construction law

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Anybody who reads the papers will know of all of the contractor horror stories that are published every week – with homeowners losing thousands of pounds after placing their trust in the wrong construction team.

A lot of the time, such losses occur due to a lack of care before construction has even started. Many people don’t even bother to sign a contract with their contractor and subsequently, there is little they can do once things go wrong.

Taking the above into account, here is our guide to selecting the right type of procurement for your next home improvement project. It should be noted that this is only the tip of the iceberg and once you have selected one of the following three, you must then acquire a standard contract that can be used with your chosen method of procurement and complete it appropriately.

Traditional Procurement

As the name may indicate, the traditional method of procurement is the most common in the construction industry. In simple terms, it means that the design stage is completely separate from the construction – meaning that the project is basically split into two parts. The design of your project will have to be created before you can source the contractor.

There are several benefits to this method, most notably the certainty and the fact that it is the industry standard. In relation to the former, as you already have the design prepared, there are no excuses for the contractor not to provide you with an exact figure for the project. If they do not stick within this budget throughout the project, you are not liable for any additional costs. The popularity of the traditional procurement method means that practically every contractor out there will know how to work with it, and this will obviously promote efficiency.

Unfortunately, there is a drawback, with this focussed around time. As the project is split into two stages, design and construction, it will take slightly longer to complete than projects which are procured in different ways.

Design and Build Procurement

Again, the name gives everything away in relation to this procurement. Unlike the traditional method which was split into two stages, the main contractor is responsible for both designing and constructing the project. Unsurprisingly, this means that the project can run much more efficiently – as there is no overlap as is the case with traditional procurement. Furthermore, the design and build procurement method holds the similar advantage of certainty – as you and the contractor will agree on the cost of the project at the very beginning.

Unfortunately, it’s not a perfect method and there are suggestions that this type of procurement does not promote the best quality design. This is because a lot of contractors merely specialise in one field, meaning that they may not be quite as proficient at designing as they are in actually carrying out the practical elements of the project.

Management Procurement

The final type of procurement we’ll take a look at management and if you are merely having a small alteration to your home, this is probably not going to be considered. It involves a main contractor being appointed and being responsible for managing the whole process – meaning that they appoint sub-contractors to carry out specific sections of the project. However, you will be responsible for sourcing a design professional – with the main professional only accountable for the practical elements of the contract.

To put the above into an example, we’ll look at the situation in relation to a proposed extension to your home. You will firstly hire an architect or design team to design the extension, before then sourcing a main contractor to manage the whole construction process in relation to this design. They will then hire contractors for each separate process; so this could be a large firm such as Taylor Lane for the frame of the extension, or NRC Ltd for the roof covering.

Management procurement is another method that is regarded as being very efficient, as processes can overlap each other and the construction phase does not have to start once all of the designing has been performed. Furthermore, unlike the design and build system, the main contractor can bring in specialist teams which should help with the overall quality of the project.

Unfortunately, there is a lack of certainty with the management method, as each segment of work is let at a different time. Therefore, if you are working to a strict budget, this might not be the most advisable solution.

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The Homeowner’s Bill of Rights

Homeowners Against Deficient Dwellings (“HADD”)(www.hadd.org) is a consumer protection group for homeowners and homebuyers that advocates on behalf of homeowners against defective construction. In their effort to protect homeowners the organization developed a Homeowner’s Bill of Rights that details what consumers should be able to expect from a builder or contractor. HADD also proposes legislation, such as a New Home Disclosure Act, a Home Lemon Act. It also sets standards for litigation, such as preventing confidentiality agreements in settlements and prohibition of arbitration.

The Homeowner’s Bill of Rights sets forth the expectations each homeowner should be entitled to from a builder and the protections they deserve from the government as consumers of new homes. The full Homeowner’s Bill of Rights includes a statement of rights and advocates for protective legislation. The following is a summary of HADD’s Homeowner’s Bill of Rights. To read the full Homeowner’s Bill of Rights, link to www.hadd.org.

Homeowners Against Deficient Dwellings Homeowner’s Bill of Rights

“When consumers buy a new home or contract for additions and/or remodeling of an existing home:

They have the right to safe and sound, quality construction.

They have the right to expect that their new home and/or any home improvements are built in compliance with all existing local, state, and federal building codes and ordinances.

They have the right to expect that only quality, performance-proven building products are used in their homes and that all such products are installed in accordance with manufacturers’ specifications.

They have the right to expect that the architect’s and engineer’s designs are completely and accurately followed.

They have the right to expect that the home will not leak or breed toxic mold(s), is structurally sound, and that all mechanical systems and structural components will perform properly.

They have the right to receive, in a timely manner prior to signing a sales contract and/or closing documents, complete information regarding their purchase contracts, warranties, disclosures of agencies, and any and all relationships and/or partnerships their real estate broker and/or builder may have with all agencies involved with the home buying process. This includes, but is not limited to: home inspectors, lenders, title companies, builders’/subcontractors’ insurance carriers, products’ manufacturers, realtors, and home warranty companies.

They have the right to access records, public and private, regarding performance and complaints pertaining to their builder, subcontractors, home warranty companies, lenders, manufacturers, realtors, title companies, insurance carriers, and any other entity associated with the home building/home buying process.

They have the right to full disclosures in regard to new housing.

They have the right to a trial conducted by their peers, rather than to be forced into contractual binding arbitration.

They have the right to peace of mind concerning the safety of their family.”

Conclusion

If you believe your home suffers from a construction defect, contact an attorney with experience in construction-defect litigation. Not every defect will warrant the time and expense of pursuing a claim, and often the time limits (statute of limitations) will prevent a homeowner from pursuing a claim. To protect your rights, contact an attorney who can help you evaluate how your state’s laws apply to the particular circumstances of your situation.

Copyright ©1994-2005 FindLaw, a Thomson Business

DISCLAIMER: This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.

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Housing and Construction Defects – An Overview

A house is generally a homeowners’ single most valuable financial investment and one of the most important emotional investments. To them it is more than bricks and mortar; it is the place where they live, rest, and raise their families. Unfortunately, hundreds of thousands of unsuspecting homeowners realize their new homes suffer from some type of construction defect that will cost thousands of dollars to repair, depreciate the value of their home, or force them to leave their home.

Construction defects cover a broad spectrum from minor problems like popped nails and peeling paint to situations when a house must be bulldozed. Some cases involve leaky windows that have led to toxic-mold contamination. Other problems include faulty design, code violations, cracked foundations, substandard workmanship, and unsafe structures.

The number of construction-defect cases has surged in recent years because houses are being constructed in record numbers to meet the high demand for housing. Many general contractors are inexperienced and others mass produce thousands of houses. The home construction industry is intensely competitive. Many builders respond to the competition with low bids for contracts, then cut corners, and frequently employ unskilled or overworked subcontractors and poorly supervise subcontracted work. At a time when government regulation is more important than ever, government inspection departments do not have the funding to adequately inspect homes and often approve below-par construction. The combination of these factors results in homes that are built with serious defects.

Types of Construction Defects

Construction defects usually include any deficiency in the performing or furnishing of the design, planning, supervision, inspection, construction or observation of construction to any new home or building, where there is a failure to construct the building in a reasonably workmanlike manner and/or the structure fails to perform in the manner that is reasonably intended by the buyer. Some of the most common and high-cost construction defects include:

Structural integrity – concrete, masonry & division, carpentry, unstable foundations
Expansive soils
Mechanical
Electrical
Water intrusion (often resulting in toxic mold)
Thermal and moisture protection
Doors, windows and glass
Finishes

Generally, courts categorize construction defects in one of four categories: design deficiencies, material deficiencies, construction deficiencies, or subsurface deficiencies.

Design Deficiencies

Design professionals, such as architects or engineers, who design buildings and systems do not always work as specified, which can result in a defect. Typical design deficiencies relate to building outside of the specified code. Roofs are an example of a typical design defect that result in water penetration, intrusion, poor drainage, or inadequate structural support.

Material Deficiencies

The use of inferior building materials can cause significant problems, such as windows that leak or fail to perform and function adequately, even when properly installed. Window leaks can result from many things including, rough framing not being flush with outside at openings, improperly flashed windows, improperly applied building paper, window frame racked during storage/moving, lack of sheet metal drip edge above window header, etc. Common manufacturer problems with building materials can include deteriorating flashing, building paper, waterproofing membranes, asphalt roofing shingles, particle board, inferior drywall and other wall products used in wet and/or damp areas, such as bathrooms and laundry rooms.

Construction Deficiencies

Poor quality workmanship can result in a long list of defects. A typical example is water infiltration through some portion of the building structure, which may create an environment for the growth of mold. Other problems include cracks in foundations or walls, dry rotting of wood, electrical and mechanical problems, plumbing leaks, or pest infestation.

Subsurface Deficiencies

Expansive soil conditions are typical in California and Colorado, as well as other parts of the country. Many houses are built on hills or other areas where it is difficult to provide a stable foundation. A lack of a solid foundation may result in cracked foundations or floor slabs and other damage to the building. If subsurface conditions are not properly compacted and prepared for adequate drainage, it is likely the property will experience problems such as improperly settling to the ground (subsidence), the structure moving or shifting, flooding and in many cases more severe problems such as landslides.

Legal Theories

The typical construction defect cases is based on the contracts between the homeowner and developer and the contracts between the contractor and subcontractors, including suppliers, architects and engineers, involved in building the home. The goal is to require the party who is responsible for the defect to remedy the situation. The complaint against the defendants typically alleges negligence, breach of contract or warranty, strict liability, and in some instances fraud or negligent misrepresentation may be alleged.

Negligence

The law imposes the obligation upon the developer/general contractor/ subcontractor to exercise the reasonable degree of care, skill and knowledge that is ordinarily employed by such building professionals. The duty of care is extended to all who may “foreseeably be injured by the construction defect”, including subsequent purchasers. Developers and general contractors are responsible for the negligence of their subcontractor.

Breach of Contract

Homeowners can sue the builder/developer, under theories based upon privity of contract, for breach of any obligation set forth in the purchase and sale documentation, and/or the escrow instructions. Typically, this is something that goes beyond a failure of the builder to build the project in accordance with the plans and specifications.

When such claims are made, courts often invoke the doctrine of substantial performance, which typically requires the builder to pay the contract price with the deduction for the reduced market value of the home/unit caused by the failure of the builder to strictly comply with the plans and specifications.

Breach of Warranty

Similar to breach of contract theories, the purchase documentation between the developer and the homeowner often sets forth warranties regarding the condition of the property. If there is an issue as to breach of an express warranty, the principles of contract apply. Courts have held that builders and sellers of new construction should be held to what is implied, that the completed structure was designed and constructed in a reasonable workmanlike manner. A builder/vendor is subject to the theory that a home was built for sale to the public to be used for a specific purpose. Privity of contract is not always required under this particular theory of liability.

In some states, homebuyers may waive or builders may disclaim implied warranties. If disclaimers are involved, they are strictly construed against the seller/developer. Typically, waivers are difficult to enforce.

Strict Liability Claims

In most jurisdictions, the implied warranty of habitability imposes strict liability on the general contractor. The theory of strict liability against a general contractor evolved from products liability law. In a strict liability case the plaintiff does not have to prove the general contractor or developer was negligent in the construction of the home. They do have to prove the defendant was involved in the mass production of housing, a defect in the house exists, damages were proximately caused by the defect, and the defendant caused or created the defect.

Fraud and Negligent Misrepresentation

Fraud is alleged on the grounds that the developer intentionally misrepresented the quality of construction in false statements or advertisements. It must be shown the developer had no intention of following the design plans and specifications as promised.

Negligent misrepresentation is based on proving the developer asserted something as factual, but had no reasonable basis for believing the information to be true.

Limits on Potential Claims

Most states impose time limits on construction defect claims by Statutes of repose and Statutes of limitations. Statutes of repose specify the time period within which a cause of action can arise at all. Under these statutes, the limitation period may expire before the plaintiff’s cause of action has arisen. Conversely, statutes of limitation foreclose suits after a fixed period of time following occurrence or discovery of an injury. These statues are complex and vary from state to state. It is critical that you seek the advice of an experienced attorney if you believe the damages to your home are the result of a construction defect before you lose your right to seek a remedy from the responsible parties.

In most states the time limits begin to run when the defect is discovered, or should have been discovered by a reasonable person. If the defect is patent, or apparent based on reasonable inspection, the action against a defendant must begin within the time period specified by state law. If the defect is latent, or not readily apparent by reasonable inspection, any action to recover damages generally must be within ten years after improvements are substantially completed.

Conclusion

Construction defect litigation is complex. It may involve several defendants, include insurance companies and involve many legal theories. Most states impose complex time limits on when a claim may be brought. If you believe your home suffers from a defect caused by the builder, or another party, protect your rights. Talk to an attorney with experience in this complex area of law.

Copyright ©1994-2005 FindLaw, a Thomson Business

DISCLAIMER: This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.

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Frequently Asked Questions about Housing and Construction Defects

Q: What is a construction defect?

A: A construction defect is a condition in your home that reduces the value of the home. Some defects are obvious such as water seepage, but many are less obvious and do not become apparent until years after the home was built.

Q: What causes a construction defect?

A: A construction defect can arise from a variety of factors, such as poor workmanship or the use of inferior materials. Many arise from a combination of factors, including:

Improper soil analysis and preparation
Site selection and planning
Civil and structural engineering
Negligent construction
Defective building materials
Q: What are some of the most common types of construction defects?

A: The most common types of defects involved in litigation include:

Mold
Water issues
Electrical systems
Landscaping and soil
Faulty drainage
Foundation, floor, wall and roof cracks
Dry rot
Structural failure
Heating and electrical
Q: How is a construction defect proved in court?

A: It depends on the defect. Some defects are obvious and are called “patent”. Other defects are hidden or do not become apparent until years after the home was built. These defects are called “latent”. A successful construction defect litigation claim relies on the testimony of experts who specialize in specific areas of construction. The experts investigate the defect, evaluate the cause and make recommendations for how to remedy the defects.

Q: What kind of damages can be recovered?

A: It depends on the facts and circumstances of your case, but in general the cost of repairs and the decline in the value of your home may be recovered. Additionally, other recoverable damages might include the loss of the use of property during the repair, the cost of temporary housing, court costs, and in some instances the attorney’s fees if provided for in the contract or by your state’s laws. Of course, any personal injuries resulting from the defect may be recovered. In some instances punitive damages may be assessed against the defendant if the court finds their behavior to be reckless and intentional.

Q: Who pays for the damages?

A: Typically the defendant’s insurance company that was in effect when the damage was first noticed will be responsible for paying the damages.

Q: Are there any time limits on filing a lawsuit for repairs?

A: Yes, but it varies by state. Many states have legislation that requires the homeowner or homeowners association to notify the developer or contractor of the defect and give them an opportunity to remedy the damage. Then they can file a lawsuit if the defect is not repaired. The statute of limitations (the time limit for filing a suit) also depends on whether the defect is latent (hidden and not obvious to a reasonable person) or patent (obvious). The shortest time limit is three years from the date the defect is discovered, or should have discovered the problem. Other statutes start from the date of completion of the home. It is important to take action immediately if your home has a construction defect.

Q: Who is responsible for construction defects?

A: There may be several responsible parties, but generally the responsibility will lay with the general contractors, developers, and the builders of residential structures even if the work was performed by subcontractors or if the defective materials used in construction were manufactured by others. Architects, designers and other involved parties may also be defendants in litigation.

Q: Should I make repairs while the lawsuit is pending and can I recover those costs in the lawsuit?

A: Usually the homeowner or homeowner’s association is required to protect property from sustaining additional damage. Such costs are recoverable in the lawsuit. Failure to perform routine maintenance and reasonable repairs can cause or contribute to additional damages, which could be offset from the owners claim and lead to the defense of “failure to mitigate damages”.

Q: Can I sell my home during a pending lawsuit?

A: Generally homeowners are allowed to sell their home during the lawsuit but most states have a disclosure law that requires a homeowner to disclose to a potential buyer that the home is involved in litigation.

Copyright ©1994-2005 FindLaw, a Thomson Business

DISCLAIMER: This site and any information contained herein is intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.

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