Monthly Archives: May 2012

Increases in Construction Material Costs Slowed in April 2012

The cost of construction materials took a breather in April, while contractors showed slightly greater ability to roll past price increases into their bids, according to an analysis of producer price index figures released today by AGC.  Association officials noted that despite the temporary reprieve from materials price hikes, market conditions for construction remain difficult.

“Contractors caught a bit of a break on major input costs in April, enabling some firms to make up for recent price spikes,” said Ken Simonson, the association’s chief economist. “However, workloads remain uneven by segment and geographical region, leaving many firms very vulnerable to unexpected price hikes for key materials.”

Read full press release here.  The news was covered by Reno Gazette-Journal, Daily Commercial NewsGlass Magazine, RealEstateRama, and ForConstructionPros.

AGC 2012 Report Shows Mixed Messages For Construction Outlook

The 2012 Construction Hiring and Business Outlook Report generated by the The Associated General Contractors of America (AGC) indicates that the prospects for the the construction industry is mixed for 2012.  According to the report, firms are balancing growing demand for some private sector market segments with continued weakness in other key private market sectors, combined with the phasing out of the stimulus package and declining public works construction.

The main findings of the AGC 2012 outlook are:

Private Sector Market Outlook Improving, Public Sector to Weaken In the private sector, power, hospital and higher education sectors are seeing increases in construction spending.  However, large declines in highway and transportation infrastructure projects are expected in 2012.

Construction Employment to Improve… Slightly Thirty-two percent (32%) of firms plan to add staff this year, with only nine (9%) percent planning to lay off staff.

Tight Credit is Delaying or Canceling Many Projects

Conditions tied to lending have become more restrictive, forcing many owners to delay or cancel construction projects. Construction companies themselves have not experienced the tight bank credit conditions directly, but many have indicated that tighter lending conditions have caused their customers to delay or completely cancel construction projects.

Cautious Firms are Quicker to Lease, Instead of Buy, New Equipment
Caution against laying out large amounts of capital is a continuing trend. Firms are concerned about future revenues, and are reluctant to lay out large sums of cash for equipment without more optimistic construction forecasts.

 The findings contained in the ACG 2012 Outlook is the result of click here.

Power and Energy Industries See Double Digit Increases in Construction Spending

The 2012 A/E/P and Environmental Consulting Industry Outlook rated power and energy as the hottest market for 2012. Close behind were healthcare, water, and highways and bridges.

The chart below provides a picture of increases and decreases in construction spending over the last year, and gives an idea of where the National trends are headed in the short term.

non residential construction spending 2011

Alabama Lien Requirements

Alabama has lien requirements dependent on your roll in a project.  A supplier should send a preliminary notice before delivering the supplies.  Otherwise, a preliminary notice is not required. 
Those who do not have a direct contract with the property owner are required to deliver a Notice of Unpaid Lien to the property owner before filing a mechanic’s lien also known as an Unpaid Balance Lien.  This puts the owner on notice that a lien has been claimed, and requires that the owner withhold funds sufficient to satisfy that claim.  This notice should be sent soon after the last date of work was performed to prevent the owner from disbursing the funds to the prime contractor.  Once the owner disburses the funds, the claimant loses any rights to those funds.

There are 2 types of Alabama Mechanic’s Liens – a Full Price Lien or an Unpaid Balance Lien.  Those who contracted directly with the owner, or material suppliers who sent preliminary notice before delivering supplies, will have a full price lien upon filing this document. Others will have an unpaid balance lien.  Whther it be a preliminary notice or a mechanic’s lien, can easily help you through this process.

Reservations about Construction for Indian Tribes

I recently received a request to place a mechanic’s lien against a job located on Indian property.  Apparently, there has been a boom in casino construction and tribes are hiring from outside the tribe.  With this rise of construction on tribal land come questions as to the rights that suppliers and contractors have.  Of the many legal aspects, Sovereign Immunity is what ultimately protects the Indians from the laws of the United States as well as the laws of each individual state.  What it all boils down to is that the mechanic’s lien law does not apply since the property is not state or federal land.

Before signing a contract with an Indian Tribe, I suggest reading “Construction Contracts with Indian Tribes or on Tribal Land.”written by Edward Rubacha, an attorney with Jennings, Haug, & Cunningham, LLP.

California Proposed Homeowner Bill of Rights Sees Passage of Anit-Blight Bill

Of the six pieces of California’s proposed “Homeowner Bill of Rights”, the first one passed the State legislature.  The portion, known as the “anti-blight” bill, imposes a $1,000.00 fine per day on all property owners that fail to maintain foreclosed homes.  This is something that has become an issue around the country as banks have struggled or refused to properly maintain the appearance of homes on which they have foreclosed.

The existing provisions of Cal. Civ. Code § 2923.3, which impose the $1,000 per day fine, are set to expire on January 1, 2013. The newly-enacted law extends the operation of the law indefinitely. Click Click here for the California Homeowner Bill of Rights Anti-Blight Bill”. for the California Homeowner Bill of Rights Anti-Blight Bill”.

Breaking News: North Carolina’s Poorly Drafted Lien Laws Spur Title Insurance to Refuse Coverage

A nonsensical system for mechanics lien filing currently exists in North Carolina: the State does not permit (absent certain circumstances) the filing of a mechanics lien by anyone without a direct contract with the owner. However, the State does permit mechanics liens by subcontractors, suppliers, etc., but only requires that the construction lien be served, not filed! These “hidden” liens are provided priority over any subsequent purchasers and lenders.  It’s extraordinary.  The North Carolina mechanics lien law appears to be in need of some revision.
One of the industries hit hard by these secret North Carolina mechanics lien filings is the title insurance industry. Generally, before a closing, the buyer hires a title company to make sure they are getting the property free and clear of any claims to it. Well, the title company has a problem managing its risk if North Carolina doesn’t require people with a claim to the property to record their claim of lien.  As a result, title companies are refusing to issue title that covers North Carolina mechanics liens. This law only hurts owners, potential buyers, and could hurt the economy of North Carolina until it changes its law to require all lienors to file North Carolina mechanics liens with a county recorder.
A copy of one title company’s open letter is below:

An Open Letter to Approved Attorneys of Chicago Title, Commonwealth Land Title, and Fidelity National Title

May 10, 2012
Dear Approved Attorney:
Chicago Title, Commonwealth Land Title, and Fidelity National Title announce that we will be curtailing mechanics’ and materialmen’s lien coverage in situations posing a significant risk of broken priority under applicable NC law at the time of their closing, effective for commitments issued after Friday, June 15, 2012.
Historically, North Carolinians could be assured they had some of the lowest rates, the lowest closing costs and the lowest claims losses in the Country, — but no longer. Unfortunately, in recent years, we have paid increasing and significant losses from mechanics’ lien coverage in North Carolina, creating a significantly higher claims ratio than the national average.  The claims submissions continue unabated in the current market.
To address this problem, for the past several years, our companies and others have made extensive efforts, negotiating in good faith on a multitude of proposals and investing substantial amounts of time in attempts to create a legislative framework whereby innocent purchasers and lenders could be protected by law. Our goal was to provide protection for buyers purchasing and lenders extending loans on properties with recent or contemplated construction.
Unfortunately, thus far, our attempts have been thwarted or ignored. Unless and until this priority protection for these innocent parties under the law is provided, the risk is uncontrollable and unacceptable.
Situations affected will include commercial and residential properties with recent construction or construction loans or both, i.e. those for which potential lien claimants may have the ability to file timely lien claims under N.C.G.S. Chapter 44A, Article 2, and for which the proposed purchaser and/or lender cannot obtain legal priority of record over those potential liens not yet filed at time of closing.   These are typically referred to as “broken priority” situations because priority cannot be assured at law and of record.
We recognize that, due to current law, this will have a significant impact on:
  • Owners who are not protected by the current law and who may be unable to obtain this protection on new construction, residential or commercial
  • Lenders who are similarly unprotected by the current law and may be unwilling to provide loans for construction on or purchase of these properties without this coverage
  • Owner-builders who may be unable to provide assurance of the coverage to construction lenders, purchasers or their lenders
  • Contractors and suppliers who may no longer be able to assume title insurance policy coverage is available if they are not paid by the appropriate party with whom they contracted
Attorneys representing all of the above, whether in closing transactions or mechanics’ lien litigation
We have negotiated in good faith for a reasonable solution to this “broken priority” or “hidden lien” problem in North Carolina in the hopes of avoiding this eventuality. We continue to stand ready to participate in any constructive meaningful negotiations to that end. However, because no such solution has been reached and there appears to be no prospect of a solution in the near future, we are no longer in a position to provide this coverage with no means of effectively and reliably assessing and managing the risk, for ourselves or our insureds. We would be remiss in our fiscal responsibilities to all of our insureds to continue to provide this coverage in these high risk situations.
Please feel free to contact your local Chicago Title, Commonwealth Land Title, or Fidelity National Title counsel to discuss any questions.

Decision to Withdraw From a Collective Bargaining Agreement May Be Costly

Withdrawal Liability. Those two words can hit a contractor right where it hurts: in the pocket. If you are a construction company that contributes to a multiemployer pension fund, such as a union fund pursuant to a collective bargaining agreement (CBA), you may want to find out about unfunded liabilities in the pension fund before you decide not to renew the your CBA. In many cases, an employer that decides to withdraw from a multi-employer pension plan will have to pony up his share of the unfunded liabilities upon withdrawal.  The requirement is the result of a national law called ERISA, and is triggered when the employer completely withdraws from a pension plan. 

The Multi-Employer Pension Plan Amendments Act (MPPAA) contains certain special exceptions and considerations for the construction industry:

1) If you have an obligation to contribute to a plan in the building and construction industry, a complete withdrawal occurs when
(2) the majority of the employees for whom you are contributing work in the building and construction industry, except when
(3) the PLAN principally covers employees in the building and construction industry, but only if
(4) the construction or building company continues to work
a) in the jurisdiction of the collective bargaining agreement of the type for which contributions were previously required, or
b) resumes such work within 5 years after the date on which the obligation to contribute under the plan ceases, and does not renew the obligation at the time of the resumption.

Before withdrawing from a collective bargaining agreement, make sure you have gone through these steps to ensure that you will not be hit with an unfunded liability charge.

The law firm of Vedder Price has a detailed primer on MPPAA withdrawal liability that may of use to anyone considering pulling out of a CBA.

To Lien or Not to Lien . . .

How do you determine when it is time to place a mechanic’s lien on a job on which you just can’t seem to collect the amount due?  Do you have certain policies set?  I constantly have customers ask me when they should begin the process. 

Several begin the lien process immediately following the end of a job.  Some send a pre-lien notice hoping that will encourage their customer to pay.  Other clients send a notice of intent stating that a lien is just around the corner should they not receive payment.  Others wait until two weeks before the deadline to file a lien.

At what point do you begin the mechanic’s lien process?  What other tactics do you use to collect past due amounts? What policies have you set in place and why?

GSA to Withhold Contract Funds Until Green Building Performs As Promised

The Federal Center South project in Seattle, along with two other Federal buildings undergoing mechanical-system upgrades, are on a fast track.  The Federal Center South project is a performance based, design-build model, which puts at risk 0.5% of the $66 million contract award.  In other words, the design build team will not receive $330,000 until the building meets the energy use targets that were promised for the structure.

In order to verify that the building will hit the energy savings targets, the money will be held back for at least 12-months after occupancy. The conditions imposed by the U.S. General Services Administration Northwest/Arctic Region are the first of their kind. Sellen Construction Co. of Seattle is performing the work on the project.

According to GSA’s website: “The building is expected to attain gold certification in Leadership in Energy and Environmental Design from the U.S. Green Building Council. Among the many green features of the new building is extensive use of natural daylight, conversion of existing hardscape into low-impact sustainable green space, use of recycled timbers and other building materials, and an energy-efficient heating, ventilation and air conditioning system that uses under-floor air distribution. The project is expected to be completed by fall 2012.”