Monthly Archives: August 2012


Minnesota Permits Service of a Lien By an Officer of a Lienor’s Company

The Minnesota Supreme Court recently ruled that an officer of a party may personally serve a mechanics’ lien statement. In Eclipse Architectural Group v. Lam, 814 N.W.2d 692 (Minn. 2012), the officer of a Minnesota mechanics’ lien claimant personally served a mechanics’ lien statement on the owner of the property. The property owner claimed that the lien should be invalidated because a rule of civil procedure prohibits a party or officer of a party from serving “a summons or other process.” The purpose of the rule is to require a disinterested person, typically a sheriff or private process server, to effectuate service. Because a disinterested person did not serve the mechanics’ lien statement, the property owner claimed that the lien should be invalidated. The Minnesota Supreme Court rejected this argument, holding that a mechanics’ lien statement is not a “summons or other process.” As a result, a party or an officer of a party may serve a mechanics’ lien statement.

Massachusetts Does Not Permit Waiver of Statutory Payment Protection

The Massachusetts Supreme Judicial Court has held that a subcontractor’s rights to pursue a payment bond required by law on a public project can’t be nullified by contract. The payment bond law does not expressly prohibit waiver by contract, and the court had to decide whether public policy concerns preclude enforcement of a contractual waiver. The case is Costa v. Brait Builders, decided on August 1, 2012.
The surety had argued successfully at the trial court level that a subcontract clause waiving the sub’s payment bond rights was enforceable, and the trial judge agreed. The surety had contrasted the payment bond law with a provision in the Massachusetts mechanic’s lien law that expressly prohibits any attempt to require advance waiver of lien rights. On appeal, the SJC reviewed the purpose behind the payment bond law, which – according to its title – was “for expediting payment to general contractors and subcontractors and improving the flow of funds in the construction industry.” The court also noted that payment bonds are required by three different construction procurement laws in the state. Thus, “the strong public policy behind the §29 bond requirement renders unenforceable a provision purporting to waive claims against such a bond.”
The court acknowledged that there are competing views on the general topic of private contracts waiving statutorily-granted rights, but concluded: “We think the better view is that [the payment bond law] embraces a substantial public policy, precluding waiver. Accordingly, we conclude that article 7 of the subcontract [waiving such rights] is unenforceable.” The case has been remanded, and the surety will find itself on the hook for a judgment in favor of the sub issued after the original trial.

Have an Arbitration Provision in Your Ohio Contract: Don’t Expect to End Up In Court

When parties to a contract agree to resolve their disputes through arbitration, Ohio courts will generally force the parties to arbitrate. Ohio’s arbitration statute, R.C. 2711.01, offers little discretion to courts when determining the enforceability of an arbitration clause. This statute states that “a provision in any written contract…to settle by arbitration a controversy that subsequently arises out of the contract…shall be valid, irrevocable, and enforceable…”

However, a court cannot force parties to arbitrate when the parties have not agreed to do so. A recent case from Ohio’s Ninth Appellate District,  Avenbury Lakes Homeowners Assn., Inc. v. Avenbury Lakes, Inc., 2012 Ohio App. LEXIS 2253, provides an example of how courts will not expand an arbitration clause that limits itself to certain aspects of the underlying contract.

BIM: A Collaberative Approach to Construction

We came across a great article on BIM construction building, which is below.  Take a look here for the original article.

At the end of a construction project, owners are accustomed to receiving a final set of drawings and specifications from the architect or contractor along with volumes of operation manuals and warranty documents. But what if those drawings, specifications and manuals were fully interactive? What if your drawings could alert you as to when it was time to replace a valve, and then provide you with the model, part number and supplier of the valve?
In a world where iPhone apps, text messaging and tweets allow for instantaneous communication and collaboration, the same is now available in the construction industry. Welcome to Building Information Modeling (or BIM for short).
What is BIM?
BIM is not a software package. Although it is software driven, it is a dynamic standard whereby different trades and user groups generate and aggregate information for a facility. The National Institute of Building Sciences’ Journal of Building Information Modeling defines BIM as:

[A] digital representation of the physical and functional characteristics of a facility. As such it serves as a shared knowledge resource for information about a facility forming a reliable basis for decisions during its life-cycle from inception onward. A basic premise of the model is collaboration by different stakeholders at different phases of the life-cycle of a facility to insert, extract, update or modify information in the modeling process to support and reflect the roles of that stakeholder.

What is BIM Used For?
BIM can be used throughout the planning, design, construction and operation of a building. During the planning and design of a building, it is common for the project architect to subcontract certain aspects of the design. For example, an architect may hire separate firms to design the structural, mechanical, electrical and plumbing systems within a building. Those separate design firms then produce separate designs using separate software systems. BIM technologies now allow those separate designs (called “models”) to be viewed together in a three-dimensional display. Contractors can then upload more detailed information into the models as the construction project progresses.
BIM During Design
Designers can use the three-dimensional displays to view the interplay between the designs for constructability reviews and also to perform what is known as clash detections. Clash detections are when designers look for places where two trades intersect in a building. For example, the three-dimensional model may reveal an electrical conduit intersecting a beam. The designers can then redesign and/or relocate the conduit and beam to avoid the “clash.” Clash detections represent one of the great benefits of the BIM system. The discovery of a clash in the field during construction can oftentimes result in costly change orders and delays as the problem is investigated and resolved. Discovery of the same issue during design averts such costs and delays as the issue can be resolved before the contractors begin construction.
Depending on the level of detail included in the model, BIM models can also be used during the planning phases of the project to perform scheduling and estimating.
BIM During Construction
BIM can also be used during the construction phase of a project. Because the BIM model readily shows the interplay between the different trades (e.g. structural, electrical, plumbing work), contractors can use the BIM model to prefabricate certain portions of the project offsite, which results in greater efficiency and quality control. For example, a contractor building a high-rise structure that has a repeating design on many floors can construct entire wall sections — complete with electrical wiring, HVAC duct penetrations and plumbing rough-ins — off-site in a warehouse location. Because a portion of the project is now being built indoors, it is not subject to adverse weather or interference from other trades and the quality can be more closely monitored. Once complete, those wall sections can then be brought on-site and installed by smaller construction crews. The end result is better quality and shorter construction durations.
Contractors can also load project-specific information into the BIM model for the benefit of the owner. During construction, contractors are typically required to give submittals to the architect that contain detailed information on the specific materials that are going to be incorporated into the project. This submittal information can then be uploaded into the BIM model. Likewise, contractor shop drawings and as-built drawings that show the exact location and size of materials as they were installed into the project can also be loaded into the BIM model. The end result is a three-dimensional model that contains detailed part information for all of the materials used on the job site.
BIM After Construction
Some owners are now beginning to use BIM technologies in their facility management process. To the extent that the BIM model was loaded with product information during construction, owners can then use that information to track the locations of certain materials that were installed in the building and even determine when those parts and materials need to be serviced or replaced.
Not All BIM is Created Equal
Owners can request as much or as little detail in their BIM models as they see fit. For this reason, BIM has been categorized into five levels — called Levels of Development or “LOD” for short — with each LOD containing increasingly more detail. The five LOD’s are summarized as follows:

  • LOD 100 – this is equivalent to a conceptual design and contains overall building massing information such as the height, area, volume, location and orientation of the building.
  • LOD 200 – this is equivalent to a schematic design and contains generalized systems to be used in the building along with approximate quantities, sizes, shapes and measurements of the building.
  • LOD 300 – this is equivalent to construction drawings and contains specific assemblies, quantities, sizes and shapes; LOD 300 BIM models are used for clash detection.
  • LOD 400 – this is equivalent to shop drawings, which means that specific assemblies are accurate in terms of size, shape, location, quantity and orientation, complete with detailed assembly and fabrication information loaded into the model.
  • LOD 500 – this is the highest level of detail in a BIM model and includes “as-constructed” assemblies with actual and accurate information in terms of size, shape, location, quantity and orientation.

Legal Issues
With the use of BIM comes an additional set of risks and responsibilities that must be allocated between the parties. First, owners should communicate their intended use for the BIM models in their contracts with the architect, construction manager and contractors. In particular, the owner should state its expected Level of Development. Thus, for example, if an owner only wants to use BIM for clash detection, then it should specify a minimum LOD 300 in its contracts. Second, contracts should also designate which party has responsibility for collecting, managing and archiving BIM model data. Finally, because the contractor can now interface with the design and load information into design models, the line between contractors and design professionals is blurred. For this reason, contracts should specify who has access rights to the various BIM models and also define ownership rights of the intellectual property contained in each model.
Conclusion
In the past, parties have often used a silo approach to construction. The mechanical engineer worked separately from the electrical engineer who worked separately from the structural engineer. The contractor worked separately from all of these parties. BIM offers a collaborative approach, bringing the various trades and professions together. The results can be cost-savings and efficiency for the owner. While BIM offers many benefits, it also redefines traditional roles in the construction process. For this reason, contracts should clearly define expectations and the roles and responsibilities of each party.

California High Speed Rail Begins Construction

It has taken two decades, but with the California Senate’s vote approving a high speed rail system, California’s bullet trains are a go. In a vote of 21-16, the California State Senate approved Senate Bill 1029 to fund the HSR, and the bill was signed earlier this month by California Governor Jerry Brown. The financing for the rail system was approved by voters in 2008, which begs the question: why didn’t this happen sooner?

As the HSR gains speed, property owners within the HSR’s planned routes will likely be faced with condemnation questions. The Authority has published a guide, available here, that gives a general overview of its proposed eminent domain procedures for the HSR. Please visit Stoel Rives’ eminent domain/valuation page if you have specific questions for an attorney.

US General Services Administration Prodded to Keep USGBC’s Rating System

Over 1,200 businesses, building professionals, environmental organizations, unions, cities, and individuals asked the General Services Administration July 25 to continue supporting the U.S. Green Building Council’s Leadership in Energy and Environmental Design rating system. The administration requires new federal buildings and substantial renovations to federal buildings to be LEED-certified, though only six percent of LEED-certified buildings are federal buildings. The fourth version of LEED is scheduled to be issued next year, and the administration is currently reviewing building rating systems as required under the Energy Independence and Security Act of 2007.

Green Retrofit Movement Hits Major Cities

Although in the past the majority of sustainable construction activity has been focused on new construction, today there is a movement in major cities toward green retrofits in both privately and publicly owned buildings. According to the United States Green Building Council, a “green retrofit” refers to upgrades to an existing building that improve energy and environmental performance, reduce water use, improve the comfort and quality of the space in terms of natural light, noise, and air quality, and are completed in a way that is financially beneficial to the owner and tenants. While the continued efforts in sustainable new construction are fruitful, new construction represents only a small portion of the overall building population. Focusing on green retrofits and sustainable renovations of existing buildings can have a larger impact on the environment.

For more information on the trend to make existing buildings green, check out this article.

North Carolina Changes to Mechanics Lien Law Requires New Forms of Service

In North Carolina, beginning January 1, 2013, all claims of lien on real property must be served on the owner, and a claim of lien on real property asserted by a subcontractor or supplier by subrogation must be served upon the contractor as well as the owner. Prior law allowed a North Carolina claim of lien to be filed but not served. Beginning in January, a claim of lien on real property will not be perfected until it is both filed and served. Therefore, service and filing of the claim of a lien on real property must occur no later than 120 days from the last furnishing of labor or materials to the project by any person claiming the lien.

Texas Contractors Can Use the RCLA to Their Benefit: Here’s How

The Residential Construction Liability Act (RCLA) is the governing law for both residential construction disputes and the procedure to follow before there is litigation. The law provides a lot of guidance, but most contractors know little about it or how to use it. The RCLA can be used by contractors to limit liability and resolve issues out of court.

The process is all about communication between the homeowners and contractors, as governed by the terms of the RCLA. The RCLA most frequently concerns only builders, large remodelers, and warranty companies. It applies to any action to recover damages arising from a construction defect, but it does not apply to personal-injury, wrongful-death, or damage-to-goods claims.

The RCLA provides a great opportunity to limit exposure if the contractor makes a “reasonable” offer of settlement to a homeowner. The ultimate decision-maker (judge, jury, or arbitrator) will determine if the offer was reasonable. Most importantly, if the homeowner rejects a reasonable offer, in a later lawsuit he can recover only the cash value of that offer plus any legal fees incurred up to the date of the offer was rejected.

Here’s how it works. The homeowner must notify the contractor, describing in reasonable detail the nature of the complaint, 60 days before filing suit. After receiving that letter a contractor has 35 days to inspect the home and 45 days in which to make the offer. The homeowner has 25 days to accept or reject the offer and must state in reasonable detail why it is unreasonable. The contractor then has 10 days in which it may make a supplemental offer.

The categories of damages the offer should address (if they are justified) are the categories of damages available under the RCLA: (1) the reasonable cost of repairs necessary to cure any construction defect; (2) the reasonable and necessary cost for the replacement or repair of any damaged goods in the residence; (3) reasonable and necessary engineering and consulting fees; (4) the reasonable expenses of temporary housing reasonably necessary during the repair period; (5) the reduction in current market value, if any, after the construction defect is repaired if the construction defect is a structural failure; and (6) reasonable and necessary attorney’s fees. The offer does not need to include all of these categories. But, since these are the types of damages available under the statute, it is good practice to include an amount for each category to the extent it is justified.

The statute can be confusing, as such it is always a good idea to engage competent legal counsel at the outset of this process to ensure you’re following the statute and doing everything possible to limit exposure.

A Short History of Construction

We found a fascinating article on the history of construction by Eugen J. Heady of Smith Currie & Hancock, which is below. This article was originally published in the Construction Connection Newsletter. See www.constructionconnection.com.)

Disputes arising on modern day construction projects typically involve extraordinarily complex factual scenarios, technical issues and legal issues. Were the ancients concerned with how to resolve problems involving construction? The principles of law pertaining to the built environment can be traced back several thousand years. Our modern civil justice system is founded on biblical principles and reflects a 4,000 year evolution of beliefs and knowledge of construction beginning with the earliest development of western civilization.
The earliest known principles of construction law can be found in the Code of Hammurabi. Hammurabi was the sixth king of Babylon and ruled from 1792 BC to 1750 BC. The Code of Hammurabi contained 282 laws inscribed on twelve stone tablets which were placed in public view. Hammurabi’s Code was one of the earliest written codes of law in recorded history. Several of the laws pertained to the built environment:
229 If a builder builds a house for someone, and does not construct it properly, and the house which he built falls in and kills its owner, then that builder shall be put to death.
230 If it kills the son of the owner, the son of that builder shall be put to death.
231 If it kills a slave of the owner, then he shall pay, slave for slave, to the owner of the house.
232 If it ruins goods, he shall make compensation for all that has been ruined, and inasmuch as he did not construct properly this house which he built and it fell, he shall re-erect the house from his own means.
233 If a builder builds a house for someone, even though he has not yet completed it; if then the walls seem toppling, the builder must make the walls solid from his own means.
The Hammurabi system of justice included the initial presentation of the law of retribution, which the Hebrew Bible refers to as the concept of “an eye for an eye” and which the Romans often referred to using the Latin phrase lex talionis. Significantly, Hammurabi’s Code establishes the concept of civil damages, whereby one must pay compensation for defective work – a concept that has survived to this day.
As laws pertaining to the built environment evolved, building codes were also established and evolved over thousands of years. Modern day building codes are intended to protect the public health, safety and general welfare as they pertain to the built environment. The same was true in antiquity. For example, the Bible contains some of the earliest evidence of the development of uniform building and construction codes. In biblical times, the Israelites utilized a classic form of residence called the four room Israelite house. The Israelites utilized its flat roof as a place to sleep and stay cool at night. Obviously, if the Israelites built a flat roof with no wall around it then they would create a fall hazard where someone could easily fall and be injured. In what may be the earliest evidence of a building code, the Bible addressed this issue directly. Deuteronomy 22:8 states:
When you build a new house, make a parapet around your roof so that you may not bring the guilt of bloodshed on your house if someone falls from the roof.
The Bible also addresses other public safety and health issues involving the built environment and suggests an apparent methodology for performing a toxic mold remediation. Leviticus 14:39-45 describes the procedure the Israelites were to follow when mildew was found in the home:
On the seventh day the priest shall return to inspect the house. If the mildew has spread on the walls, he is to order that the contaminated stones be torn out and thrown into an unclean place outside the town. He must have all the inside walls of the house scraped and the material that is scraped off dumped into an unclean place outside the town. Then they are to take other stones to replace these and take new clay and plaster the house. If the mildew reappears in the house after the stones have been torn out and the house is scraped and plastered the priest is to go and examine it and, if the mildew has spread in the house, it is a destructive mildew: the house is unclean. It must be torn down—its stones, timbers and all the plaster—and taken out of the town to an unclean place.
Translations of the Hebrew Bible vary and this passage has been variously translated by biblical scholars to refer to mold, mildew and the plague of leprosy. In any event, the suggested remediation methodology is harsh. Moreover, there is no suggestion offered as to any compensation and it appears that any financial loss would be borne alone by the unfortunate homeowner.
Fast forwarding, American law regarding the built environment began a relatively rapid evolution beginning in the mid-1800s.

  • 1857: The American Institute of Architects (AIA) was founded.
  • 1878: The American Bar Association was organized but did not yet recognize construction law as a distinct area of legal practice.
  • 1880s: States began to enact mechanic’s and materialmen’s lien laws.
  • 1888: The AIA and the National Association of Builders (predecessor to the Associated General Contractors of America) drafted and promulgated the “Uniform Contract.” The Uniform Contract was the first attempt to create a standard form construction contract.
  • 1893: Congress enacted the Heard Act, which required federal contractors to post surety bonds to protect subcontractors, laborers and materialmen against the contractor’s nonpayment and protect the government from the contractor’s nonperformance.
  • 1897: Illinois Architects Act of 1897 was enacted. Illinois recognized design professional specialization by enacting a state design-professional registration law.
  • 1905: Revisions to the Uniform Contract included a provision for arbitration of disputes.
  • 1906: The Great San Francisco Earthquake prompted municipalities to take building and fire codes more seriously and to enact new comprehensive building and fire codes.
  • 1911 to present: The AIA published sixteen editions of standard form construction documents.
  • 1925: Federal Arbitration Act enacted by Congress.
  • 1935: Miller Act was enacted by Congress. The Miller Act was more comprehensive and replaced the Heard Act. All states followed the federal government’s lead by enacting their own versions of the Heard Act or Miller Act.
  • 1949: At 22 years old, Overton Currie opened a law office in his home town of Mississippi. His first two jury trials were construction cases.
  • 1955: Uniform Arbitration Act was promulgated and eventually adopted by most states. The courts then began to embrace and favor arbitration as a method of dispute resolution.
  • 1955: Overton Currie moved to Atlanta, Georgia and began graduate studies at Emory University Law and Divinity Schools earning a Master of Divinity Degree. He also earned an advanced Master of Law Degree from Yale University.
  • 1959: Overton Currie resumed his law practice in Atlanta as a construction lawyer.
  • 1965: Maynard Smith, Overton Currie, and Reginald Hancock formed the partnership Smith Currie & Hancock, focusing their practice on the construction and government contracting industries.
  • 1976: The American Bar Association formed the Forum on the Construction Industry thereby recognizing construction law as a distinct area of legal practice. The Forum now has over 6,000 members.
  • 1989: Fifty-six senior American construction lawyers, including Overton Currie, one of Smith, Currie & Hancock’s founders, formed the American College of Construction Lawyers (ACCL). The ACCL’s stated mission is to improve and enhance the practice and understanding of construction law and to promote the positive role of lawyers as “friends of the project.”
  • 1991: The American Bar Association, Forum on the Construction Industry, awarded Overton Currie the Special Achievement Award and described Overton as “the Founder and Dean of the Construction Bar.”
  • 1994: Thomas J. Stipanowich, while a law professor at the University of Kentucky, published an article entitled “Two-Minute History of Construction Law (King James Version)”. The article recognized Overton Currie’s profound contribution to the evolution of construction law. The article begins “IN THE BEGINNING there was Overton Currie” known as one of “the MIGHTY MEN of OLD”.
  • 2003: The International Building Code promulgated by the International Code Council replaced hundreds of earlier local and regional building codes.

While the evidence of laws and codes involving the built environment dates back over 4,000 years, construction law as a distinct area of legal practice was first recognized in the United States in the mid-1970s when the American Bar Association formed the Forum on the Construction Industry.