Thoughts on construction law from Christopher G. Hill, Virginia construction lawyer, LEED AP, mediator, and member of the Virginia Legal Elite in Construction Law
Unfortunately, developer bankruptcies are very much in the news these days. This news, while unsurprising in today’s economy and given the housing issues that hit last year, can give heartburn to those contractors that perform the site work, pave the roads, and of course build the houses at these developments. Like Musings has discussed before, bankruptcy of an owner or developer is a real possibility for which contractors and subcontractors must prepare.
However, contractors in Virginia may have a silver lining for the bankruptcy cloud. Virginia mechanic’s liens, being creatures of statute, survive bankruptcy and remain in force even after the owner of the property files for bankruptcy. Even more importantly, the 6 month statute of limitations on filing a case to enforce your mechanic’s lien stops running as of the date that bankruptcy is filed.
Even more importantly, aside from certain specific situations, mechanic’s liens in Virginia gain priority over all other secured liens.
In short, in today’s climate, contractors should not feel that they are completely helpless in the bankruptcy fight. Filing a mechanic’s lien after consultation with an experienced attorney can put a contractor or subcontractor in as good a position as possible should he owner of a project file for bankruptcy.
Please comment below, or subscribe to Musings if you find this of interest.
For this weeks Guest Post Friday, Musings welcomes Matthew DeVries. Matt is the author of www.bestpracticesconstructionlaw.com, is a construction attorney in Nashville, Tennessee. He is a father of five energetic children and he often uses his family experiences to shed light on the green building, sustainable design, technology and project management issues discussed in his blog. You can reach him at (615) 742-8577, mdevries@smithcashion.com, or on Twitter: @matthewdevries.
You’ve already met my eleven year old Princess. Many months ago, I was teaching my kids about grace … undeserved merit or favor. Well, my daughter was stalling and delaying on eating her meal … by almost an hour. So, naturally, I saw this as a teachable moment.
“Honey, do you remember when we were talking about grace this week? Although you should eat all your food, I am going to show you some grace tonight. Even though you don’t deserve it, I am going to eat the rest of your chili for you.” How nice of me. I proceeded to spoon the rest of her chili into my bowl. Happy tummy!
Without skipping a beat, my inquisitive daughter asked, “Dad . . . You got any grace for my broccoli?” Nice.
While we continue to joke about that evening, I am reminded that too many times we fail to get something because we fail to “ask” for it. And when we ask for it, we sometimes fail to ask for it properly. Having litigated construction disputes for many years, the issue of entitlement often turns on whether the contractor properly submitted its claims in accordance with the terms of the parties’ contract. Whether the dispute involves a change order, delay damages, or time extension, I have litigated too many claims for additional compensation or time where: (a) the request was never made; (b) the request was not timely made; or (c) the request was not properly made.
As an attorney, I try to teach all my clients that proper documentation primarily serves as a claim preservation method—whether to provide notice of the claim or to document the claim impact. No matter the size of the project, proper documentation will eliminate a number of disputes. For example, consider the following claim provision: “Any claim for additional time must be given within seven days of the event given rise to the delay.” Best Practices would teach you to outline and highlight these types of provisions in your contract documents before you start contract performance. Make a spreadsheet with key provisions. And when one of those “events” arise, you should immediately send your letter “asking” for additional time or, at a minimum, “preserving” your right to later seek additional time and money. Don’t wait until the lawsuit or demand for arbitration before giving notice of your claim.
In other words, if you want someone else to eat your broccoli … you have to ask for it!
As always, please join the conversation and subscribe if you want to keep up with this and other Guest Post Friday posts.
For this week’s Guest Post Friday here at Construction Law Musings, we welcome Vickie Lane. Vickie is the primary point of contact for Business Development with HAZMAT Plans & Programs, a consulting and training firm that also works under the name of HP&P Safety. Vickie’s functions with HP&P include extensive pre-project research and support though estimating, planning and cost administration. Vickie attended Ohio State University and now enjoys her role as a first time grandmother and spending free time up in the Colorado Rocky Mountains. Vickie can be reached at vlane@hppsafety.com or on Twitter @HAZMATPlans and @hpandpsafety.
Most of us perceive hazards on a construction site to be those that can be readily visualized or perhaps easily imagined, like trench cave-ins or falls from heights. These are the obvious, but what about the nocuous, microscopic hazards that can’t be seen by the human eye, but can destroy the health of your workers? Welcome to the world of hazardous materials.
The inherent danger associated with hazardous substances is workers might not be not aware of exposure. Think of a snake in the dark scenario. If it is a rattlesnake, you have warning before the bite. A cobra on the other hand gives no such warning and the bite can be fatal. So it can be with hazardous and toxic substances.
A few things to know:
1. OSHA does not use the term HAZMAT. OSHA refers to hazard materials as “hazardous and toxic substances”. HAZMAT is the term used by the DOT to refer to hazardous materials in transport.
2. Standards that can apply to hazardous substance include OSHA, EPA, RCRA, your state’s Department of Health and Environment, and if in transport to or from locations, large quantities fall under DOT and PHMSA. NIOSH has a wealth of health and safety information on work around toxic and hazardous substances.
NIOSH also provides studies of workplaces if workers or employers feel there has been exposure to hazardous and toxic substances. This work is done under their Health Hazard Evaluation Program. More information on the HHE program can be found at http://www.cdc.gov/niosh/hhe/HHEprogram.html.
3. Hazardous substances can be found in many shapes and forms including particulate, gas, vapor, mist, liquid, and dust. Workers’ exposure to toxic substances can come from inhalation, skin contact, ingestion or eye contact. This is where it is extremely important for contractor adherence to OSHA’s standards for Personal Protective Equipment. The right gloves and respirators can be life savers.
4. Identify the hazardous substances in your workplace. Lead, Asbestos, Silica, Isocynates are a few of the most common forms of toxic substances found on a construction site. Excessive exposure to any of these can result in respiratory problems, lung damage, nervous system damage and future respiratory arrest……also, don’t forget the dust on your work clothes can endanger your family’s health too.
5. Once again, remember multiple regulatory standards may apply. OSHA standards apply with a current National Emphasis Program on Asbestos, Lead and Silica. The EPA and “Your State” Department of Health also have regulations with an emphasis on Lead and Asbestos in construction. Disregards regulations on work around on any of these hazardous substances and you could be looking at fines and penalties from OSHA, EPA and “Your State” – Not to mention the potential of lawsuits from workers and possible public exposure!
6. Earthwork may involve soil contaminated with heavy metals or minerals. OSHA requires HAZWOPER training for any workers who may be exposed to hazardous substances. 24 Hour training is required for the Occasional Site Worker such as project managers or truck drivers. 40 Hour HAZWOPER training is required for those who actually have the potential to exposure while working in the contaminated soil…..when calling for training, remember HAZWOPER not HAZMAT training. We consultants can be easily confused!
7. Keep a copy of MSDS sheets at the jobsite and in the main office. Also, be sure to have a Hazard Communication Program and if need be, Respirator Program in place. Employees who require respirators for work will also need to be trained and Fit-Tested. A medical evaluation is required prior to fit-testing for all employees whose work will involve mandatory use of respirators and is suggested for those who voluntarily use elastomeric face pieces.
8. Ensure that your Emergency Action Plan is up-to-date and in place. Think BP. Need I say more? An EAP not only can protect your workers but our environment.
Work around hazardous and toxic substances can be complex and complicated. Proper planning, education and PPE will help to protect your workers from that “snake in the dark”. For more information, OSHA 29 CFR 1926 Subpart Z, Toxic and Hazardous Substances and OSHA 29 CFR 1926.65, Gases, vapors, fumes, dusts and mists.
As always Vickie and I welcome your comments below.Please subscribe to keep up with this and other Guest Post Fridays at Construction Law Musings.
Previously in this on-again-off-again series of posts on construction contract basics, I discussed attorney fees provisions and indemnification. In this installment, the topic at hand is venue and choice of law.
As construction professionals (outside of us construction attorneys), you are likely to be focused on things like the scope of work in a construction contract, the price terms, payment, delays, change orders, and the like. However, the venue (where any lawsuit or arbitration will have to happen) and the choice of law (what state’s law applies) can be equally important. You need to know where you will have to enforce your rights under the contract and also what law will apply. Will you need to go to another state to enforce your rights? Even if not, will your local attorney have to learn the law of another jurisdiction? These are important questions when reading and negotiating your prime contract (if with the owner) or subcontract (if with the general contractor). Continue reading Construction Contract Basics: Venue and Choice of Law
For this week’s Guest Post Friday, Musings is privileged to have a good friend Rick Provost weigh in. Rick has over 20 years of experience helping to build the country’s largest design/build franchise network specializing in exterior home improvement. Formerly the President and CEO of Archadeck®, Rick now provides his franchising expertise through The Consultancy, a consulting firm specializing in business systems development for contractors. Rick also is a facilitator, coach, and consultant for Business Networks, a peer-review network for remodelers and insurance restoration contractors, and a columnist for Remodeling Magazine Online.
While at a recent conference of the Restoration Industry Association (RIA), I heard several contractors complain about remodelers and home builders attempting to get into the insurance restoration business. With head-shaking disdain, they remarked that the restoration business isn’t as simple as builders think. And they’re right.
But that’s not what some would have us believe. Shortly after the conference, I found a Website advertising a book that would teach contractors the Six Easy Steps to becoming an insurance restoration contractor, including how to achieve a remarkably precise 87.62% bid success rate, with HUGE PROFITS. BIG, FAT, WONDERFUL 20% to 40% PROFITS!
A few of these “easy steps” remind me of the first half of comedian Steve Martin’s joke about how to become a millionaire and never pay taxes: “First…get a million dollars.”
Easy Step 1 is to “Establish a relationship with the proper insurance company ‘insider’, known as an adjuster.” Go ahead and establish that relationship. However it helps to have knowledge of the special procedures unique to restoration work. Easy Steps 2 through 6 are to analyze the damage, perform the repair cost analysis, obtain an agreed scope and price from the insurance adjuster, set up the contractual relationship, and then proceed with the repairs. Bingo!
Let’s isolate just one of those “easy” steps. An insurance estimate is scoped and priced differently than a remodeling job, usually using the Xactimate software program, which requires special training. If you’re a participant in an insurer’s program, they will pay your cost based on Xactimate’s pre-set values plus 10% markup — not margin — for your overhead, plus 10% for profit. (Pause for laughter.) Money is made in this business, to be sure. But could you make money in your business if you used that formula, literally?
Now, perhaps I’m being cynical. Maybe it is easy to dive into 24-hour emergency response and restoration of water, smoke, and fire damage. Maybe you have the equipment to perform content inventory and pack-out, fire damage demolition, smoke mitigation, mold remediation, gray and black water mitigation, and even (shudder) trauma scene cleanup. But I’ve made my point. Restoration work is a completely different animal than remodeling.
Different, that is, until you get to the “put-back” or rebuilding step. This is where the remodeling industry intersects with the restoration industry. Put-back means what it implies–replacing the structure and finishes to their original state: framing, insulation, drywall, trim, flooring, painting, and so on. Margins are typically lower than for mitigation work because put-back requires management and technical skills that cost more in the marketplace. This would obviously dilute a restoration contractor’s blended margin if he carried the fixed costs necessary to perform that kind of work. Therefore, many choose not to pursue it. But it’s also the type of work that matches a remodeler’s skills and resources.
Given the state of the remodeling industry right now and for the foreseeable future, this may present an opportunity for you to subcontract for a local restoration firm that does not currently perform the put-back portion of insurance claims work. The difficulty will be in convincing them that their company’s good name will not be tarnished by your failure to perform acceptably. That’s a hot-button issue, as their business relies on maintaining a satisfactory reputation among the insurance adjusters who feed them work. One bad job could undo years of goodwill.
So if you can demonstrate why there would be no risk in subbing to your company; or if you’re willing to become an employee, there might be an opportunity for steady work through this protracted slowdown. After all, fires and burst pipes don’t care about the economy.
(P.S. The second half of Martin’s joke is “Then say… ‘I forgot!’”)
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