New Households Moving to Apartments
December 20, 2012 — CDJ Staff
The New York Times reports that multifamily construction?Äîapartment buildings?Äîis leading the recovery in construction. Construction of single-family homes is only a third of the way up from its fall from its earlier heights, while multifamily construction has recovered two-thirds of its peak. Young adults are moving out of their parents’ homes, but instead of buying homes, they’re renting apartments.
Houston is adding thousands of new units, leading to a fear of overbuilding. Rents have been rising, but as the supply of apartment units rises, higher rents may be unsustainable. However, during the recession, young adults did not move out of their parents’ homes, leading to about two million doubled-up households. David Crowe, the chief economist of the National Association of Home Builders, noted that “all of the net addition to households since 2004 has been in rentals.”
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Another Las Vegas Tower at the Center of Construction Defect Claims
November 7, 2012 — CDJ Staff
Accusations are coming from both sides over construction defects at a Las Vegas tower, only this time, it’s not the Harmon Towers, it’s Hilton Grand Vacations, which is part of the Planet Hollywood Resort. The project was originally dubbed PH Towers Westgate, and it was developed by Westgate Resorts, which is suing the contractor, Tutor-Saliba for $10 million over late completion and construction defects.
Among the defects Westgate is claiming are cracked floor tiles in the valet lobby and cracks and delamination of the pool deck. Tutor-Saliba argues that the failure of the valet lobby floor is due to Westgate specifying only 1/16th inch-wide grouting, instead of the specified ¬º inch, and Westgate’s refusal to allow expansion joints on the pool deck has lead to problems there. Westgate’s attorney, Robert Schumacher, attributes the problems to “shoddy construction practices.”
According to the article in the Las Vegas Review Journal, plans were only 60 percent complete when construction began, leading to “thousands of change orders.” Despite not meeting an August completion deadline, Tutor-Saliba is claiming it is owed a $1.5 million bonus nevertheless.
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California Supreme Court to Examine Arbitration Provisions in Several Upcoming Cases
December 9, 2011 — CDJ Staff
Glen C. Hansen, writing on Abbott & Kinderman’s Land Use Law Blog looks at several cases pending before the California Supreme Court which ask if a developer can insist on arbitration of construction defect claims, based on provision in the CC&Rs. Currently, there is a split of opinions in the California appeals courts on the issue.
Four of the cases are in California’s Fourth Appellate District. In the earliest case, Villa Milano Homeowners Association v. Il Davorge, from 2000, the court concluded that the arbitration clause was sufficient to require that construction defect claims undergo arbitration. However, the Fourth Appellate District Court concluded in three later cases that the arbitration clauses did not allow the developer to compel arbitration. In two cases, argued in 2008 and 2010, the court concluded that to do otherwise would deprive the homeowners of their right to a jury trial. In the most recent case, Villa Vicenza Homeowners Association v. Nobel Court Development, the court decided that the CC&Rs did not create contractual rights for the developer.
The Second Appellate District Court came to a similar decision in Promenade at Playa Vista Homeowners Association v. Western Pacific Housing, Inc. In their decision, the court noted that CC&Rs could be enforced by homeowners and homeowners associations, but not developers.
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Ohio Court Finds No Coverage for Construction Defect Claims
March 28, 2012 — Tred Eyerly, Construction Law Hawaii
Charles and Valerie Myers hired Perry Miller to build their home. Myers v. United Ohio Ins. Co., 2012 Ohio App. LEXIS 287 (Ohio Ct. App. Jan. 26, 2012). After completion of the home, Miller was again hired to construct an addition which included a full basement, staircases, bathroom, bedroom, hallway and garage.
After the addition was completed, one of the basement walls began to crack and bow. Miller began to make repairs, but eventually stopped working on the project. Other contractors were hired to make repairs, but further problems developed. A second basement wall began to bow and crack, allowing water into the basement. The wall eventually had to be replaced. Subsequently, the roof over the addition began to leak in five or six places before the drywall could be painted. The leaks caused water stains on the drywall and caused it to separate and tear. It was discovered the roof needed to be replaced.
The Myers sued Miller and his insurer, United Ohio Insurance Company. The trial court ruled that the policy did not provide coverage for faulty workmanship, but did provide coverage for consequential damages caused by repeated exposure to the elements. United Ohio conceded liability in the amount of $2,000 to repair water damage to the drywall. United Ohio was also found liable for $51,576, which included $31,000 to repair the roof and ceiling and $18,576 to replace the basement wall.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Micropiles for bad soil: a Tarheel victory
March 14, 2011 — Original article by by Melissa Brumback on March 14, 2011
Despite foundation challenges, construction is almost complete on the expansion at University of North Carolina’s Kenan stadium. The project started with a deep foundation system from design-build contractor GeoStructures. Known as the Carolina Student-Athlete Center for Excellence, the addition was built on a parcel with a knotty mix of fill soils, subsurface boulders and varying depths to rock. To achieve uniform foundation support, GeoStructures designed a Micropile system (also known as a Mini pile system) which could be drilled into the variable ground conditions.
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Reprinted courtesy of Melissa Brumback of Ragsdale Liggett PLLC. Ms. Brumback can be contacted at mbrumback@rl law.com.
FHA Lists Bridges and Overpasses that May Have Defective Grout
September 13, 2012 — CDJ Staff
The Federal Highway Administration has released a list of bridges and overpasses that may be prone to corrosion problems due to grout that was in chlorides when it was supposed to be completely free of them. Currently, the FHA is working with state departments of transportation to determine if the defective grout was indeed used on additional bridges and overpasses. The initial FHA list of structures determined to have been built with the defective grout lists thirty-four sites, of which four are in Ohio, the largest number for any state.
California contains only one such site, the intersection of the 55 and 405 freeways, one of the few items on the list not designated as a bridge.
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Contractual Liability Exclusion Bars Coverage
August 2, 2012 — Tred Eyerly, Insurance Law Hawaii
The Fifth Circuit Court of Appeals considered whether coverage existed for a defectively built tennis court in light of a contractual liability exclusion. Ewing Construction Company, Inc. v. Amerisure Ins. Co., 2012 U.S. App. LEXIS 12154 (5th Cir. June 15, 2012).
Ewing Construction Company entered a contract with the School District to construct tennis courts at a school. After completion, the School District complained that the courts were cracking and flaking, rendering them unfit for playing tennis. The School District filed suit, seeking damages for defective construction. It alleged that Ewing breached its contract and performed negligently.
Ewing tendered the underlying lawsuit to Amerisure. Amerisure denied coverage and Ewing filed suit.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Florida Property Bill Passes Economic Affairs Committee with Amendments
April 14, 2011 — April 14, 2011 Beverley BevenFlorez - Construction Defect Journal
The Florida Property Bill (HBB 803) was passed by the Economic Affairs Committee by a vote of 11-7, according to Property Casualty 360, after adopting nine new amendments. The additions to the bill included limiting notice of claims to a set number of years, extending the statute of limitation on property claims from five years to six years, among others.
HB 803 and SB 408, the Senate companion bill, focus primarily on residential property insurance. They make changes to the Florida Hurricane Catastrophe Fund, while also promoting increased notification of policy changes to policyholders. Sections of the bills provide minor fixes such as renaming Citizens Property Insurance Corporation to Taxpayer-Funded Property Insurance Corporation. However, other sections of the bills contain more significant policy changes such as sinkhole coverage and hurricane claims.
The bills’ intent, according to the SunSentinel.com, is to reduce fraudulent claims and to bring new insurers into the insurance market. However, SunSentinel.com also reports that the bills may drastically increase property insurance premiums.
Read the full Property Casualty 360 article...
Read the full Sun Sentinel article...
Pier Fire Started by Welders
August 2, 2012 — CDJ Staff
Welders working on Pier 29 in San Francisco were preparing the building for the America’s Cup sailing race. Instead, they accidentally caused $2.4 million in damages. Mindy Talmadge, a fire department spokesperson, attributed the fire to crews welding a latter to a wall. According to Talmadge, a spark entered a crack in the concrete wall and “the wood on the building underneath was really dry.” It took firefighters more than two hours to extinguish the blaze.
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Construction Suit Ends with Just an Apology
February 10, 2012 — CDJ Staff
After suing a contractor for failing to complete the remodeling of their home, an Orange County couple has settled for an apology. Douglas J. Pettibone represented the contractor, who had lost his business after a broken neck, multiple surgeries, and an addiction to pain medicine. Mr. Pettibone represented his client pro bone. The case was settled in arbitration by JAMS.
Mr. Pettibone noted that his client gave “a heartfelt and very moving apology.” The remodeling was completed by another contractor, two years after Thorp Construction stopped work on the project. After the apology, the case was dismissed.
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One to Watch: Case Takes on Economic Loss Rule and Professional Duties
June 28, 2011 — Douglas Reiser, Builders Counsel
According to the Supreme Court of Washington Blog, The Supreme Court heard oral argument in Jackowski v. Hawkins Poe on Thursday, June 16, 2011. The court’s synopsis of the case can be found on the Washington State Court website.
In short, two home purchasers brought a lawsuit against the home’s sellers, the sellers’ agent and the purchasers’ own agent, alleging claims of fraud, fraudulent concealment, negligent misrepresentation and breach of common law and statutory duties. The trial court dismissed the buyers’ claims on the basis of the economic loss doctrine and Division II reversed, opining that the ELR does not apply to professional duties. The Supreme Court will now look at applying the Independent Duty Doctrine established last year, and whether professional duties (those of the real estate agents) should be reviewed under a different light.
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Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
An Upward Trend in Commercial Construction?
March 28, 2012 — Melissa Dewey Brumback, Construction Law North Carolina
Year-end economic indicators demonstrate that private commercial construction may be increasing in 2012, primarily as demand grows for new projects built in the United States.
According to an article in Businessweek, the Architecture Billings Index held at 52 in December, indicating a modest expansion in the market. The American Institute of Architects said that the commercial and industrial component of the number climbed to 54.1 in December, the highest in 10 months.
The monthly survey of U.S.-based architecture firms is one of the main indicators of nonresidential construction, and these numbers suggest that modest improvement may be on the horizon.
The information is confirmed by data from the Census Bureau that shows that spending on lodging, office, commercial and manufacturing buildings grew 8.2 percent in November to $9.2 billion from a year ago. These types of commercial and industrial projects are historically canaries in the mine and are usually the first part of the industry to improve as the economy expands.
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Reprinted courtesy of Melissa Dewey Brumback of Ragsdale Liggett PLLC. Ms. Brumback can be contacted at mbrumback@rl-law.com.
Construction Defect Notice in the Mailbox? Respond Appropriately
August 4, 2011 — Douglas Reiser, Builders Counsel
Recently, I have seen a rash of ignored construction defect notices. What is a construction defect notice? It’s a statutorily required notice, sent from a homeowner to a contractor, listing a number of defects found at their property. If you get one, don’t ignore it.
The Revised Code of Washington includes a number of provisions intended for residential construction disputes. Among them is the “Notice to Customer” requirement in RCW 18.27.114, which can preempt a contractor’s lien rights, and the “Notice of Construction Defects” found in RCW 64.50.020.
The Notice of Construction Defects is a standard notice mandated by RCW 64.50, a chapter in the Revised Code of Washington, intended to provide a pre-litigation resolution process for contractors and consumers. The chapter applies only to those losses “caused by a defect in the construction of a residence or in the substantial remodel of a residence.”(See “Action” RCW 64.50.010).
Unfortunately, many contractors will simply ignore these notices or tell the homeowner to make a warranty claim. But, the notice actually provides a contractor with a forty-five (45) day window to alleviate the dispute.
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Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
A Lien Might Just Save Your Small Construction Business
April 4, 2011 — Douglas Reiser in the Builders Counsel Blog
Many owners incorrectly believe that payment to the general contractor gets the owner off the hook for payment to subcontractors and suppliers. This assumption sometimes fosters the irresponsible owner, who fails to ensure that everyone is getting paid. Fortunately for those contractors further down the contracting chain, this assumption is incorrect.
Suppliers and subcontractors can file a lien to secure payment for their labor and materials. A filing party must offer proper notice (if applicable) and file an adequate and timely lien in the County where the work is performed. You can read our earlier posts on these topics by following this link.
A lien notice and a lien put an owner on notice that your business has provided labor and/or materials for the improvement of the owner’s property (See RCW 60.04.031 for more info). If the owner fails to take care to ensure that your business is paid the law mandates that the owner may have to pay twice.
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Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
Lower Court “Eminently Reasonable” but Wrong in Construction Defect Case
July 10, 2012 — CDJ Staff
Noting that “circuit court’s orders are eminently reasonable, logical and just” the Supreme Court of Appeals of West Virginia has granted a writ to halt enforcement of these orders and to compel arbitration instead in the case of State v. Tucker. The initial case concerned claims that an HVAC system had been improperly designed, constructed, manufactured, or maintained, leading to serious problems. Glenmark Holding, the owner of the Suncrest Executive Plaza brought a lawsuit against seven defendants. Three of the defendants, Morgan Keller, Inc, York International Corporation, and Johnson Controls, Inc. argued that Glenmark was obligated to enter into arbitration.
Glenmark and the other defendants argued that the motions for arbitration should be denied “so all the claims and cross-claims of the parties could be litigated in one forum, in one proceeding.” The circuit court noted that arbitration is preferred over litigation because of its supposed “expeditious, economic resolution of issues,” but that in this case, “the petitioners would expend additional, not fewer resources responding to the parties’ claims and cross-claims.” As “compulsory arbitration would be insufficient and inequitable” the court denied the request, finding the arbitration clauses “unconscionable and, therefore, unenforceable.”
Morgan Keller, York, and Johson argued that “the interpretation of arbitration clauses is governed exclusively by the Federal Arbitration Act.” The appeals court found that “the circuit court was within its authority to consider Glenmark’s claim that the arbitration clauses were unenforceable.” However, the appeals court rejected the circuit court’s conclusion about the “piecemeal” resolution of the conflict, as it contradicts a Supreme Court ruling. The Supreme Court stated in 1983 that the FAA “requires piecemeal resolution when necessary to give effect to an arbitration agreement.” In a 1985 decision, the Court held that a court could “not substitute [its] own views of economy and efficiency.”
Nor could the court find the arbitration clause to be unconscionable or unenforceable. The court noted that the contract was a standard AIA form, and was amended by the parties involved, whom the court characterized as “commercially sophisticated.” The court found that the agreement limited the rights of all parties and was not one-sided.
As the arbitration clause was neither unconscionable nor unenforceable, and Supreme Court rulings preclude a court from substituting its own procedures, even when these are “eminently reasonable, logical and just,” the appeals court halted the order of the circuit court, sending the matter to arbitration.
Read the court’s decision…
Anti-Assignment Provision Unenforceable in Kentucky
December 20, 2012 — Tred Eyerly, Insurance Law Hawaii
On a certified question from the Federal District Court, the Supreme Court of Kentucky decided that an anti-assignment provision in a policy is unenforceable.Wehr Constructors v. Paducah Div. Assur. Co. of Am., 2012 Ky. LEXIS 183 (Ky. Oct. 25, 2012).
Before building an addition to its hospital, Murray Calloway County Hospital purchased a builder's risk policy from Assurance Company of America.The policy provided, "Your rights and duties under this policy may not be transferred without Assurance's written consent . . . ." The Hospital contracted with Wehr Constructors to install concrete subsurfaces and vinyl floors in order to expand the hospital. After installation, a portion of the floors and subsurface work was damaged. The Hospital submitted a claim to Assurance for $75,000, but the claim was denied.
Wehr sued the Hospital to recover money for its work on the construction project. In settling the case, the Hospital assigned to Wehr any claim or rights the Hospital had against Assurance.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
Arbitration Clause Not Binding on Association in Construction Defect Claim
June 19, 2012 — CDJ Staff
Determining that a community’s CC&Rs do not form an agreement to arbitrate, the California Court of Appeals has reversed the decision of the Superior Court inVerano Condo. Homeowners the Ass’n v. La Cima Dev., LLC (Cal. App., 2012). La Cima purchased an apartment complex in December 2004, which they converted into condominiums. In the process, La Cima created the CC&Rs, under which the Verano Condominium Homeowners Association came into being. One section of the CC&Rs included arbitration clauses. Additionally, the purchase agreements for individual condominium units also contained arbitration clauses. Subsequently, the owners became aware of construction defect both in units and in the common areas. The Association sued La Cima both in its own interest and on behalf of its members. La Cima moved to compel arbitration, which was denied by the trial court. La Cima appealed.
The court concluded that “CC&Rs are insufficient to form an agreement to arbitrate between La Cima and the Association.” The court noted that “no evidence exists to show the Association consented to the terms of the CC&Rs, either explicitly or implicitly.”
The court agreed with La Cima that the arbitration agreement applied to those owners who had purchased their units directly from La Cima. Moreover, as the conversion to condominiums involved interstate commerce, in part because a Delaware company was selling condominiums located in California, the court held that the Federal Arbitration Act (FAA) applied, and as such “even a state constitutional standard, such as the the jury waiver provision requirements of the California Constitution, cannot be used to circumvent the FAA in the face of an otherwise valid arbitration agreement.”
However, the court also held that there was “no agreement in the CC&Rs between La Cima and owners who did not purchase units directly from La Cima,” adding that “no meeting of the minds between La Cima and these later purchasers and their successors occurred.” The court did not believe that “the Legislature intended that CC&Rs would be used to provide continuing and irrevocable contractual development or role as a representative of the owners of the development.”
The purpose of the CC&Rs, according to the court are to “protect owners from one another and permit enforcement of its terms by the Association.” The court stated that “La Cima relinquished its interests in the land by selling its property and may not assert any rights under the CC&Rs following the transfer of its ownership interest.
In its conclusion, the court determined that claims must be organized in three classes. The claims the association made against La Cima for defects in the common area “are not subject to any valid agreement to arbitrate.” The second category are those owners who did not purchase their units directly from La Cima. Here, also, the court found that the units “are similarly not subject to a valid arbitration agreement.”
The third category, however, was “owners who purchased units directly from La Cima.” The court held that these arbitration agreements were valid, and if the claims were to be taken up by the association, the association could only submit these claims to arbitration. The lower court was instructed to separate these claims, as here La Cima’s motion could be granted.
Read the court’s decision…
Homebuilding Still on the Rise
December 20, 2012 — CDJ Staff
The National Association of Home Builders reports that spending on private homes was up three percent in October 2012, bringing it to a four-year high. This was part of a trend in which fourteen of the last fifteen months have seen increases in spending on residential construction. Likewise, multifamily residences have seen thirteen months of increased spending, putting it 82% higher than its low, two years ago. ¬?In addition to new homes, remodeling is also up, reaching its highest point in five years.
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