’s refusal to pay what you were promised for your project. Please do not hesitate to call the Florida Construction Law Group today.

23Sep 2015

We’ve said it before and we will say it again: if you are a contractor, hiring a contractor, or you are involved in the business of construction in any way, you cannot afford to neglect utilizing strong, thorough contracts in your business dealings.

There is simply too much at stake and too much that can go wrong for you to not have a solid legal foundation supporting your actions and your interests. Construction contracts cannot guarantee that you will never have to deal with a lawsuit, but they will mitigate your risk and give you something legitimate and legally defensible for you to fall back on if things go awry.

Payment for a construction job in particular can be a lightning rod for people to attempt to take advantage of a situation by underpaying or overcharging. A good construction contact needs to explicitly detail how and when payment will occur and make provisions for unexpected developments or changes in the way the job will be completed.

Generally, there are three main classifications of payment for a construction job that need to be detailed in your contracts, depending on the circumstances of the work. We’ve detailed these three classifications below:

Lump-Sum

A lump-sum contract places almost the entirety of the risk on the contractor. This is the most common form of payment classification in construction contracts and is characterized by an agreed upon fixed price for an agreed upon amount of work. If the contractor is able to do the job for less than the lump sum, he or she will still be entitled to full payment of the lump sum, which means an increase in profits. Conversely, if they are not able to complete the work within the lump sum budget, he or she must foot the bill to cover the difference. When calculating a lump-sum payment contract, the contractor needs to plan for any contingencies or unexpected costs and build them into the fixed price.

Unit Price

This form of payment classification is normally utilized when there is easily quantifiable work that needs to be completed, as opposed to more complex construction projects. Unit price payment is when a specific price is known for a task, but not necessarily the quantities of the product needed to complete the task. The owner agrees to pay for however much of the unit is used to complete the scope of work. For example, the contractor may know the price for certain quantities of concrete needed to complete a project, but not exactly how much concrete he or she will need. Thus, the owner agrees to pay an amount of money per an amount of concrete up to however much it takes to complete the job. Unit price payment could be combined with other forms of payment, like lump sum, to cover one particular aspect of a job.

Cost-Plus (with or without guaranteed maximum)

In a cost-plus arrangement, the owner agrees to pay the contractor for the actual cost of work, plus a fixed fee or percentage of the overall costs. This way, the owner will not be paying for contingencies that were built in to the price but never used, as he or she would in a lump-sum contract. However, without a defined guaranteed maximum amount, there is little to no incentive for the contractor to keep his or her costs down. It is wise to include a guaranteed maximum price (GMP), which shifts the risk of additional, unexpected costs onto the contractor rather than the owner, which incentivises them to keep their costs down. GMP may also include provisions for sharing savings should the contractor complete the job for less than the expected costs.

If you are dealing with payment issues that have arisen from a real estate or construction dispute, or if you need help developing contracts for your jobs and deciding which form of payment to utilize, please contact the Florida Construction Law Group and let us work to protect your interests.

23Jul 2015

Hiring a contractor to perform serious renovation work on your home can be an unnerving prospect for many people. You want to ensure that you are getting the best work at a fair price, but if you choose a bad or unscrupulous contractor you will probably get neither.

A poor job by a contractor could end up costing you a great deal of time and thousands of dollars more than you intended to spend, so it is essential that you choose your contractor wisely.

Keep an eye out for these 10 red flags when choosing your contractor or when they are just starting their project. If you do choose a poor contractor, it’s important to move quickly to let them go as soon as it becomes clear they are not living up to your expectations.

1. Be vigilant of scammers

Particularly if you’ve been the victim of a widespread natural disaster, be wary of profiteers and those who would prey on your vulnerability. Some signs that a contractor could be trying to scam you include a lack of contact details like a phone number and business address. They may also be going door-to-door soliciting their services.

2. Upfront payment

Avoid contractors who require 100% upfront payment for the job as well as cash-only payments. This could indicate a lack of legitimacy or skill, and could leave you high and dry if the contractor never comes back to finish the job.

3. High-pressure sales

Another red flag is those contractors who try to push you into signing a contract on the spot. They may offer you a “great deal” but only if you agree to use their services right then and there. Any legitimate contractor understands you need time to think through such a big decision so don’t be pressured to act hastily.

4. No references

If the contractor cannot refer you to another satisfied customer, then do not give them the job. You want a proven track record to ensure they actually have the ability to perform the work well.

5. Lack of permits, license, or insurance

If the builder asks you to obtain the building permits for the job yourself, this may indicate that they are not properly licensed or registered locally and want to avoid detection. Always verify their relevant licenses with the proper authorities, and only give them the job if they have proof of valid insurance as well.

6. Unsatisfactory answers to questions

Whether the potential contractor is overly vague, unwilling, or simply unable to answer your questions about the proposed work or contract, don’t accept unsatisfactory answers to your questions. You are entitled to details and a contractor who is willing to give them to you.

7. Lack of contract

This one is simple, never allow a contractor to complete a job without signing a thorough and legal contract. Period.

8. Lack of communication or poor communication

If you find you can never get in touch with your contractor and he or she doesn’t return your calls, this is a sign that you should not hire them or that you might need to fire them.

9. Solicits a job for you based on leftover materials

We already mentioned avoiding door-to-door contractors, but some may offer you a great deal because they’ve just completed a job for a neighbor and have leftover materials. This could indicate that the contractor is not local or legitimate.

10. Deal too good to be true

If the deal sounds too good to be true, it probably is. Avoid it altogether or make sure you conduct thorough research on the contractor to make sure you aren’t being taken advantage of.

Do your best to avoid contractor red flags when hiring for your renovation or construction project. If you believe you have been the victim of an illegal or illegitimate contractor, call the Florida Construction Law Group to talk about your options and give yourself a chance to recoup some of your losses.

19Jun 2015

By definition, a construction defect is a condition that reduces your home’s value. There are two primary categories of defect: “patent” defects, which can be spotted right away, and “latent” problems that don’t appear until years after your home was built.

What causes defects?

These problems typically occur if inferior materials were used or the construction work was not completed in accordance with good practice. Other leading causes include:

  • Improper site selection and planning
  • Civil or structural engineering errors
  • Problems with soil analysis and preparation

What are the most common types?

The construction defects most commonly involved in litigation include water problems, faulty drainage, mold, dry rot, and cracks that appear in the roof, walls, or foundation. For a claim to succeed, a homeowner must have an expert examine the defect, determine its source, and recommend ways to remedy it. This expert will then testify in court to back the plaintiff’s claim.

Who is responsible?

Most times, the responsibility lies with the developers, builders, and general contractors. Designers and architects can also be held liable for construction defects.

What damages are recoverable?

If your home shows a patent or latent defect, the amount of damages you will recover will depend on the circumstances of the case. Recoverable damages include:

  • Repair costs
  • Decline in the value of the property
  • Cost of temporary housing during the repair
  • Court costs

If anyone was injured due to the defect, the party responsible may be liable for associated damages. Punitive damages could also be levied if the court decides that their conduct was reckless or willful.

Is there a time limit for filing?

Laws will vary from state to state, but in Florida, construction defect lawsuits must generally be filed within four years from the latest of the following situations:

  • The date you actually took possession of the home
  • The date that a certificate of occupancy was issued
  • The date that construction was stopped (if the work was never completed)
  • The date of completion or termination of the contract between the engineer, architect, or contractor and the employer

If a latent defect is involved, § 95.11(3)(c), Fla. Stat. states that “the time runs from the time the defect is discovered or should have been discovered with the exercise of due diligence.”

Can repairs be made while a lawsuit is in progress?

As a homeowner you are required to prevent further damage to your property, so repairs may be made and the costs are recoverable. Otherwise, the defense may argue that you failed to mitigate damages.

Can a home be sold while it is the subject of a construction defects lawsuit?

While you are allowed to sell your home during the litigation process, Florida’s disclosure law requires you to inform potential buyers of all known facts about the property, such as taxes, past and present condition, and need for repairs. Litigation over construction defects arguably falls in this category.

If you have any questions on the subject, or if you need assistance with any aspect of construction law, we can help. Please contact us today to learn more!

20May 2015

When you’re a subcontractor searching for work, knowing what general contractors look for in the people they hire will give you a major competitive edge. To improve your chances of winning more jobs, keep these three important tips in mind.

Tip #1: Know your strengths

When bids come in for subcontracting jobs, the general contractor often finds it difficult to distinguish the different subcontractors except by price. Does this mean you can only stand out and win a job by presenting the lowest bid?

Not necessarily, if you market yourself more strategically. Ask yourself what you do that’s different or better from the way your competitors do it. Do you keep your certifications faithfully up to date? Seek new ones as the industry changes? Do you have a larger work crew who can get a job done faster? Do you have a perfect safety record? If so, use those details to present yourself as the best candidate for the job.

Tip #2: Know how to market like a pro

There are many ways that you can market your services to a general contractor.

  • If you win a job, give the contractor material that they can use when presenting to the owners. If you can contribute to their success, they will remember you when future opportunities come up.
  • Invest in your team’s professional development, and publicize the fact that you do so. General contractors considering your bid will know that they are obtaining trained and competent personnel for their job.
  • After completing a job, remain in touch with the general contractor and send them any useful leads that you come across. It increases the chances of them returning the favor when they have another job on the table.

Tip #3: Always be professional

A professional image is important to your career. Give the contractor every reason to remember your work positively: make sure that your crew cleans up the site before going home each night, hold regular safety meetings to keep the project accident-free, and respect the contractor’s payment schedule. (Insisting on immediate payment will make you look desperate.)

Good marketing skills and a professional approach can hold more weight with a general contractor than the lowest bid. Invest in both and your career will only benefit. And if you have any questions about construction law, we’re here to help, so please don’t hesitate to ask!

10May 2015

Building your dream home is supposed to be one of life’s most exciting moments, and with careful planning and attention to detail, it can be. But if you start the project without knowing in advance what will and won’t work for you, or cut corners where you shouldn’t, the result could turn the dream into a nightmare.

This blog entry highlights five mistakes that people commonly make when building their new home, and how to avoid them.

Mistake #1: Not including a buffer in your budget

Once you’ve gotten all the necessary quotes from architects, contractors, and other building professionals, you will have a general idea of how much it is going to cost to build the home you want. But don’t assume that this is all you will end up paying before it’s over, because it could be more. And if your budget has been exhausted, the house could remain half-finished until you get more funds together.

Your budget should generally include a buffer of around 10% of the quoted cost. This will prevent the project from being derailed by unexpected costs such as wage increases, changes in material costs, etc.

Mistake #2: Short-term planning

Many people build homes with only short-term plans in mind. A small bungalow is fine for a young couple, but what if you have children? Will there be rooms available for them or will expensive renovations have to be done? Do you plan to eventually bring your parents in to live with you? If so, think about putting bedrooms on the ground floor. Your house should be built to accommodate important lifestyle changes.

Mistake #3: Failing to consider resale value

If you don’t plan on living out the rest of your years in the house, you’ll want to sell it eventually. A lot of people forget this, and either build the place in appealing but inconvenient locations, or design it to reflect their personal quirks and tastes. When the time comes to sell, buyers shy away.

To help ensure that your house brings a good return on investment, keep the layout and fixtures tasteful and timeless. Buy your build plot in a desirable location. All of these factors will contribute to a good resale value.

Mistake #4: Trying to bypass the permit process

Getting the go-ahead to build your home involves obtaining certain permits. The process can involve a series of time-consuming and expensive inspections, which is why people occasionally try to start construction first and worry about the permits later. Don’t do it: your project could be stopped and you may even be fined.

Mistake #5: Not vetting your builders or contractors

With so much at stake, you need to confirm that the builder and contractors you hire are competent and reliable. Don’t be blindsided by low prices: the work could end up being just as cheap.

Ask prospective builders for photos of past work and testimonials from previous clients. If possible, go view a house they built. If it looks good, you’re probably in good hands.

Building your dream home is a major life milestone: don’t ruin it by making mistakes that can be avoided with a little diligence.

20Apr 2015

You’re ready to build your dream home – or you think you are. You probably know exactly how many rooms you want to have and what their purpose will be, but have you thought through all of the key details?

Poor planning and badly managed budgets can cause far-reaching problems, so you need to approach the project from many angles. These tips will help you create a better design plan and budget for your dream home, so that the final result is everything you hoped for – and more.

  1. Carry out space planning carefully. Unless you’re building a mansion, proper attention to space planning and design is paramount. Don’t go overboard on the storage space: do you really need a closet in the foyer, especially if you live in South Florida where coats aren’t regularly worn? Does the master bedroom closet have to be a walk-in one? If not, allocate the extra space to the bedroom or adjoining bathroom.
  2. Hire an experienced builder. Any construction project is a major undertaking, but when you are building your dream home, you can’t afford mistakes. It can be tempting to save money by simply hiring the cheapest builder around, but is it really worth risking everything to save a few bucks? In construction you often get what you pay for… so don’t cut corners on your dream home!
  3. Consider HVAC needs. It’s hot in South Florida – so make sure your new home can stay cool! HVAC systems should be in accordance with the size of your home. Large units in small houses will cause energy bills to skyrocket, while small ones in bigger homes will do a poor job of cooling and heating. Whatever size system you end up installing, don’t forget to arrange for regular maintenance: moisture and mold growth are common concerns that can negatively impact your family’s health.

Take your time and make all important decisions in advance, not as you go along. Poor design choices will make your home uncomfortable and possibly unhealthy. Work closely with your architect or builder: they will help you decide what makes sense given your family’s needs, and show you where you can save some money as well as where you absolutely should not cut any corners.

Questions or comments? Need assistance with the legal side of building your home? Please contact us today to learn more!

10Apr 2015

The litigation process can be contentious, stressful, and expensive. The time needed to get to trial and obtain a resolution often exceeds the time spent completing a construction project, and litigation drains the energy and attention of all participants from the project or job at hand. Similarly, professional reputations are damaged or lost in an industry where reputation is a valuable business asset.

Often, these negative dispute repercussions can be avoided entirely by opting for mediation or arbitration to reach an agreement.

Construction Mediation

One alternative to litigation is mediation, a private and informal method of dispute resolution that involves a mediator. The process is entirely voluntary, with no one being compelled to accept a settlement. Mediators are neutral and independent parties who assist disputants in reaching an agreement and a resolution to the problem at hand. Settlement terms are decided by the parties, not the mediator.

At the hearing, the disputants have the option of presenting evidence and/or documentation to support their position. The mediator facilitates the negotiation process but cannot issue a binding decision. Once a settlement is reached, the mediator will help draft the agreement terms, which can then be taken to an attorney and written into a legal contract.

Construction Arbitration

The purpose of arbitration is to privately settle a dispute by using a neutral third party as a decision maker. It is essentially a forum that permits the disputing parties to present their cases to a single arbitrator (or sometimes a panel) for a final decision.

Unlike trial judges, who often have no expertise in construction, engineering, and architecture, arbitrators can be experts selected for their technical knowledge. Their award decisions are also more likely to be final, which reduces the risk of costly appeals.

Arbitration is preferable to litigation in that it is a speedier and less expensive method of resolving disputes. It is also a more informal proceeding, and closed to the public. Both sides are allowed to present evidence and call witnesses to support their position, and each party can question the other’s witnesses and evidence. After everything has been presented, the arbitrator withdraws to review the case and make a decision.

In binding arbitration, any award made may be enforced in court. Judges will carefully review each case and its specific arguments to determine if anything in the proceedings invalidate the award, such as fraud or misconduct.

If you have questions about this process or about construction law in general, we can help. Please get in touch with us today!

23Mar 2015

It’s often said that with large construction projects, delay-related disputes are inevitable. Situations that are beyond the control of the contractor(s) do arise and cause delays, but the tips below will minimize the risk of a project dragging on past its originally projected completion date.

1. Complete the submittal process on time. Paperwork can and will hold up a project. The submittal process is the stage at which materials are proposed, approved, and ordered. If the entire project team is not behind the process from the beginning, the materials won’t arrive on time and delays will result.
2. Discuss any project changes/additions up front. There are inevitably changes to any construction project. Have a discussion with your contractors to determine how changes or additions will impact the project’s overall timeline and then communicate with your client. This will ensure that a three-month project will not develop into a six-month project.

3. Develop realistic milestones and contingencies: Schedule disputes often arise because of unrealistic milestones. To make them realistic, each one needs to have sufficient contingency in keeping with the degree of uncertainty. This contingency can be established by asking the contractor to provide an early completion schedule or carrying out a comprehensive risk assessment and documenting the findings.

4. Take a collaborative approach to information management.  When all parties involved in a project know what’s going on at each phase, frequent or late changes can be prevented. By establishing a central and collaborative information management system, everyone has access to important documents and correspondence, reducing the likelihood of errors and misunderstandings.

5. Correct and document any logic-based schedule flaws. If you find and correct any schedule flaws, document and explain these changes when you make them. If a dispute makes it into a courtroom, arbitrators and judges will question changes made after construction is complete.

Keeping construction projects on schedule is always a challenge. Delays are expensive financially and in terms of eroded customer trust, so they need to be avoided as much as possible. Although timely performance can be impacted by unpredictable factors such as abnormal weather, other potential issues (poor scheduling, labor or material shortages, and regulatory changes) can be anticipated with proper planning, limiting their ability to take projects off-track.

Questions about construction law? Facing a legal dispute? We can help – give us a call today at (305) 227-4030!

10Mar 2015

Building your dream home on a budget is possible. It takes discipline and a willingness to make the right choices, but in the end you’ll have a house you love and can afford.

This article explores five tips for building your dream home on a budget. They’re simple, don’t call for a lot of sacrifice, and won’t leave you in the red after the project is complete.

Tip No. 1: Think small

We’re always encouraged to think big, but when it comes to building your home, small can actually be better.

It can be difficult to see it this way, given the fact that most new subdivisions contain huge homes that could have been estates in an earlier era. But do you really need all that space? Instead of building a larger home, why not throw out or give away things you no longer need, such as old furniture and books that haven’t been read in years? The majority of American families can do just fine with a 2,300 square foot home, and it’s a lot less expensive to heat and light too.

Tip No. 2: Keep it simple

Look at any of today’s builder houses and you’ll see a lot of unnecessary add-ons, such as an army of gables and a zigzag floor plan with multiple corners. Many stock house designs also have illogical structural organization, and compensate with extra elements to hold it all in place. These added supports don’t come cheap, either.

Stick to box-style designs. They are simple, affordable, and have a clarity in their layouts that makes them easy to build and maintain.

Tip No. 3: Eliminate extra walls

Open floor plans have a lot going for them. The fewer walls there are in a home, the less material is used, which translates into lower build cost. They also make inside spaces look and feel larger, making a house with less square footage more appealing.

Tip No. 4: Make smart materials choices

A lot of people blow their budgets by insisting on stained wood baseboards, hard coat plaster walls, and granite counter tops. Resist the urge to compete. An attractive floor can be built using materials from a warehouse wholesaler, and what’s wrong with laminate counter tops? Bold colors can add an inexpensive touch of glamor, and durable materials save additional money by being low-maintenance.

Tip No. 5: Buy at discount warehouses or online

Expensive showrooms are a budget hazard, as the products have huge markups without any appreciable extra benefits. You can purchase hardware, furniture, lights, and accessories from online retailers. A lot of people visit showrooms to decide what they want, and then buy the same units online at a fraction of the price. Plumbing fixtures can be trickier to buy over the Internet because the retailers don’t always sell the right internal housing for the shower heads and faucets, but a local plumbers’ supply warehouse can help you coordinate these particular needs.

Focus more on what you need than what you want or think you should have. Sticking to a budget will require you to compromise, but you won’t spend years afterward paying off the build costs.

Questions about construction law? Building your own home and need legal support? We can help – give us a call today at (305) 227-4030!

23Feb 2015

Getting a construction loan can be difficult, but the good news is that it doesn’t have to be. The right approach and advance preparation can result in the approval you’re looking for.

New home sales are on the rise, putting construction loans in great demand as homebuilders try to cash in on the limited supply of available properties. Here are four tips that will improve your knowledge of project financing and maximize your chances of approval.

  1. Confirm that you can afford to pay back the amount you want to borrow. Before going out to buy land, make sure you can prove to the lender that you are able to afford the monthly payments. They will also want to know your FICO score, how much (if any) money you have for a down payment, the extent of your construction experience, and how you plan to accomplish the proposed project.
  2. Investigate your financing options beforehand. There are different types of construction loans out there. One of the more popular options is the “one-time close,” which provides you with one fee schedule and one closing. You can also get a 12-to-18 month construction loan that will have to be refinanced into a conventional mortgage once the project is completed. This involves two sets of closing costs and two loans, but once construction is finished you can look around for mortgages that suit your circumstances and budget.
  3. Investigate interest rate options. Interest rates can be locked until construction ends, but they tend to be higher under this type of arrangement. If the rate remains the same after the project is finished and the loan is converted into a mortgage, you need to ensure that a floating interest rate won’t impact your ability to afford the monthly payments when rates go up.
  4. Take interest reserve into account. This reserve, which is added onto your loan total, is an estimated interest payment covering the construction period. It eliminates the need to make monthly payments while the project is being built, but because this reserve is added to the loan amount, you will pay interest on it. Decide whether you want the interest rate to be added, or if you want to make monthly interest payments instead.

If you don’t have perfect credit or a strong relationship with an existing lender, obtaining an affordable construction loan will be challenging, but if you only apply for what you can truly afford, approval is more likely to happen, especially in today’s booming housing market.

If you’ve got questions about construction law, we can help. Contact us today!

11Feb 2015

In the construction industry, contracting parties have the freedom to agree to whatever method to determine the amount of compensation for the amount of work performed on a contract. This article will discuss the general types of methods of compensation for contractors, which are: lump sum contracts, measurable or re-measurable contracts, and cost plus contracts. Although parties are free to combine or create new methods of compensation, as long as mutually agreed upon.

A lump sum contract is where a contractor agrees to perform the labor in the contract for a fixed amount or lump sum. The contractor carries the burden of being liable for unforeseen contingencies, if the expenses to complete the labor are greater than the contracted fixed amount of payment, in a lump sum contract. However, one exception is where the contractor has performed additional work outside the terms of the contract, which may be compensable. Finally, under common law, the contractor is not entitled to payment until the contractor has completed all the work under the contract.

Under a measurable or re-measurable contract, a contractor’s right to payment is determined under a contractual mechanism which considers: (1) the final amount of labor performed, which is measured; and (2) payment at the previously agreed upon rate, which is based upon the final amount of labor performed, which is valued. A contract administer must measure and value the work performed using the rates and amounts stated in the contract. The contract administrator has the power to increase or decrease the rates and amounts that are found to be unreasonable, where the actual amount of labor performed is greater than or less than what was billed. Additionally, where the work performed was drastically different than to what the contractor could have anticipated, such as worse conditions, a revision of contract rates may be appropriate.

A cost plus contract is where a contractor is compensated for both the financing of the construction project and for a fee as profit. A contractor’s right to payment arises through indemnity and is entitled to costs, such as: wages, site establishment costs, subcontractors, suppliers, and off-site overheads.  Typically, cost plus contracts require evidence of the costs incurred, in which an invoice will suffice. However, invoiced costs must be deemed reasonable, or at least not challenged by the owner or contract administrator to be reimbursable. Finally, a contractor is not entitled to reimbursement for interest accrued on money borrowed to fund the construction operation.

Ray Garcia, Esq.

Board Certified in Real Estate Law

by the Florida Bar

www.floridaconstructionlawgroup.com

08Dec 2014

Most contractors know that one of the biggest complications for their business isn’t related to finding or completing work, but rather litigation.  Whether the customer wasn’t clear on what they wanted, or they are just looking to take advantage of a situation, the costs of litigation can cause major problems for any contractor or construction company.

To help you reduce the risks of being sued in your next job, here are ten tips:

  1. Review the Plans – Take the time to go over all of the plans and any specs related to the job with your client before you place your final bid.  Making sure you are on the same page with the client can help to prevent many problems.
  2. Always have a Written Contract – No matter how nice the client seems or how small the job is, a written contract should be required for every job you perform.
  3. Get Extras in Writing – If the client wants any extras, include that in the contract.  If they add them on after the contract is signed, write up an addendum to the contract and have both parties sign it.
  4. Document All Delays – All contractors know that there is always the potential for delays due to unforeseen circumstances.  When this occurs, make sure to document it clearly.
  5. Document all Disputes – If you run into any sort of dispute or disagreement with the client, make sure to keep a detailed record of what the dispute was, and how it was resolved.
  6. Speak with a Construction Attorney – Ideally, you should have an attorney who specializes in construction law review all contracts.
  7. Keep Records – Keep detailed records of the exact work you performed, the supplies you purchased, and everything else that happens on each job.
  8. Give Specific Due Dates – Every job should have a set date by which you are committed to have each step done.  This will help avoid miscommunications and other problems that can end in litigation.
  9. Document Payment Schedules – If you are allowing the client to make payments on a job, make sure it is clear when each payment is due, and what happens if the payment is late.
  10. Educate Employees – If you have employees or sub-contractors working on a job, make sure they know to document their work and any disputes they may have while on the job.

These ten tips will help reduce the chances of facing a lawsuit – but there is no substitute for having an experienced construction law attorney on your team. Please contact us today if you’d like to learn more!