Under the N.C. Nonprofit Corporation Act, members of North Carolina nonprofit corporations, including incorporated condo associations, have standing to assert the rights of their organizations derivatively. N.C. Gen. Stat. § 55A-7-40(a). That means members of incorporated condo associations upset about perceived construction defects can assert the rights their associations might have against the parties potentially responsible for those deficiencies.
Why would condo members want to assert defective construction claims derivatively, as opposed to individually? Simple answer: prevailing plaintiffs under the Act can recover their expenses in maintaining derivative claims, including their attorneys’ fees. N.C. Gen. Stat. § 55A-7-40(e). That arguably creates an incentive for condo owners to join derivative claims alongside individual claims when suing for defective construction.
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But as the N.C. Court of Appeals (“COA”) made clear in its January 21, 2014 decision in McMillan v. Ryan Jackson Properties, LLC, condo owners who want to assert claims for construction defects on behalf of their associations had better get their facts straight before pulling the litigation trigger. Pointing the finger at the wrong guy can lead not only to dismissal of a derivative claim, but also to an award of attorneys’ fees in favor of the defendant.
Ten years ago, you had the roof on your office building replaced. Your roofer had assured you that the new membrane would be waterproof, wouldn’t crack and would be well-suited for your building over the long-haul. He even backed up these representations with a document stating that both the membrane and his workmanship were “fully warranted for 20 years.”
The work was substantially complete on September 15, 2003, and until recently, the new membrane hadn’t given you any problems. After storms passed through your neck-of-the-woods last week, however, your “new” roof leaked. Big Time.
Turns out you’re going to need to replace your roof immediately, ten years earlier than expected. Adding insult to injury, interior spaces were damaged, including common areas and rented space, and the operations of some of your tenants were disrupted. You suspect they might seek rent abatement, maybe more. Good thing you kept that 20-year warranty in a safe place, right?
Kind of. Under a recent North Carolina appellate decision, you might be able to compel the roofer to replace the roof, but you’re not likely to succeed in recovering any monetary damages from him.
It’s a pleasure to welcome the thoughts of David Morrison of the United Kingdom to NC Construction Law, Policy & News. David has been a contractor, subcontractor, trader and project manager throughout his years in the construction industry. Beginning life mixing concrete in Hackney, London in the 1980s, David soon began to develop a reputation as the “pen pusher” on-site when he became interested in law and legislation in the industry. Having experienced both sides of construction disputes, David now enjoys a much more tranquil life on the marketing team at UK Tool Centre. Admittedly, he does miss the smell of mortar and bacon at dawn, though…
Having a contract properly prepared and signed is the single most important aspect of securing payment for work carried out by tradesmen. A document that clearly expresses the expectations of both customer and tradesman is invaluable should any dispute arise regarding work carried out and its worth. Tradesmen in the UK should familiarise themselves with the Supply of Goods & Services Act 1982 and have their contracts and workmanship adhere to its specifications to ensure prompt payment for services rendered and the legal right of entitlement if payment in part or in whole is withheld.
Image by eschipul via Creative Commons license.
In recent years, a majority of states have ruled that a contractor can be found liable for personal injuries suffered by third parties from accidents occurring after the contractor’s work is completed and accepted.
Not North Carolina.
In a decision handed down on August 7, 2012, the N.C. Court of Appeals (“COA”) once again embraced the “completed and accepted work doctrine,” which provides that an independent contractor is not liable for injuries to third parties occurring after the contractor’s work is completed and accepted. The doctrine has been the “law of the land” in the Old North State since 1946, and our appellate courts show no signs of reversing course.
This post explores the COA’s decision in Lamb v. D.S. Duggins Welding, Inc., considers the merits and drawbacks of the completed and accepted work doctrine and concludes with some observations about the rule’s exceptions and limitations.
Virginia construction attorney Chris Hill
Last week, I reported that the U.S. Supreme Court had refused to hear the Jacobs Engineering Group, Inc. v. State of Minnesota case, which arises from a decision of the Minnesota Supreme Court allowing that state’s legislature to retroactively revive long-expired latent defect liability.
This week, I provide a summary of the Minnesota Supreme Court’s decision and prognosticate about its consequences over at Chris Hill’s excellent blog, “Construction Law Musings.” You can read my guest post on Chris’s site by clicking here.
Many thanks to Chris, a fellow Duke ’94 alum, for giving me the opportunity to guest blog at his place. I’ll be back here with original content early next week. Lots going on with mechanic’s lien law & policy to share…
- Photo by pdufour via Stock.XCHNG
In a pair of recent decisions, the N.C. Court of Appeals has clarified that an “accident“ or “occurrence” may arise from faulty construction, ruled that the “your work” exclusion is not so broad as to exclude from CGL coverage damage to property other than the faulty work product itself, and held that lost revenue and other consequential damages may be recoverable against a CGL policy, even if such damages arise from the defective construction itself. Taken together, the two opinions narrow the reach of the “your work” exclusion in North Carolina, and should preclude the type of firestorm that engulfed the contracting community, insurance industry and legislature in South Carolina earlier this year, when its Supreme Court came to virtually opposite legal conclusions.
You’ll find a full discussion and analysis of both decisions, including their potential impact on the construction industry here in North Carolina, after the jump.