Wolfe Law Group – Construction Law Musings- Richmond, VA

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.

Why You Need a Contract Mediation Clause

Originally posted 2017-09-25 15:59:37.

For this week’s Guest Post Friday here at Musings, we welcome Seth J. Smiley. Seth is the managing member of Smiley Law, a boutique law firm located in New Orleans, Louisiana. Seth handles all aspects of construction cases from initial contracting to payment once work is complete. Other areas of focus include mediating, commercial collections, landlord/tenant law, corporate/business formation, and insurance property damage claims. The son of a general contractor, Seth has first-hand work experience in the construction industry. Seth is licensed to practice law in Louisiana and California.

The construction industry has a complex landscape. Contractors range from the very sophisticated to the guy working out of the back of his truck. Regardless of where you fall on this spectrum, it is imperative to know that the construction world is moving toward alternative dispute resolution (ADR).

Continue reading Why You Need a Contract Mediation Clause

The Landscape of US Immigration Laws and How It Affects The Construction Industry

For this week’s Guest Post Friday here at Musings, we welcome back a good friend and fellow construction attorney, Scott Wolfe Jr. Scott is a construction attorney who practices law through his firm Wolfe Law Group in California, Washington, Oregon and Louisiana. He is also the founder of Zlien, a nationwide preliminary notice and mechanic’s lien filing service. He is the author of blogs Construction Law Monitor and the Construction Lien Blog.

The Landscape of New Immigration Laws in the United States

Now that that Arizona law has been deemed Constitutional by the United States Supreme Court, its effects are spreading like wildfire.

The “Legal Arizona Workers Act” allows law enforcement officers to detain anyone who is stopped for a lawful reason if the officer suspects the person to be an illegal immigrant. The law further allows Arizona to shut down businesses that hire illegal workers.

The Arizona law is significant not only for its novelty but also because it has now spawned the birth of similar immigration bills that are arguably even stricter.

On September 1, 2011, a new Alabama immigration law tougher than Arizona’s measure will take effect. An article on pbs .org offers a great explanation, stating: “It goes even further than the Arizona law by introducing new rules for…businesses…[and] makes it a crime to hire illegal immigrants “

Other states like Georgia and Louisiana, are starting to pass similar immigration laws that can have a negative effect on small to mid-size construction companies. In April, Louisiana introduced a bill similar to that of Arizona’s, being less strict that Alabama’s, and in May, Georgia did the same. Similar legislation is pending in Utah, Colorado, and Florida.

A lot of the controversy with these immigration laws is that they require the use of “E –Verify” to electronically verify if a particular worker’s social security number matches their name. We’re all used to the old I-9 form, and the E-Verify system is essentially the I-9 made electronic.

Continue reading The Landscape of US Immigration Laws and How It Affects The Construction Industry

Document Management for Your Construction Company

For this week’s Guest Post Friday, Musings welcomes back Doug Reiser (@douglasreiser). Doug is a construction attorney, LEED AP and the principal at Reiser Legal LLC in Seattle, WA. His office provides effective construction counsel for businesses in the construction industry. He also runs the Builders Counsel Blog, a blog focused on progressive issues in Washington construction law. Doug is a former partner/member at Wolfe Law Group LLC and former owner and director of Express Lien Inc.

Discovery is the process of exchanging information that is relevant to a legal dispute. Discovery is everywhere: litigation, arbitration, mediation and even in your simple spat with a working partner (“Show me where I agreed to that!”). What you have in your records can be the difference between a win or a loss in a dispute.

Attorneys are lost without a complete file. We are unable to assess risks, properly advise clients and develop strategies. Your first discussion about a dispute should begin with “what’s in your file?” Furthermore, attorneys become expensive when your file is messy, out of order and incomplete. Tracking down records, reviewing duplicates and sorting through voluminous files are time intensive.

The process begins with your documentation policy. This includes both what you document and retain, as well as how you document and retain. If you are a contractor, you can always make it better and more efficient.

There are a bunch of technologically advanced methods for managing your construction documents. You can go to AccuBuild, Capterra, or My Construction Documents, if you want high-tech construction document management software. You can turn to Clearwell or CaseCentral, if you are litigation-heavy and constantly concerned about ending up in high-stakes lawsuits.

But, what about the little guy? These tips are for you.

5 Simple Things You Should Document

(1) Document Your Agreement – Get a written contract and document any and all change orders. This is so vitally important.. You don’t have to have a 15 page agreement to have a contract, even a simple work order with the terms of your arrangement will be better than nothing. Change orders are the subject of a lot of disputes. Get permission to do the work – in writing – then proceed.

(2) Document & Save Your Conversations – Contractors tend to agree to things on a whim, over a beer, or during a phone call. You aren’t being crafty by confirming your conversation in an e-mail – you are being smart. This ensures consistency and clarity. Everyone is on the same page and your lawyer will know that, as soon as they read the e-mail.

(3) Keep Job Records – So many contractors think that someone else (supervisor, etc.) is keeping their time. Every contractor should find a notebook, or a time sheet template online, and track all labor. Also, keep a daily notebook of what happened on the job. It won’t take much time and will ensure that your pay requests are backed up with suitable data.

(4) Keep Receipts, Invoices & Lading Records – So many contractors toss out receipts, invoices and other records of payment and delivery, because they believe they are unnecessary in a “lump sum” job. They often forget that the issue of delivery, payment, or procurement of materials might arise. Keep them all and sort them by the contract or change order that they coincide with.

(5) Keep Copies of Insurance, Bonds & Taxes on Hand – Lawyers like to see insurance policies, guaranty contacts, and bonds right off the bat. Furthermore, they often seek copies of payroll taxes, workers compensation submissions and other governmental records to confirm payment of labor. Keep copies on record at all times. Sort them by date, so that they are easily accessible for each project.

5 Simple Ways to Maintain Your Documents

(1) Create Individual Project Files – Open a new folder on your computer for each project. Within that folder, use sub-folders to manage different types of documents. Inside each folder, name and date each document so that they are readily recognizable. Simple as that. Have everything in one place that is easily shared with your counsel.

(2) Scan All Records – We live in a great age where paper can be tossed and data can live on forever. Contractors should greatly consider keeping an entirely electronic file. Its easy to share, rids your office of clutter, and can be accessed from anywhere. If you have separation anxiety from the paper, keep it around. But, scan it in each time you receive something new and keep it in your folders.

(3) Maintain an Electronic File – This goes along with the above. But, I would advise to keep everything electronic. Communicate by e-mail and save copies in your project file. Request electronic copies of documents from your customers and other parties. This ensures that you have the original, un-tampered files. Having a purely electronic file allows you to easily share files with consultants, engineers, and attorneys.

(4) Document What You Do – Keep a record of what you do on a project and what you do with documents. Using a software program like BaseCampHQ or Google Sites, you can keep consistent and easily shareable records of what you and your team does on the job, in the office and when managing records. You can even use Freshbooks or other billing software, to track tasks that your team performs on each project.

(5) Create a Policy & Communicate It – Another common problem is that companies typically have 5 different people, doing 5 different things. Call a meeting, establish a procedure and enforce it. Perform monthly checks on whether or not your file is complete. Your procedure could be as simple as creating a folder and a Google Sites page for each project, scanning all records, naming them and placing them in the files. Even this procedure will put you above many of the contractors out there.

Summary: Document as much as possible; keep it in one place; Save yourself the headache and cost of a messy discovery process.

Thanks to Chris Hill for having me back for a 3^rd visit. We all love our Musings!

As always Doug and I welcome your comments below. Please subscribe to keep up with this and other Guest Post Fridays at Construction Law Musings.

UCC Article 9- A “New” Collection Tool?

For this week’s Guest Post Friday, Musings is honored to have Doug Reiser. Doug is a construction attorney licensed in Louisiana and Washington, focusing the majority of his efforts on the contracting and management phases of the construction process. Recently being named a LEED AP, Doug hopes to grow with the blossoming green building industry.

He works with at the boutique construction firm Wolfe Law Group, LLC as a member and the director of the Seattle, WA office. Doug is a contributor to the blogs Construction Law Monitor, LA Green Law, and Chinese Drywall Blog, as well as an owner and general counsel for Express Lien, Inc. and contributor to its blog at constructionlienblog.com.

Good old UCC Article 9. Lawyers, do you remember that part of your legal studies?

Unless you represent manufacturers or other goods producers, you probably shut the book on secured transactions right after your bar exam and turned the page to state lien laws. As a brief refresher, the UCC provides a security interest (or lien if you prefer) for sellers of goods upon those goods which they sell or transfer. It can be obtained by security agreement or control/possession of the good. It is perfected (made enforceable and prioritized) by filing with the state, generally, but in some cases automatically (consumer goods).

State lien laws are more at home with most of us. We feel comforted that in our states these laws will protect our clients and ensure that they are secured. Because in the end, our goal as construction attorneys is to maximize our client’s wealth prospectus. And in most cases – that means getting them paid.

Some time ago, I began to remember that secured transactions exist; that these tools were intended to ensure that the sellers of goods were protected from loss in a transaction.

But why haven’t these tools become utilized in the construction? Are there benefits to attempting a mixed security arrangement?

The best example is the material or equipment supplier. As a supplier of goods to a project, the supplier could effectively have both rights: (a) a security agreement with the contractor for a security interest in the goods, and (b) a mechanic’s lien against the property for the value of the goods.

Not far off is the general contractor, who in many ways acts as both a laborer and a seller of goods, albeit downhill from the supplier it purchased the goods from. Couldn’t a general contractor have a UCC interest in the materials and appliances that it places on the project and still have a state mechanic’s lien?

Here is what you need to know to best take advantage of the intertwining of these laws:

(1) Fixture Problem & the UCC Solution – In the past, construction attorney have deferred to state mechanic’s lien laws because of the issues of fixture law. In fixture law, suppliers run the risk of their goods becoming permanently attached to buildings and therefore losing their “goods” nature, becoming a fixture to the property. In that case, it always made more sense to have a mechanic’s lien against the property, which now houses your goods.

But in actuality, your client could lose priority. Lets face it – a UCC lien on the goods themselves is better than being #21 in line to a piece of property which is likely to be usurped by a mortgage company at the top of the priority list.

Use a fixture filing. People act like they are going out of style, but when used properly, a supplier may be able to negotiate to walk on the job and pull out their materials without much of a fight from other creditors.

A fixture filing can be perfected by simply filing a financing statement (WA ones here) in the County where the project is located. As scary as it seems to track your UCC filings, in many states, they are no more difficult than a state mechanic’s lien.

(2) Fixture Wars – In Washington state we ran across an actual war over who wins – UCC fixture or WA mechanic’s lien. The victor: it depends (love that).

In WA a recent case demonstrated that the determination of the goods as personal property or real property is the factor. If the goods installed on a job site are personal property (not affixed) then the UCC lien wins out. If the goods become part of the real property – the mechanic’s lien wins out.

This analysis is important in the wake of millions of dead and bankrupt projects nationwide. On any certain project, you may have appliances and equipment that are real property and several similar items that are personal property. The court in Union Elevator reasoned that grain elevator equipment that had been at a plant for 9 years was still considered personal property, even though it had been used there everyday and was necessary for the business’ function. In doing so, the seller of the equipment prevailed on its UCC claim.

The implication for contractors is this – do you want to continue to worry about the classification of your equipment/supplies/goods? In my opinion, it is not worthwhile to risk this loss. Though mechanic’s lien laws protect you after you fail to get paid, UCC laws provide a mechanism during contracting, which can be self-assuring.

(3) Use Your Contract- Get a PMSI

In many situations (especially transactions of high costs) contractors, suppliers or equipment companies may want to do both. Obtain a security agreement in your contract, file the financing statement in the debtor’s state and the project county, and then follow up the project with a mechanic’s lien against the project.

In most states, a security agreement has no real formatting requirements. It can simply be a sentence in your contract that states “the seller/contractor retains a security interest under UCC Article 9 to any and all equipment/supplies/appliances sold under this contract and is authorized to file a financing statement regarding the same.” That simple.

PMSI (purchase money security interests) are the end-all-be-all of collection tools. Talk to an attorney about how to make certain that you have an enforceable PMSI in your materials, equipment and appliances.

A properly filed and perfected PMSI in fixtures can in many circumstances beat out the bank on their construction mortgage.

(3) File Online & With Care – Its the internet people – the wave of the future. Almost every state provides online filing of UCC interests. To my knowledge, no state in the USA permits the online filing of mechanic’s liens (British Columbia does though).

The ability to file UCC liens online makes it a very simple and attra
ctive vehicle to security for contractors. Most states even have easy to understand filing instructions which makes the chore a potential “in-house” endeavor.

Use care when filing and make certain to index claims under the proper names. Even the misplacement of one letter may be the difference between #1 rank and end of the line.

The lien game seems to have been too easy for too long. Mechanic’s liens are simply not cutting it the way the used to. The UCC is not as scary as those text books made it – contractors should try it on for size.

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