Construction Dive Magazine

This article originally appeared in Construction Dive Magazine, May, 2017, Reprinted with Permission.

Lee Weintraub, Florida Construction Defect AttorneyIn an effort to safeguard their residents against fraud and the chaos that can result from unprofessional behavior or lack of experience and knowledge, most states have some kind licensing procedure in place for professions like lawyers, physicians and real estate agents.

However, when it comes to construction contractors — who practice in an industry that is full of life and death scenarios — there is little state-to-state licensing uniformity.

How do these regulations vary across the U.S., and is there any indication that a strict regulatory scheme results in a higher level of professionalism and quality among contractors?

How licensing rules vary

“We see both extremes where it’s extremely difficult to get a license, and then on the opposite side where anyone with a hammer and pickup truck can be a contractor,” said Chuck Taylor, director of operations for Chicago- area Englewood Construction.

Taylor’s assessment of the licensing landscape isn’t an exaggeration.
Florida and California, for example, license a plethora of trades from pool maintenance technicians to drywall hangers to bridge builders. Along with extensive business and trade knowledge testing, both states have strict financial requirements, which include providing information about the person qualifying the applying company — the one who takes the required exams and assumes financial and professional liability for the its construction operations — other stakeholders and as the business itself.

California also requires a license bond, and Florida mandates that those qualifying a company have a minimum FICO score of 660. Both states also collect applicant fingerprints and run background checks.

Lee Weintraub, chair of the public private partnership practice at Becker & Poliakoff in Florida, said mother nature is partly to blame for the aggressive licensing agendas in these two states.

“My understanding … is that it’s because they are two of the biggest natural disaster zones,” he said. “They get earthquakes, and we get hurricanes.” And with extreme weather events come the predatory contractors who take the money and run, so the rationale behind the first laws was to protect consumers.

From those beginnings, he said, the scope of those licensing regulations grew into what the industry has today — a lot of licensed trades.

On the other end of the spectrum are states like Texas and Illinois, Englewood Construction’s home state. Neither has a state-level contractor licensing system, with the exception of trades that are considered tied to public safety like roofing, fire protection, asbestos and electrical.

In a sector where exceptions are the rule, from state to state, there isn’t one agency that is responsible for that type of licensing, either. It could be a state fire marshal’s office, a public health agency or a financial services office.

But the differences aren’t limited to states. Cities like Chicago and New York also have contractor registration and licensing programs of their own to fill in the gaps that state regulatory agencies leave behind. Even a state with far-reaching state licensing requirements like Florida still has county-level licensing for trades not covered by state law or for those who perform work in only one county.

In the case of, for example, a drywall contractor who only performs work in Pinellas County, FL, they can take an exam and get licensed locally, but, because there is an equivalent state-level license, they must still register with the state and meet the same financial requirements as a state contractor.

The impact of stricter requirements

The leaves the question: How do these rules impact contractors?

Taylor and Weintraub both said the extensive financial and application requirements of licensing systems, like there are in Florida and California, help weed out those financially unprepared to run a construction business.

Regarding the argument that such strict contractor regulations saddle contractors with too much paperwork and associated expense, Weintraub said, “There’s no merit to the argument that it makes it worse for contractors. There are some restrictions that aren’t onerous like putting a license number on a truck … but there’s no burden I see at all on your ability to run your company.”

There are some local requirements, however, that Weintraub said could be considered more fundraising-minded.

For example, Florida licensed contractors are authorized to perform work freely throughout the state, but counties and municipalities still take a bite of the apple by levying registration fees or other charges, even if the contractor’s base of operations is in another part of the state.

Englewood does work all over the country, and strict licensing requirements, he said, sometime seem like a purposeful barrier to entry.

For example, in Arkansas, one of the pieces of paperwork required with
a general contractor’s license application is an audited or reviewed financial statement, which can be a pricey proposition for a company the size of Englewood, as many accounting firms calculate their fees for this service based on company revenue. This is something that could derail a company’s plans to enter the market, Englewood said, but it’s difficult to ascribe motive.

New York doesn’t have a major state licensing program either, according to John Patrick Curran, partner at Sive, Paget & Riesel. Contractors, he said, are licensed at the local level, with the exception of those working in the field of asbestos abatement.

In New York City, Curran said, along with some other cities, only contractor registration is required, but that’s primarily for practical safety reasons.

Registration assures the contractor has adequate insurance and complies with Department of Buildings rules.

For example, the DOB requires that projects between 10 and 14 stories have a Site Safety Coordinator on the job and that a Site Safety Manager must be present during construction on projects 15 stories and higher or more than 100,000 square feet. The DOB licenses both categories of safety personnel.

“It’s more of a safety thing than anything else,” Curran said of the contractor registration requirement.

Where quality comes into play

What about an impact on quality?

“Does the fact that you carry a license have any impact on your qualifications? I don’t think so,” said Andru Ramker, president of Hawkeye Construction of South Florida. His company performs work in many states where licensing requirements vary, and he doesn’t believe there’s a difference in skill level.

The primary reason for that, he said, is that the licensee is not usually the one performing the work, at least in commercial applications. Instead, there are layers of employees, subcontractors and independent contractors completing the actual construction. Quality control, he said, often comes down to whether supervisors have the training necessary to recognize if a crew is capable of doing the work.

Ramker added, however, that a positive license history can send a message to customers. “Where it would have an impact is that if a client comes to you and wants to select you, they have the ability to check and see your license is in good standing,” he said.

In Ramker’s case, he has been a licensed general contractor in Florida since 1979, and that demonstrated longevity, he said, can give clients assurance that he’s not going anywhere until the job is done.

“From the standpoint of [many] of us who have a license,” Ramker said, “we have it for all the right reasons and are proud to carry it.”

Let me start with the caveat that I am not getting into the political or race issues at the heart of recent events in Baltimore. However, from the point-of-view of someone working in construction and insurance law, the insurance and rebuilding questions created by the protests/riots in these cities is of great interest. Although the specific article here references insurance issues and struggles to rebuild in Maryland, similar concerns and analyses would apply anywhere that such events take place.

As the article from Insurance Business America notes, many small businesses have been unable to reopen post damage as they are caught in a web of what is and is not covered under their applicable policies. Many questions loom: does the property insurance policy afford coverage; what about the Business Interruption policy; what are the applicable deductibles?

As is typical of any insurance coverage the devil is in the details of the specific policy at issue. Insurance policies can cover almost anything but the more a policy covers the more expensive it likely is and thus cost prohibitive to many small business owners. As a result many business owners reduce coverage, or increase deductibles, in order to afford the policy premium.

Unfortunately, many owners are now finding out that:
– They are underinsured;
– Older buildings need to be brought up to code and their policies do not include such “Law & Ordinance” coverage;
– The storefront glass is not a covered loss;
– Depending on the characterization of the event, “riot” as opposed to “rebellion”, may impact coverage;
– The deductible period for a business loss may cover the time frame when the majority of the damage occurred;

Unfortunately for these business owners it is too late and they are stuck with the insurance policy they bought or did not buy as the case may be. However, it is beneficial for all business and property owners to review their existing policies and sit down with the professionals to hammer out any changes that may need to be made. For those that believe that they are not “at risk” for such casualties such as in Baltimore, that is the narrow and short view of insurance. Reviewing the policies would be beneficial for all other risks including fire, flood, hurricanes, etc. In the long run that may be one of the best invested couple hours of a business or property owner’s life.

Concrete generally consists of three components: (a) water, (b) an aggregate material such as sand, gravel, or stone, and (c) cement. In condominiums, concrete is often used in the formation of the shell of the building, with further support and strength being provided by reinforcing steel located within a condominium’s concrete slabs, balconies, and columns.  Over time, exposure to atmospheric conditions, including but not limited to, items such as chloride ions or carbon dioxide (through a process known as carbonation), may cause or contribute to the corrosion of reinforcing steel located within concrete. Other factors may also contribute to this corrosion process. When this reinforcing steel corrodes rust can form, with a resultant volume that is greater than the volume of the original reinforcing steel. Rust can also adversely affect the bonding between the reinforcing steel and the surrounding concrete, with the potential for cracking, spalling, rupturing, and delamination of the concrete itself.

If potential concrete-related problems are observed, it would be helpful to engage the necessary technical and construction personnel to evaluate and remediate such conditions. A licensed competent structural engineer with experience in concrete repair work can ideally assist in several ways; including but not limited to, (1) identifying the cause(s) of the problem, (2) determining the projected scope and extent of remedial work, (3) preparing the necessary plans, specifications, and project manual(s), (4) assisting in soliciting and evaluating bids / proposals from contractors for such repair work, and (5) supervising and/or overseeing the contractor that is engaged to perform such remedial work.  The engineer’s responsibilities should be established beforehand, typically in and as part of the terms of a contract between the engineer and the condominium.

Hiring a licensed competent concrete restoration contractor and establishing the contract that is to be used with this contractor for such concrete repair work is also important. Among the types of contracts that have been used for concrete repair work are (a) lump sum or stipulated sum contracts, (b) guaranteed maximum price contracts, and (c) unit price contracts.  With respect to “unit price” contracts, the actual contract price is generally based upon the amount of linear, square, or cubic feet of work done. Notwithstanding an engineer’s (prior) estimate, once the damaged concrete is chipped away and one can see what specifically needs to be done, an entity, such as a condominium association that has entered into a unit price contract may, at times, find itself incurring costs that exceed the estimated cost of such work. With respect to “lump sum” or “stipulated sum” contracts the contract price is typically stated in the contract. Nevertheless consideration should be given as to what is and what is not included in this stipulated contract price, and if there are any other provisions (caveats / exceptions) that could nonetheless change this price. A “guaranteed maximum price” contract is, as the name suggests, one in which the price will typically not exceed a certain amount (again presuming no caveats or exceptions apply).  Irrespective of the type of contract that is used, the contracting parties should evaluate all of the terms and conditions of such contract, and be aware of how it affects their respective rights, obligations, and responsibilities.

179300577Construction lawyers throughout the country have long preached the importance of proper construction documentation to owners and developers alike. Comprehensive documentation of a project is essential to protect owners; especially in the quick-build environment we are experiencing now.

Fortunately, there are several companies providing powerful tools that are invaluable to the mitigation of claims and overall protection of the owner and/or developer. One example is Multivista, a leader in photographic construction documentation. Multivista offers state-of-the-art construction photography and video documentation. Their products include interactive visual as-built documentation, construction webcams, and inspection-grade photos of the project.

Other core competencies include “Facility Management Information,” which is the process of converting documentation manuals and warranty information into an indexed, integrated system that is accessible via computer. Put more simply, imagine if a building manager could scan building components such as doors and windows to immediately pull up installation and warranty information. The result is a fully integrated “virtual building” that allows workers to access a visual model of the facility and all available facility information.

This level of project documentation is supportive during construction disputes and assists the attorneys and experts reach a speedy resolution. The technologies, although costly, marry construction and information in a time when some owners are even mounting webcams on top of hard hats to tell if a worker is lying down or taking a nap. They present a more practical approach to necessary construction documentation and also include real-time components. Owners using these tools are able log into an online interface remotely and monitor actual job site conditions anytime, anywhere. This is priceless.

One of the most important ways to spur “green building” practices is through financial incentives. These incentives often come from government at the local, state and federal levels, but may also be supplied by private groups and organizations involved in the green building movement. Incentives may be offered in numerous forms.  Here are some of the most common methods:

Tax Credits and Waivers – Tax credits often are in the form of crediting tax liabilities to the owner of the project. Tax waivers, or abatements, often allow property owners to avoid paying taxes for a period of time. While there are multiple reasons for doing this, like reducing the use of natural resources or promoting cleaning buildings, the local government often recoups the lost or deferred tax revenue through the increased assessed property values down the road.

Grants – Grants can be a great source of funding for project owners to offset costs and potentially make green building more profitable. Generally, in order to obtain a grant from a local governmental entity, the owner has to submit a proposal which may be based on pre-specified goals or other criteria.

 

Rebates – Simply stated, rebates can get you back money for building green. There are numerous energy-efficient products that may be eligible for rebates, and developers or home-builders should check with the products manufacturer or the city or state to see what they can get back. Examples of items include laundry machines, solar water heaters, windows, insulation, and roof or roof systems.

 

Reduced fees – Some state and local governments lower or waive fees that usually come with the construction process, such as permitting, for contractors or developers undertaking green building practices. This can save owners a lot of money, especially on larger projects.