June 21, 2012 · 8:52 AM

Hidden Lien Legislation Appears Primed for Approval in General Assembly

The train is on the track, and there’s no slowing it down.That was the impression left on construction industry stakeholders after House Judiciary Subcommittee B approved Senate Bill 42 unanimously yesterday.

Although the bill was initially re-referred to the Finance Committee, that referral was subsequently withdrawn, and a quick scan of today’s legislative calendar suggests the bill will be considered by the entire House at 11:00 a.m. this morning (the House calendar is here; see bottom of page 2).

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June 19, 2012 · 4:59 PM

Great Judicial Quote About Major Construction Projects

Gotta share this quote I recently read from a 1981 decision of the D.C. Court of Appeals that colorfully captures the complexities and chaos of a major construction project:

[E]xcept in the middle of a battlefield, nowhere must men coordinate the movement of other men and all materials in the midst of such chaos and with such limited certainty of present facts and future occurrences as in a huge construction project …  Even the most painstaking planning frequently turns out to be mere conjecture, and accommodation to changes must necessarily be of the rough, quick and ad hoc sort, analogous to ever-changing commands on the battlefield.

Blake Const. Co., Inc. v. C. J. Coakley Co., Inc., 431 A.2d 569, 675 (D.C. 1981).  So construction is like a battlefield, and war is hell.  Might I suggest having a good lawyer fighting on your side?!

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June 18, 2012 · 11:59 AM

Latest on Lien and Bond Bills Pending in the General Assembly

Image from Wikipedia Commons

Monday is upon is, the beginning of what is likely to be the penultimate week of the General Assembly’s 2012 short session.

As my regular readers know, I’ve been tracking two key pieces of construction-related legislation: the lien law revision bill recommended by a legislative study commission, and the bill advanced by the title insurance industry to address the “hidden lien problem.”

This post provides an update on where those two bills stand, and also reports on a third construction-related bill that hit my radar last week.

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June 13, 2012 · 7:01 AM

Title Insurers Seek Profound, Immediate Changes to N.C. Mechanic’s Lien Law

My May 23 post about proposed revisions to North Carolina’s lien laws mentioned that protection against “hidden liens” had been omitted from earlier versions of the bill, due to a concern that the issue required additional study prior to legislative action.

The title insurance industry, however, has other ideas.

In recent weeks, title insurers have ratcheted up the pressure for the issue to be addressed immediately, prior to the General Assembly’s adjournment of its “short session” at the end of this month.   The legislation they are pursuing would make profound changes to the manner in which all potential lien claimants — architects, engineers, general contractors, subcontractors and suppliers included — would need to preserve their lien rights, before a claim of lien is ever filed.

This post provides background on the so-called “hidden lien problem,” summarizes the title insurers’ current legislative efforts, and identifies potential problems with their draft legislation.

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June 8, 2012 · 1:38 PM

No End In Sight: Managing Latent Defect Exposure in a Post-Jacobs Engineering World

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…

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June 5, 2012 · 6:37 AM

What Contractors Should Know About the Surety Bond Underwriting Process

Danielle Rodabaugh of SuretyBonds.com

I’m thrilled to welcome my first guest blogger, Danielle Rodabaugh, to N.C. Construction Law, Policy & News.  Danielle is chief editor at SuretyBonds.com, a nationwide surety provider that issues construction bonds to contractors every day.  As a part of the company’s educational outreach program, Danielle writes articles to help construction professionals understand the intricacies of surety bonds and the underwriting process.  You can keep up with Danielle on Google+. 

Whether you’re new to the construction industry or have decades of experience under your belt, you probably have some questions about surety bond acquisition and what goes into the underwriting process.  Before we go much further, though, I’d like to review the basics of how surety bonds work and why they’re required.

Surety bonds ensure project completion.

When surety bonds are used on projects, they’re known as “contract bonds” or “construction bonds.”  Project owners require them to ensure construction professionals work according to terms laid out in contracts.

There are a number of different contract bond types.  Some of the most common ones are license bonds, bid bonds, performance bonds and payment bonds.  No matter what kind of surety bond you need, it will function as a legally enforceable contract that binds together three parties:

  1. The individual contractor or contracting firm that buys the bond is the principal.
  2. The project owner, which is typically a state agency, that requires the contractor to be bonded is the obligee.
  3. The insurance company that issues the bond bond is the surety.

If a contractor fails to fulfill the bond’s terms, then the obligee can make a claim on the bond’s sum to gain reparation for any damages or financial losses.

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May 29, 2012 · 11:03 AM

BREAKING: U.S. Supreme Court OK’s Revival of Time-Barred Defect Claims By Legislative Fiat

As set forth in the attached order, The Supreme Court of the United States will NOT review the decision of the Minnesota Supreme Court upholding legislation by the Minnesota state legislature that revives long-extinguished design defect liability arising from the 2007 collapse of a portion of the I-35W bridge in Minneapolis.Prior to the collapse, Minnesota’s “statute of repose” (a statute that limits the time during which an action can arise) for design defects was 15 years.  Despite the fact that the design work for the bridge in question was performed in the mid-1960’s, and despite the fact that the designer of record — Sverdup & Parcel and Associates, Inc. — had been bought out by Jacobs Engineering in 1999, the Supreme Court’s denial of certiorari means that Minnesota is now free to pursue $37 million in indemnity claims against Jacobs Engineering that had expired under the 15-year statute no later than the early 1980’s.

This is a scary outcome for participants in the construction industry, with potential insurance, contract drafting and document retention repercussions.  I’ll be back in the days ahead with additional analysis.  In the interim, you can read AGC’s brief in favor of review here, which sets forth quite eloquently the reasons why the Supreme Court should have reviewed and reversed the Minnesota Supreme Court’s decision.

UPDATE (5/29/12 1:38 p.m.): Coverage from Engineering News & Record can be found here.

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May 24, 2012 · 7:59 AM

Legislative Tinkering with Mechanic’s Lien Law — North Carolina Is Not Alone

The California legislature is also in the process of tweaking its statutory scheme — see this blog post from the “Government Contracts Advisor” blog.

According to the post, California’s goal for these revisions is to “modernize, simplify, and clarify the law, making it more user friendly, efficient, and effective for all stakeholders.”  Among other changes, it appears that California is standardizing industry lien waiver forms — much like the proposal the General Assembly is now considering.  But it also appears that California is going a step further than North Carolina by requiring GC’s to file preliminary notices to lenders, ostensibly to address the “hidden lien” problem discussed in my blog post yesterday.

Interesting stuff.  Again, I will continue to keep you posted on developments with North Carolina’s ongoing legislative efforts.

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May 23, 2012 · 12:03 PM

7 Things You Need To Know About The Proposed Lien Law Revisions Filed in the General Assembly Yesterday

Legislation revising North Carolina’s mechanic’s lien law was filed in both the House and Senate sides of the N.C. General Assembly yesterday.  Text of the legislation can be found here.While not the ambitious rewrite that members of the construction bar and real property bar had envisioned when the process of revising the statutory scheme began a few years ago, the pending legislation would make several important changes to existing mechanic’s lien law, while leaving a couple other significant issues for future legislative effort.

Click “Continue reading” below for my thoughts on the five most significant proposed changes embodied by the current revisions — as well as my thoughts on the top two “non-changes” to existing law.

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May 21, 2012 · 7:44 AM

Celebrity Delay Claim of the Century?

Image from Wikipedia Commons

My weekly round-up of what’s making news in the construction industry turned up a story out of Las Vegas, Nevada about a developer suing an owner for compensable delay.  It seems that the $50 million project, involving the conversion of a private residence into a museum, has never really gotten off the ground.

And Mr. Las Vegas is smack-dab in the middle of it.

The conversion of Wayne Newton’s Sin City estate, “Casa de Shenandoah,” into ”Graceland West” involves construction of an exhibition space, a theater, a zoo and a visitors’ center, among other attractions.  But the developer is alleging that it can’t make meaningful progress so long as Mr. Newton and his family refuse to relocate to a new $2 million home the developer is building on the 40-acre property.  “It is quite clear that it was always their intention to remain in the Mansion regardless of the terms of the agreement,” the lawsuit alleges.

Some of the developer’s other allegations strike this construction lawyer as somewhat — ahem — “unusual”:

The company claims Newton’s home was in a “sad state of disrepair” when it purchased the land for $19.5 million in June 2010, with his horses uncared for and 6-feet-tall animal manure piles covering the grounds.

“The penguin ponds were disgustedly dirty, full of algae and were endangering the penguins, all of whom were sick and many had died,” the lawsuit reads.

– From the AP’s coverage, which you can read in full here.

Probably goes without saying that Mr. Newton won’t be singing “Danke Schoen” to his developer anytime soon.

For his part,  Mr. Newton contends the developer failed to acquire permits, failed to communicate with Mr. Newton, failed to turnover required financial statements and bullied its employees.  In other words, it looks like this dispute might have legs, and could stay interesting.

So I’ll be keeping my eyes on the story going forward.  Who knows?  Maybe the outcome will contain a valuable lesson or two for the construction bar.  But that’s of secondary concern.  For the love of Pete, save the penguins!

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