law – Construction Law Musings- Richmond, VA

A Lien By Any Other Name Can Sound Just As Sweet

Originally posted 2014-08-04 09:00:11.

For this weeks Guest Post Friday here at Musings, we have our first three time guest poster. Scott Wolfe, Jr. (@scottwolfejr on Twitter) is a construction lawyer practicing in Washington, Oregon and Louisiana. He is the founding member of the bi-coastal construction law boutique practice, Wolfe Law Group. He is also the founder of Express Lien, a nationwide lien service that offers a free web-based preliminary notice and lien management software. Check out his great blogs on various areas of construction law.

Nearly everyone in the construction industry has heard the term “lien” thrown around on a project. Depending on the type of project being constructed, however, the lien-like remedies available to you may differ significantly.

This post discusses the types of lien or claim remedies available to contractors, suppliers and laborers on the three classes of construction projects: private, state and federal. This post discusses the concepts broadly, and does not focus on the law of any particular state. Remember that laws differ from state-to-state, and it’s important to consult the laws applicable to your project.

The Lien – Private Works

When you think of the term “lien,” you are likely thinking of the remedy available to unpaid parties on a private construction project.

In most states, when a party provides labor and/or materials to an improvement, and the party is not paid, the law allows that party to file a lien on the property itself and claim a privilege thereon (similar to a mortgage privilege held by a bank on mortgaged property).

This is the key difference between a private lien and a public claim. Unlike most public claims, a private lien actually gives the unpaid party a privilege upon the property. Most states then allow the lien claimant to bring a proceeding against the property owner to foreclose on the lien (and thus, the property).

To acquire this powerful privilege, many states require contractors to send pre-lien notices. The notice may be due before work begins or immediately thereafter, and other notices may be due immediately before filing the lien itself.

The first step to knowing the notice requirements in your state, however, is knowing the type of lien you’ll file on a project. It’s something you’ll want to understand from the start of your work.

Claims on State Projects

Most states do not allow “liens” to be taken against property owned by the state. Accordingly, the traditional “lien” that can be filed on a private work cannot be filed on a public work.

However, this does not leave unpaid contractors, suppliers and laborers without a remedy.

Normally, a state project will require the general contractor to post a bond in an amount sufficient to pay for the claims of all subcontractors, laborers and suppliers. In the event you’re unpaid on a state project, most states allow the unpaid party to file a claim against that bond.

Usually, this process is referred to as filing a claim, as opposed to filing a lien.

Three key things to keep in mind when working on a state project:

(1) Like a private lien, state projects may also require you to send pre-claim notices, so familiarize yourself with those requirements;

(2) Like a private lien, you will only have so long to assert your claim against the bond, so do it timely; and

(3) It’s important to know the name of the surety and the public entity in charge of the work, as you’ll be required to notify these parties of your claim. Have this information from the start of construction, or request it from the general (you’re entitled to know).

Claims on Federal Projects

Like property owned by the state, property owned by the federal government cannot be liened. Unpaid contractors, suppliers and laborers must bring a claim against the general contractor’s bond, through what is referred to as a “Miller Act Claim.”

To make a claim under the Miller Act, first tier subs and suppliers must bring suit against the bond within 1 year from last furnishing labor and/or materials, and must deliver notice to the owner and/or surety. Second tier subs and suppliers to first tier subs must deliver a Miller Act Notice to the prime contractor within 90 days from last furnishing labor and/or materials to the project, and a suit must be brought within 1 year of last furnishing labor and/or materials.

Again, as it is true with state projects, it’s important to know the name of the surety and the public entity in charge of the work. If it’s not provided to you, you can request it.

Conclusion

Regardless of what class of project you’re working on, a lien-like remedy is probably available to you in the event of non-payment. However, it’s critical to understand the different remedies available at the onset of construction, for each remedy carries different pre-lien or pre-claim requirements.

As always, both Scott and I encourage your comments below. I also encourage you to subscribe to keep up with this and other Guest Post Fridays at Construction Law Musings.

Musings on Guest Post Fridays

Originally posted 2015-03-17 10:06:58.

When I first got the idea of “Guest Post Fridays” back in early 2009 and then launched it with a great post from Scott Wolfe of The Wolfe Law Group (@scottwolfejr), I had no idea that it would take off in the way that it has. Now, almost 2 years and 90 posts later, Construction Law Musings has had the privilege of a wealth of perspectives on, among other topics, mediation (thanks Vickie Pynchon and Ron White), green building (thanks Chris Cheatham, Shari Shapiro, and James Bedell to name three of many), insurance (thanks Martha Sperry and Mark Rabkin), general perspectives on construction topics (thanks Doug Reiser, Melissa Brumback, among many others) and even the occasional interview.

While it is impossible to list all of you who have contributed to Guest Post Fridays here at Musings (please use the link above to review all of these posts and see who else has contributed) and to thank you individually, please know that each and every one of your contributions have made Construction Law Musings a more vibrant and interesting place to visit. The opportunity to work with such varied, intelligent, and insightful people over the last year has been wonderful. With each post I learn something new.

Without these contributions to add a layer of color that I could not provide alone, Musings would just be another blog about construction law by a Virginia lawyer. With them, Musings is a fun place to hang out and learn. To those who have posted here in the past, the door is always open for a repeat posting, just give me a buzz with a topic and when you can do it.

In short, thank you to all of you who have contributed since this experiment began and I look forward to hearing what you all have to say in the future.

Image via stock.xchng

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

Fraud, the VCPA and Construction Contracts

Originally posted 2014-11-10 09:36:15.

I’ve discussed the economic loss rule here at Musings on several occasions. The economic loss rule basically states that where one party assumes a duty based in contract or agreement, the Virginia courts will not allow a claim for breach of that duty to go forward as anything but a contract claim. This doctrine makes fraud claims nearly, though not absolutely, impossible to maintain in a construction context. In a majority of instances, fraud and construction contracts are very much like oil and water, leaving parties to fight it out over the terms of a particular contract despite actions by one party or the other that non-lawyers would clearly see as fraud.

However, a recent case decided by the Virginia Supreme Court gives at least some hope to those who are seemingly fooled into entering a contract that they would not other wise have entered into. In Philip Abi-Najm, et. al, v Concord Condominium, LLC, several condominium purchasers sued Concord under for breach of contract, breach of the Virginia Consumer Protection Act (VCPA) and for fraud in the inducement based upon flooring that Concord installed that was far from the quality stated in the purchase contract. Based upon these facts, the Court looked at two questions: 1. Did a statement in the contract between Concord and the condo buyers create a situation in which the merger doctrine barred the breach of contract claim, and 2. Did the economic loss rule bar the VCPA and fraud claims?

After analyzing the merger claim and determining that the merger doctrine did not bar the breach of contract claim, the Court moved on to its analysis of the VCPA and fraud in the inducement claims. In both instances, the Court determined that the causes of action would stand. It reasoned that the VCPA created an independent statutory requirement making it unlawful to misrepresent that goods are of a particular quality. Because this duty arose independent of the contract, the claim was not barred by the economic loss rule.

Similarly, the fraud in the inducement claim was not barred because the plaintiffs alleged that Concord deliberately misrepresented the quality of the flooring knowing that it would likely cost Concord the sales if it disclosed the actual quality of the floors. In short, the fraud, as alleged, was independent of the contract because it was conceived to bring buyers in despite Concord’s having no intention to follow through on the quality of the floors.

The lesson here is that pleading matters and that not all is lost for a consumer or home buyer that thinks that he or she is subject to fraud. However, the devil is in the details and in the details put into the pleadings. Without pleading some independent duty outside of the contract, any fraud or other non-contract claim will fail. The advice of an experienced Virginia construction attorney will help you parse through the facts and properly package them for presentation to the Court.

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.

E-Mail Can Waive Arbitration (sometimes)- A Cautionary Tale

Originally posted 2010-12-11 10:00:10.

We have discussed arbitration clauses at length here at Musings. From the judicious use of these clauses to help resolve disputes to waiver of rights under these clauses through inaction, arbitration clauses permeate the construction landscape. A recent case out of the Western District of Virginia Federal Court adds a new wrinkle to this analysis. In Protherapy Associates LLC v. AFS of Bastian, Inc et al, the Court considered an arbitration clause in a service agreement.

In this case, the Plaintiff provided therapy services to residents of nursing homes. It sued for breach of a contract that included a standard arbitration clause stating that all disputes relating to the contract are to be resolved through arbitration. Subsequently, the parties reached a settlement agreement through e-mail negotiation. The agreement, again in e-mail form, stated the amounts to be paid to the plaintiff by the defendants and on what schedule. The settlement e-mail also stated that any dispute relating to the non-solicitation provisions of the contract would be resolved in the Western District of Virginia Federal Court. However, this final e-mail did not provide for any particular jurisdictional requirements for payment disputes and explicitly left any unchanged portions of the original contract in full force.

The defendants brought a motion to compel arbitration under the original contract. The Court denied this motion relating to the non-solicitation claims and granted it as to the payment dispute. The Court reasoned that the parties specifically waived arbitration as to the non-solicitation provisions but specifically left arbitration in force regarding all other contractual claims.

While this case is not one relating to a construction contract, it provides some good lessons for construction professionals and the construction lawyers who advise them.

1. E-mails resulting in changes to a contract, even through settlement negotiations, can waive contractual provisions.

2. Choose your words in such e-mails carefully, you may end up in two different venues like the defendants in this case if you are not careful to either keep arbitration in force for all claims or for none.

3. The power in point 1 of this list, when used carefully, can assure that the parties to a contract end up in the venue that they desire when seeking to enforce a negotiated settlement.

In short, be careful when crafting a non-judicial settlement of a contractual dispute to avoid litigation over what the settlement means. It is expensive enough to litigate any breach of terms of a settlement without having a court tell you what those provisions entail.

Image via stock exchange

As always, I welcome your comments below. Please subscribe to keep up with this and other Construction Law Musings.

Preparing For and Avoiding Residential Construction Disputes: For Homeowners and Contractors

Originally posted 2010-08-13 09:00:18.

For this week’s Guest Post Friday here at Construction Law Musings, we welcome a great friend. Scott Wolfe Jr. (@scottwolfejr)is a construction attorney in Louisiana, Washington and Oregon, and is the founding member of the construction practice Wolfe Law Group. He authors the Construction Law Monitor. He is also the founder of the mechanic lien and preliminary notice filing service, Zlien, and the author of its Construction Lien Blog.

Residential construction disputes come in all shapes and sizes, but very typically have one thing in common: they can get very nasty.

This is understandable, especially in today’s economy. The homeowner is spending hard-earned money on something very personal to them, their home. They want it done right. The contractor is working on really tight margins, and with a diligent client.

These disputes can become frustrating legal battles that costs thousands of dollars. And since it’s such a hot topic politically (there is lots of pressure for legislatures to protect against construction fraud), many states have layers of consumer protection laws that are consequential to both the residential contractor and the homeowner.

This post does not discuss any one state in particular, but gives a bullet-point style summary of some things to keep in mind when starting a construction project. And that’s right, I said starting. The only way to adequately prepare for and avoid residential construction disputes is to take steps before any work begins, and in many cases, before signing the construction contract.

For Homeowner: Tips to Prepare and Avoid Residential Construction Disputes

Tip 1: Hire a Licensed Contractor. This one is very important. If you don’t have a licensed contractor doing your work, you’re taking a very big risk. Unlicensed contractors don’t have much to lose if they run from your job, construction fraud usually occurs with unlicensed contractors, and unlicensed contractors are usually without bonds, insurance, workers comp, and a lot of other things that can ultimately create liabilities for you.

So, tip one is to hire a licensed contractor. You can make sure the contractor is licensed by checking with the state’s agency for contractor licensing. Here are the agencies for a few states (in Virginia and where I practice). Typically, you can search for their license status right online. Washington, Oregon, Louisiana, Virginia.

Tip 2: Request a Written Contract. Get your agreement with the contractor in writing. If it’s not in writing, you can easily find yourself in a disagreement about the agreement.

Tip 3: Read Up on Hiring Contractors. Nearly every state’s contractor board agency has resources dedicated to helping homeowners understand the construction process. Take advantage of these resources. (see Consumer Video in Louisiana, Consumer Publications in Oregon, Virginia’s Consumer Services)

Tip 4: Condition Payments on Receiving Lien Waivers. Protect yourself against paying twice for the construction work, and from getting liens placed against your home. For each payment you make to the contractor, require lien waivers from the contractor and its subcontractors and suppliers.

For Contractors: Tips to Prepare and Avoid Residential Construction Disputes

Tip 1: Require a Written Contract. Get your agreement with the homeowner in writing. If it’s not in writing, you can easily find yourself in a disagreement about the agreement. Plus, many states require contracts be in writing. Breaking these state’s laws can result in penalties, fines, or the nullity of your agreement (depending where you are).

Tip 2: Understand Your Obligations. Unfortunately for residential contractors, there are a maze of requirements when performing work on a residential project. It doesn’t matter whether your just installing a new HVAC system or remodeling the kitchen, or if you’re building a residence from scratch – consumer protection statutes are abound in residential construction, and it’s your job to know them and know them well.

Most consumer protection statutes require some sort of pre-contracting notice get delivered to the homeowner. Understand what notices are required in your state, and fulfill them.

If you fail to furnish the notice, you may run afoul of consumer protection laws which subject you to penalties, damages, and the loss of lien rights.

Tip 3: Take Lots of Photos and Be Organized. From the start of the job, through the progress of work, and at completion – take lots of photos, make notes, keep a work log, and do other things to organize your work and document what you’ve done. You may need it…even before you think you need it.

Tip 4: Consult an attorney. We’re here to help. Here is my firm. Here is Chris’.

Thanks again Chris for letting me post on Musings. Keep up the good work.

Scott and I welcome your comments below. Also, please subscribe to keep up with this and other Guest Post Friday Musings.