Here’s an excerpt of my post.

The recent changes to Va. Code §43-3 (effective July 1, 2012) clarify several points regarding the allocation of lien amounts to individual lots.  The main points of clarification are as follows:

• Common areas are explicitly excluded from the “denominator” of the lien allocation equation.  In other words, where there are 10 home sites and one common area, a site or utility contractor no longer needs to worry if it should allocate part of its lien amount to the common area and can safely allocate the amount owed to the ten home sites.
• Traffic signalization, and installation of electric, gas, cable, or other utilities are explicitly included in the definition of “site development improvements
• Any payments to the contractor for which the owner/developer does not designate a particular lot will apply to any previously sold lot and the remaining lots will continue to bear their share of the liability.

Check out the entire post and thanks to Scott Wolfe for giving me the opportunity, yet again, to post at his great mechanic’s lien resource.

As always, I welcome and encourage your comments below, please share your thoughts.  Also, please subscribe to keep up with the latest Construction Law Musings.

© Construction Law Musings- Richmond, VA is licensed under a Creative Commons Attribution-No Derivative Works 3.0 U.S. license.

ConsensusDOCS General Contracting Contractual Relationships (Photo credit: Wikipedia)

I have discussed the ConsensusDOCS here at Musings on a few occasions.  These relatively new form documents, endorsed by the AGC among other trade organizations, are a great counterpoint to the AIA documents that we all are more than familiar with and as construction attorneys and contractors have likely reviewed on numerous occasions.

Recently, these documents have joined the parade and have taken to the cloud.  The folks at ConsensusDOCS made this move to ease the type of collaboration that I have discussed must occur on construction projects among the players.  The use of the cloud based technology is one of the first uses of this technology to increase productivity.

Of course, like with any form documents, either use the ConsensusDOCS as written or not at all because they have been drafted to work together as written.  Changing the wording of any set of form contracts in places aside from the “fill in the blank” areas can only lead to inconsistencies and work for your lawyer should something go wrong.

I encourage you to review the ConsensusDOCS and poke around the new web based interface and then come back and let me know what you think.

As always, I welcome and encourage your comments below, please share your thoughts.  Also, please subscribe to keep up with the latest Construction Law Musings.

© Construction Law Musings- Richmond, VA is licensed under a Creative Commons Attribution-No Derivative Works 3.0 U.S. license.

Musings will be leaving the “green” reservation for a bit and discussing more mundane, though no less relevant, issues that arise in the construction world.

One interesting note is that the Virginia Storm Water Regulations were recently updated and are open to public comment. If you are affected by these regulations, be sure to make your voice heard.

On the construction law front, the Virginia courts are busy as always.  Two recent cases stand out to me.  The first is a Virginia Supreme Court case, Dunn Construction Company, Inc. et. al. v. Cloney.  In Dunn Construction, the home builder admittedly failed to meet the plans and specifications when constructing the home, in particular the foundation wall.  The contractor then “repaired” the wall and claimed openly that it had filled the repaired wall with rebar and reinforced the “cells” with concrete. After this representation (that turned out to be false), Mr. Cloney got a structural engineer to inspect the wall and determined that the contractor did not do what he said he’d done.  Of course, litigation ensued.  Along with the compensatory damages for breach of contract, the trial court granted Mr. Cloney punitive damages for the fraud of the contractor.  The Virginia Supreme Court reversed the punitive award, and restated its long standing position that where a duty comes from a contract, no common law tort action can go forward.

What makes this case interesting is it’s extension of the so called “economic loss rule” to a case of a representation that is seemingly outside of the contract itself. Dunn Construction represented, after the contract was supposedly complete, that it had performed certain remedial measures that were not readily apparent from a visual inspection.  Despite this fact, the Court found the duty to repair and honestly state the extent of the repairs arose from the contract, i. e. without the contract, the representation never would have occurred, and therefore a tort action for fraud could not go forward and punitive damages were unavailable.

The second case of note is Abacus Construction Company, Inc. v. Milestone Construction Services, Inc..  Without going into the major details of each and every claim and back charge involved in Abacus, suffice it to say that both sides had “change orders” that constituted a majority of the claims in the case.  The Court went through each claim, compared it to the contract language and the scope of work outlined in the contract before determining if the additional charges were allowable.  Much of Abacus’ claim was disallowed because “change orders” either were not in writing or described work that fell within the original scope of the contract.  Additionally, the terms of the contract at issue allowed Milestone to recover 10% overhead on their back charges and its attorney fees.

The takeaway from these two cases? The Dunn Construction and Abacus Construction cases show just how serious the Virginia courts are about contracts.  Your contracts are essentially the “law” for your project.  As a contractor or subcontractor, the contract is the road map for all of your remedies and risks, so they need to be taken seriously and drafted carefully.  Musings has discussed the importance of contracts on numerous occasions, and the Virginia courts consistently re-emphasize this importance.  To make sure that these contracts are drafted properly and used correctly, get the assistance of an experienced construction attorney.

As always, your comments are welcome and encouraged.  If you find this interesting, please subscribe to keep up with this and other Construction Law Musings.

Image from FreeFoto.com.

© Construction Law Musings- Richmond, VA is licensed under a Creative Commons Attribution-No Derivative Works 3.0 U.S. license.

UT Dallas 74,000-square-foot (6,900 m2) Student Services Building (Photo credit: Wikipedia)

As readers of Construction Law Musings can attest, I am an enthusiastic (if at times skeptical) supporter of sustainable (or “green”) building.  I am solidly behind the environmental and other benefits of this type of construction.  However, I have likened myself to that loveable donkey Eeyore on more than one occasion when discussing the headlong charge to a sustainable future.  While I see the great benefits of a privately built and privately driven marketplace for sustainable (I prefer this term to “green” because I find it less ambiguous) building stock and retrofits of existing construction, I have felt for a while that the glory of the goal has blinded us somewhat to the risks and the need to consider these risks as we move forward.

Another example reared it’s ugly head recently and was pointed out by my pal Doug Reiser (@douglasreiser) at his Builders Counsel Blog (a great read by the way).  Doug describes a project that I mentioned previously here at Musings and that is well described in his blog and in a recent newsletter from Stuart Kaplow (@stuartkaplow), namely, the Chesapeake Bay Foundation’s Philip Merrill Environmental Center project.  I commend Doug’s post for a great description of the issues, but suffice it to say that the Chesapeake Bay Foundation sued Weyerhauser over some issues with a sustainable wood product that failed.  While the case was dismissed on statute of limitations grounds, the case illustrates issues that arise in the “new” sustainable building world.

While at bottom, the legal considerations for us construction attorneys are not all that different (breach of contract, construction defects, failure to meet plans and specifications), some of the risks inherent in the process are either new or old ones wrapped in new materials.  In short, we’re using old materials in new ways and using new materials that hadn’t been used before in these types of projects.  This means that we don’t have the years of engineering data to back up proper use of these materials and this can lead to issues over time.

My fear is not that energy efficiency and other benefits of sustainable building will not be met, but that failure to see and anticipate these risks will lead to setbacks in the process. On major problem with a “green” project (LEED or otherwise) will do more to slow the process than taking our time and doing things right the first time.  As my dad used to say:  its better to be 5 minutes late than speed to be there “on time” and get a speeding ticket that slows you down even more.

Thanks again to Doug and Stuart and please let me know your thoughts.  Am I off base?  What do you think?

As always, I welcome and encourage your comments below, please share your thoughts.  Also, please subscribe to keep up with the latest Construction Law Musings.

© Construction Law Musings- Richmond, VA is licensed under a Creative Commons Attribution-No Derivative Works 3.0 U.S. license.

Here’s a short excerpt:

As a litigator and counselor I almost (though not quite) always recommend mediation at some point during the process. A majority of the time, the infusion of the mediator’s perspective results in a settlement if not that same day, then later. In those rare cases where mediation has not resulted in a settlement, the process has been worthwhile.

In general, my experience with construction mediation is quite positive. Without going into many of the details (for more on my thoughts, check out the ADR Page at Construction Law Musings), mediation allows the flexibility and freedom for business people to make business decisions that result in a more satisfactory result than the lost time, expense and uncertainty of litigation.

For the whole post check it out here.

As always, I welcome and encourage your comments below, please share your thoughts.  Also, please subscribe to keep up with the latest Construction Law Musings.

© Construction Law Musings- Richmond, VA is licensed under a Creative Commons Attribution-No Derivative Works 3.0 U.S. license.

Image via Wikipedia

On at least one occasion here at Construction Law Musings, I have discussed the need to operate your business as a corporation or LLC.  The primary reason that I, as a construction attorney, recommend this is for the liability protection against attacks on your personal assets.  Proper use of incorporation can and does protect your home and other personal assets from attack by creditors with a firewall of sorts that separates your business liabilities and assets from your personal ones.

However, the Henrico County, Virginia Circuit Court recently reminded us all why I italicized “proper” in the last sentence.  In ACE Electric Co. Inc. v. Advance Technologies Inc., the Virginia court considered a lawsuit by ACE Electric against Advance, a defunct engineering firm, and the owner and principal of Advance, Erik Butler.  The suit revolved around the improvement of boilers at the University of Richmond, here in my home town.  The essential facts are that Mr. Butler assured ACE and the university that his company was well qualified to take on the project.  As the project progressed it became abundantly clear that the assertions were untrue.

Under most circumstances, even in a case such as this where fraud could have been alleged, the claims against the principal of the company would not have worked out for the plaintiff.  However, in a somewhat unusual decision, the Henrico, VA court found that, aside from failing to keep separate corporate and personal books and failing to maintain the “corporate formalities” required for the basic protections,

[I]t would work a profound injustice to allow Mr. Butler to escape liability for repaying this debt

In short, the court allowed ACE to “pierce the corporate veil” and attack Mr. Butler’s personal assets.  Such a result was clearly much better for ACE because its judgment will not go into the trash heap of judgments against defunct or judgment proof companies (barring an appeal and reversal).

The takeaways?  First, always explore the possibility of veil piercing of the type found in this decision, you may be able to get better leverage and a more collectable judgment.  Second, and possibly most importantly, assure that you as a construction company take the fairly minimal steps necessary to assure that your company is protected against just this sort of attack.  Make sure that you keep your corporate and individual books, expenses, liabilities and assets separate (particularly in the case where you, like me, are either the only member of the company or are in a small company that passes through its taxable income).  Also, assure that you keep a paper trail of corporate formality intact with the State Corporation Commission.

Taking these fairly simple steps and with the help of an accountant and attorney, incorporation will provide solid protection against those wishing to attack your personal assets.  As the ACE decision described above reminds us all, failure to take these steps can lead to disaster.

As always, I welcome and encourage your comments below, please share your thoughts.  Also, please subscribe to keep up with the latest Construction Law Musings.

© Construction Law Musings- Richmond, VA is licensed under a Creative Commons Attribution-No Derivative Works 3.0 U.S. license.

Painted relief map of the state of Virginia. (Photo credit: Wikipedia)

With the economy the way that it is, my mechanic’s lien practice (and bond claim practice for that matter) is thriving.  Interestingly, the recent uptick in the construction economic landscape here in Virginia caused me to get more, rather than fewer, calls requesting help with the filing or defense of mechanic’s liens.

As I go through each of the claims with the proverbial fine toothed comb (and with an eye to the fact that these creatures of statute are tricky beasts) I am struck by the fact that the owner of the construction project listed on the construction contract is often a different person or legal entity than the entity that owns the ground under the building.  This issue is more complicated when your work is only on a portion of a property that houses multiple street addresses.

As is clear from the mechanic’s lien statute (Va. Code 43-1 and following) that failure to properly name the owner of the property can be fatal to the lien, getting this preliminary question answered correctly is key.

Because even the seemingly simplest of commercial construction projects can have these types of wrinkles, every Virginia construction lawyer needs to be sure to get a title search performed on the property by a well qualified title examiner.  If you, as the attorney, are qualified to do so, then even better.  Just make sure that you’re thorough and know the recording systems of the county or city clerk’s office in the jurisdiction where you plan to record your lien.

In sum, be sure to thoroughly check the title of the land under the project prior to recording a lien, you will be glad you did.

PS- Check out the ALPS411 blog for my latest post on May 2, 2012

As always, I welcome and encourage your comments below, please share your thoughts.  Also, please subscribe to keep up with the latest Construction Law Musings.

© Construction Law Musings- Richmond, VA is licensed under a Creative Commons Attribution-No Derivative Works 3.0 U.S. license.

Newport News, Virginia U.S. Post Office and Court House (1941) (Photo credit: Wikipedia)

Well, I’m back from vacation and almost dug out from under the stack that was on my desk when I returned and can now get back to Musings.  Thanks for awaiting my return (I’m sure it was with baited breath )

I have spoken here at Construction Law Musings on the Dragas line of cases that essentially came to the conclusion that no good deed goes unpunished.  Just last week, while I was happily at the beach, the Eastern District of Virginia Federal Court decided a case that required an insurer to defend a Chinese Drywall claim against a general contractor.

In Builders Mut. Ins. Co. v. Parallel Design & Development LLC the Court considered a declaratory judgment action by the insurer, Builders Mutual, where the insurer attempted to utilize the “Your Work” and pollution exclusions to try and avoid providing a defense to Parallel.  In that case, a homeowner filed a claim in Virginia state court seeking damages for the health and other noxious effects of the Chinese drywall found in her home and for the cost of medical monitoring required due to these effects.  Of course, Parallel sought to invoke its rights under its insurance policy.

Upon hearing the arguments by Builders Mutual (many of which were strikingly similar to those made in the Dragas cases), the Newport News, VA division of the Eastern District of Virginia determined that Builders Mutual did have to provide a defense and possible indemnity for these damages.  In making this decision, the Court determined that the term “pollutant” found in the policy was ambiguous and therefore the ambiguity worked against the insurer.  Furthermore, it determined that the localized nature of the issue made this particular type of noxious emission fall outside of the typical environmental pollution.

The Court went on to conclude that because some, if not all, of the claims made by the homeowner fell outside of the property damage scope of the “Your Work” exclusion in the policy, Builders Mutual was obligated to defend Parallel.  In short, Builders Mutual was on the hook to provide a defense.

Without seeing the particular language of the policy at issue, I cannot give my take on why this conclusion was different from some of those in the Dragas cases.  All I can say is that a careful reading of your CGL policy with the help of an experienced construction attorney is key to arguing these types of claims.

What are your thoughts?

As always, I welcome and encourage your comments below, please share your thoughts.  Also, please subscribe to keep up with the latest Construction Law Musings.

© Construction Law Musings- Richmond, VA is licensed under a Creative Commons Attribution-No Derivative Works 3.0 U.S. license.

I have spoken on many occasions here at Construction Law Musings and elsewhere about the risks and rewards for contractors found in sustainable construction.  The rewards were fairly apparent.  New markets, government incentives and the desires of owners to be “green” clearly point toward a need for contractors to get into the sustainable building game.

However, when I was first writing my Eeyore like thoughts most of the thoughts of all us construction attorneys were speculative.  Whether because wholesale “green” construction was relatively new or because the court process was relatively slow, there were not many ways to test if our, shall we say “less optimistic,” predictions were going to come to pass.

For better or worse, several of the more dire predictions have come true.  One major green construction debacle is the Destiny USA litigation.  I cannot possibly set out all of the various issues as well as my friend and colleague Chris Cheatham does in his e-book about the project and its aftermath (.PDF).  I highly recommend this e-book and the posts found at Chris’ Green Building Law Update blog for those of you interested in how the IRS, the USGBC and the Green Bonds Program interact to cause many a pitfall for construction and design professionals.

Another scenario that has always been at the back of my mind is the potential liability found in the engineering aspects of these construction projects.  As I have said before, contractors, subcontractors and engineers are all interacting with new building materials or using tried and true materials in new ways.  This type of innovation is both laudable and risky.  Without years of engineering data or an eye toward the potential future issues, AEC professionals can get caught in a liability bind.

This scenario came to a head in the case of the Chesapeake Bay Foundation building in Montgomery County, MD.  In that case (described well at GBLU), the Foundation wanted “green” building materials in their local headquarters.  The Foundation then used “green” Parallams in the construction of the roof truss system (among other elements of the building) in order to meet its goal.  Despite assurances from the supplier of the parallams, a Weyerhauser subsidiary, that these beams would survive exposure to the elements, the parallams began to rot and the building became potentially unsafe.  Needless to say litigation ensued.

At the risk of sounding like I’m saying “I told you so,” these scenarios are just the sort of scenarios that my colleagues and I have been discussing.  I am far from happy to be among a group of folks that have been shown to be correct.  I am fully behind the move to sustainable building and do not want to see these hopefully isolated incidents put a damper on that laudable movement.  However, these examples show the need to anticipate risks and work with construction attorneys, architects and engineers knowledgeable in the practical and legal aspects of risk management in sustainable building.

On a more optimistic note, and despite the title of this post, I do not believe that the sky is falling.  If anything, these incidents should give us the ability metaphorically get our umbrellas up and anticipate these risks better in the future.  With the added knowledge that these cases provide, we can carefully move forward to a future in construction with a strong sustainable base.

As always, I welcome and encourage your comments below, please share your thoughts.  Also, please subscribe to keep up with the latest Construction Law Musings.

© Construction Law Musings- Richmond, VA is licensed under a Creative Commons Attribution-No Derivative Works 3.0 U.S. license.

(Photo credit: Wikipedia)

As you read this, I am happily taking a break from my construction law practice and hanging at the beach enjoying some spring break fishing and family time on Sanibel Island, Florida. Musings will pick back up again next week.

In the meantime, check out the recently added Alternate Dispute Resolution page to hear my thoughts on construction mediation and arbitration.  Also, be sure to read the Guest Post Friday page to catch up on some of the great contributions from my friends in the construction, Web 2.0 and legal worlds.

Thank you for your continued readership and I’ll see you next week.

Please join the conversation with a comment below.  Also, I encourage you to subscribe to keep up with the latest Construction Law Musings.

© Construction Law Musings- Richmond, VA is licensed under a Creative Commons Attribution-No Derivative Works 3.0 U.S. license.