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Construction Law Authority / Articles posted by Sanjay Kurian (Page 4)

Legislative Proposal Could Wipe Out Common Area Warranties

Reacting to the Fifth District Court of Appeal's decision in Lakeview Reserve Homeowners v. Maronda Homes, 48 So. 3d 902 (Fla. 5th DCA 2010), discussed here, the legislature may consider a bill next year to prohibit implied warranties of fitness and merchantability from applying to streets, roads, sidewalks, drainage areas, utilities, or any other improvements that are not located on or under the lot on which a new home is constructed.  Senate Bill 1196 is the legislative bill that was proposed and can be found here.  The Lakeview case was appealed to the Florida Supreme Court and the oral argument was made just last week but the legislature may be moving forward without waiting for the court to rule. The bill is a bad deal for homeowner's for a number of reasons.  First, the proposed statute is not limited to Chapter 720 homeowner’s associations. As worded the limitations would negatively impact homeowner associations, condominiums, co-ops, timeshares and mobile home parks as the term...

Construction Contracting for the Owner – Essential Terms of construction contracts

I wanted to address key terms for any contruction contract.  Although some of these may seem mind numbingly obvious, I have seen contracts over the years that failed to address very critical points. 1. Scope of Work - What are you trying to get done?  For more detail go here. 2. Contract Price - What is the price and how do we determine that? It depends on the type of contract.  Does the price include permitting, bonding or additional insurance? 3. Start Date and End Date - When do you want the work to start? When should it be completed? 4. Insurance - How much and who has to carry it? 5. Indeminfication - Who has to hold who harmless?   6. Dispute Resolution - Are you agreeing to arbitration or litigation in the case of a dispute?  Which disputes are subject to these provisions? What jurisdiction will these disputes be resolved in? Does the prevailing party get their legal fees back?...

Construction Contracting for the Owner – Types of contracts

There are several types of contracts which are used in between owners and contractors. The primary ones are lump sum contracts, unit price contracts, time and materials, construction manager and design-build.

Lump Sum:

A lump sum contract is the most basic agreement between a contractor and owner. The contractor agrees to provide specified services for a specific price. The owner agrees to pay the price upon completion of the work or according to an agreed payment schedule. T lump sum includes the costs of labor and materials and the contractor’s overhead and profit. The benefits of a lump sum contract for the owner are primarily that the costs are known at the outset of the project and the contractor has the risk if additional materials or time is needed.

Unit Price:

In a unit price contract a fixed price is established for each unit of work. A common example for condominium associations is a unit price for cubic feet of concrete repair on a balcony renovation project. This is useful as the price is set for the that unit of work.  Like a lump sum contract, the contractor is paid an agreed upon price, regardless of the actual cost to do the work. Unlike a lump sum contract the agreed upon price is usually for a small component of the work and not the entire project so the final cost may not be known at outset since the contract quantities at bid time are only estimates. Any contract for cost plus should require the contractor to keep careful records so as to be able to show quantities.

Time and Materials:

In a time and materials contract the contractor charges an hourly rate for labor, and there can be a certain percentage added to the materials and labor for profit. The perceived benefit for the owner is that they are not paying for any fluff that a contractor may build into the lump sum, and contractors are ensured that they will a fair profit. However, this contract shifts the price risks completely from the contractor to the owner. In the absence of checks and balances for the types of materials used and the actual time spent, including a guaranteed maximum price the owner could be giving the contractor a blank check.

Potential Settlement of a Chinese Drywall Case

Per today's Tampa Tribune Online: "A Miami-based supplier of tainted Chinese drywall agreed in a court filing today to a $55 million settlement of claims that the corrosive product damaged homes, all or nearly all of them in Florida. The proposed settlement, which requires approval from U.S. District Judge Eldon Fallon in New Orleans, would resolve claims by thousands of plaintiffs against Banner Supply Co., several related companies and Banner's insurers."   The full article can be found here.   As noted in the article, the deal still has to be approved by the court and until that happens all of this is tentative.  However, this may be a good step in these cases being resolved and homeowners being able to recoup some of their damages.  Obviously this is not the end of this legal chase as the parties making payment will be seeking to recover from the suppliers of the chinese drywall.  Although settlement of this one case...

Hurricane Season – Disaster Planning Webinar Q and A

As readers of this blog know, one June 1 we put on a webinar to begin preparations for hurricane season. The webinar is available here under the title Disaster Planning for the 2011 Hurrican Season: Are You Ready to Weather the Storm? for those who were unable to join us live. During the course of the webinar we received a number of questions we were unable to answer live due to time constraints. I have listed below some of those questions and the answers. For the sake of clarity and brevity some of the questions have been modified. As always, the below answers are not intended to be legal advice but solely informational.   Q- Can the Board of Directors of a Condominium Association forbid owners and/or guests from entering the property after a natural disaster.  A- Generally, for the Association to prohibit access to the condominium a governmental entity would have to declare the building or surrounding area to...

Supreme Court accepts review of Lakeview Reserve v. Maronda Homes

In the recent case of Lakeview Reserve Homeowners v. Maronda Homes, 48 So. 3d 902 (Fla. 5th DCA 2010), Florida's 5th District Court of Appeal found that a homeowner's association had a claim for breach of common law implied warranties of fitness and merchantability against a builder/developer for defects in the roadways, drainage systems, retention ponds and underground pipes.  The Fifth District found that these items immediately supported the homes by making them "habitable, and so, fit for its intended purpose."  In reaching this decision, the Fifth District certified conflict with the Fourth District's 1985 opinion of Port Sewall Harbor & Tennis Club Owners, Association, Inc. v. First Federal Savings and Loan Association of Martin County, 463 So. 2d 530 (Fla. 4th DCA 1985).  The Port Sewall case relied on the Florida Supreme Court's prior decision in Conklin v. Hurley, 428 So. 2d 654 (Fla. 1983), which the Fifth District distinguished. In light of the conflict between the appellate districts, the Florida Supreme Court has...

Construction Contracting for the Owner – Scope of Work

It is an easy enough question, what is the scope of your project? For example it may be simply to reroof the building. However, what materials should be used, what will be done with damaged plywood decking, does the existing roof need to be pulled off or can it be roofed over? These are all basic questions that need to be addressed from what appeared to be a simple question. As the owner, the scope is very important for purposes of knowing what your expectations are and that the contractor understands those expectations.  The scope will also impact the price. In our reroof example, what is the contractor doing with the air conditioner stands on the flat roof? Are they being removed and put back, or the being removed and new ones put in? Can the work be done with the air conditioning units in place?  Whether a reroof or any construction work...

Construction Contracting for the Owner: The Owner – Contractor Relationship

   In choosing a Contractor, often the Owner chooses a Contractor through a bidding process. Sometimes the Owner engages a Contractor on their own.  However the Contractor is contracted it is important to spell out the details of the terms. Courts will not protect an Owner from a bad deal that the Owner has voluntarily entered. This means that those multimillion dollar one page contracts floating around (I have seen a number of them over the years) will be enforced by a court if the Owner does not live up to the terms, no matter how one sided. In the bidding process, the Owner, with the help of the Design Professional, sends out a bid packet to various contractors and invites them to bid on the project.  The Owner and Design Professional then evaluate the bids and review the responsiveness of the bid, the responsibleness of the bids (is the bidder lowballing now in hopes of issuing...

Construction Contracting for the Owner: The Owner – Design Professional Relationship

Once the owner has decided to undertake a project they generally retain the services of a design professional. The design professional is the engineer or architect hired by the owner to be used at various points throughout the project. General discussions between the owner and design professional should include the owner’s expectations of the projects, budgets, specific materials which need to be used or special considerations about the project. In both renovations and new construction these discussions would also include aesthetic considerations.  Although all these discussions may happen, the scope of the design professional’s relationship with the owner is that which is spelled out in the contract between the owner and design professionals. An owner in retaining the design professional needs to define his expectations of the design professional, and those expectations should be reduced to a written contract. As an owner, if you want the design professional to provide contract administration then you must ask...

Construction Contracting for the Owner – Parties to a Construction Project

  This is part 1 of our series on Construction Contracting for the owner.  Once you have decided to begin a construction project, whether this project is a reroof, concrete restoration, painting, repaving or anything else, there are generally 3 main groups involved. The first of these groups is the owner. The owner is the person or entity on whose behalf the work is being done. The types of owners range from an individual, development entity, hotel, condominium association, homeowner's association or a governmental agency.  Although the owner may be using a bank to finance the construction, the owner is the party generally responsible for ensuring payment to the other 2 groups. The second group is generally the design professionals. This group consists of the engineer or architect hired by the owner to prepare any drawings or specifications for the work to be done.  In larger projects, the owner may contract with an Architect who then hires various subconsultants (geotechnical engineer, structural...