“Up On The Roof”

Victor Metsch | Smith Gambrell & Russell LLP | October 18, 2018

When this old world starts getting me down

And people are just too much for me to face

I climb way up to the top of the stairs

And all my cares just drift right into space…[*]

Every aspect of residential cooperative or condominium life sooner or later becomes the subject of disagreement. And disputes as to responsibility for maintaining, and the right to use or build on, the roof are frequent in our Courts. A few recent examples follow:

Hersh v. One Fifth Ave. Apt. Corp., 2018 NY Slip Op 05522, App. Div. 1st Dept. (July 26, 2018)

Supreme Court granted defendant’s motion to dismiss the claim for breach of fiduciary duty and denied plaintiff’s motion to amend the complaint.

The Appellate Division summarized the facts and complaint:

In this case, plaintiff alleges that her apartment sustained extensive water infiltration due, in large part, to the condition of the greenhouse on the roof terrace located on the floor above her. According to plaintiff, the individual owners of the offending greenhouse (defendants Alan Belzer and Susan Martin), the cooperative (defendant One Fifth Avenue Corp.), and the individual board members failed to adequately address and remedy the situation, and their failure to act resulted in catastrophic water damage to plaintiff’s apartment[.]

And affirmed dismissal of the complaint as against the individual cooperative board member:

It is well-settled that a breach of fiduciary duty claim does not lie against individual cooperative board members where there is no allegation of “individual wrongdoing by the members…separate and apart from their collective actions taken on behalf of the” cooperative…Here, the complaint does not allege that any of the individual board members committed an independent wrong that was distinct from the actions taken as a board collectively. Thus, the breach of fiduciary duty claim is not viable. Because the proposed amended complaint fails to cure this deficiency, plaintiff’s motion seeking to amend the complaint was properly denied.

Contrary to plaintiff’s contention, this result is entirely consistent with Fletcher v Dakota, Inc….In Fletcher, we concluded that “although participation in a breach of contract will typically not give rise to individual director liability, the participation of an individual director in a corporation’s tort is sufficient to give rise to individual liability”…Thus, we declined to dismiss claims against a cooperative board director who was alleged to have participated in the cooperative’s violation of the State and City Human Rights Laws.

Here, in contrast, there is no viable corporate tort alleging breach of fiduciary duty, because a corporation owes no fiduciary duty to its shareholders…Thus, in the absence of a corporate tort in which the individual board members could have participated, the breach of fiduciary duty claim as against them was properly dismissed. Indeed, Fletcher made this very point by dismissing the breach of fiduciary duty cause of action against an individual board director, while at the same time sustaining Human Rights Law claims against him.

Fairmont Tenants Corp. v. Braff, 2018 NY Slip Op 04083, App. Div. 1st Dept. (June 7, 2018)

Supreme Court granted Fairmont’s motion for summary judgment, denied Braff’s motion for summary judgment and declared that the cooperative had right, title and interest to the roof adjacent to units 2F and 2G and enjoined Braff from occupying or using that space.

The Appellate Division summarized the dispositive provision of the proprietary lease:

There are no issues of fact requiring a trial. The proprietary lease defines the apartment as “the rooms in the building as partitioned on the date of the execution of this lease designated by the above-stated apartment number, together with their appurtenances and fixtures and any closets, terraces, balconies, roof, or portion thereof outside of said partitioned rooms, which are allocated exclusively to the occupant of the apartment” (emphasis added). This clause is ambiguous because it is unclear from the lease whether the disputed roof area has been exclusively assigned to defendants. As such, the court properly looked to extrinsic evidence, including the offering plan, which is a “controlling document” that gives the proprietary lease meaning…The offering plan makes clear that there is no outdoor space allocated exclusively to defendants’ apartment.

And concluded that:

Supreme Court also properly granted plaintiff summary judgment dismissing defendants’ waiver defense and counterclaim. Paragraph 26 of the lease addresses “facilities outside the apartment,” and under this provision, the Coop has a revocable license to that area…Further, the coop’s knowledge of defendants’ use of the roof space does not raise issues of fact regarding the coop’s waiver of a right under the lease in light of an unambiguous no waiver clause[.]

Supreme Court also properly dismissed defendants’ adverse possession defense and counterclaim. It is undisputed that defendants have permitted workmen on the roof at issue in 2015, and that they have given access to the roof space to building staff from time to time. Accordingly, the court properly found that defendants’ use of the roof space was not “exclusive” for any period of time prior to 2015[.]

Finally, defendants’ continued trespassing on the roof space entitles the coop to injunctive relief as the irreparable injury is the interference with the coop’s property rights[.]

Lee v. Scott, 2018 NY Slip Op 31029(U), Sup. Ct. N.Y. Co. (May 29, 2018)

Supreme Court, entertaining plaintiff’s motion for summary judgment in a roof rights dispute, summarized the background:

In September 1996, sponsor Bennco Properties, Inc….converted a five-story garage into a mixed-use condominium building…pursuant to the Offering Plan. Stefan Benn…was the principal of Bennco. Le Toulouse Condominium is located at 79-81 East 2nd Street, New York, New York. Charles W. Weiss, attorney for the Sponsor, filed the Declaration of Condominium and By-Laws…in December 1996. Article Fourth of the Declaration provided for five total units — four residential units and one commercial unit…The Declaration zoned Unit C-1 for commercial and residential use, and restricted the four remaining units, Units R-1 to R-4, to single family residential use only…Each residential unit occupies one floor of the second through fifth floors of the Condominium.

In February 2004, Bennco transferred ownership of residential Unit R-3 and Unit R-4 to Stefan Benn. In December 2012, Benn transferred ownership of Units R-3 and R-4 to the LGB Family LLC…with Benn as its sole Managing Member. Defendant Charles Weiss, individually, and through Charles W. Weiss, P.C. acted as the building’s attorney from 2007-2012. Weiss helped to draft the 1996 Offering Plan. Plaintiffs Patricia Lee…and Marc Lester…purchased the one commercial unit (“Unit C-1”) in September 2011 from defendant Michael Scott…Lee currently serves as the President of the Board of Managers of the Condominium.

The dispute:

The dispute between the parties concerns the right to use and build on the Condominium’s roof. Plaintiffs allege that the Benn Defendants do not own the Condominium’s roof, and that the Declaration and By-Laws do not grant any rights to construct any material structure on the roof. Plaintiffs argue, instead, that the no unit owner can access the roof for any reason other than for repair and maintenance with Board permission…Plaintiffs also argue that the roof is commercial space, and therefore, only plaintiffs have access and use of the roof…Defendants Benn allege, inter alia, that the March 2010 Third Amendment and the December 2012 Third Amendment read together, grant Unit R-4 extended roof rights, including the right to build a Penthouse apartment, swimming pool, and lawn…In addition, defendants Benn contend that the Declaration always provided that the roof deck is a limited common area for the exclusive use of Unit R-4’s owner[.]

The declaration and by-laws:

Under the Declaration and By-Laws, the roof contains General Common Elements, including a caretaker’s room and bathroom, the former freight elevator tower, and stairwell bulkhead, and a Limited Common Element roof deck…The Offering Plan lists the stairwells, lobby, and a portion of the roof deck (stairway bulkhead and 46 square feet of roof space) as “shared residential common elements.” Schedule C, under the Declaration, lists Unit R-4’s limited common elements as “Balcony, 96 sq. ft.” and Roof Deck “3,084 Sq. Ft.”…However, Schedule C, attached to the 2010 Declaration, lists Unit R-4’s limited common elements as “Balcony, 96 sq. ft.” and Roof Deck “1,852 Sq. Ft”…The footnotes to Schedule A, in the Offering Plan provide that the ‘RD’ notation (for “Roof Deck”) allocates exclusive use of the roof deck to unit R-4…The Offering Plan, Schedule D, also includes architectural drawings for the building where its “Legend” indicates the roof is a residential element and shares the same tax lot identification number (1005) as unit R-4…However, the House Rules delineated in Article IX Subsection 5(j) provides “roof-top areas of the Building shall not be used by any Residential Unit Owners, occupants, guests, servants, employees, agents or invitees, at any time for any purpose, [except] with the consent of the Board of Managers for repair or maintenance purposes only.”

Subsequent developments:

On June 15, 2004, the New York City Department of Buildings…issued a building permit…to Benn (as owner of Unit R-4) for alterations to the roof. Plaintiffs Lee and Lester assert that Benn commissioned two sets of plans. Plaintiff argues that Benn fraudulently submitted fake 2004 plans to the Department of Buildings…to obtain a Permit that only encompassed a renovation of the caretaker’s bedroom, bathroom, and former freight elevator tower…However, Benn then used that Permit to build a residential unit without permits, approvals, or amendments, and in violation of the NYC Zoning Resolutions…Today, as a result of planning and alterations that Benn commenced in 2004, the rooftop structure currently includes multiple bedrooms, bathrooms, living spaces and a pool…It appears Benn has controlled the use of the Penthouse apartment after the completion of the buildout.

The Third Amendment to the Declaration of Condominium of Le Toulouse Condominium dated March 15, 2010…attempted to resolve the Offering Plan’s different characterizations of unit R-4’s roof rights and incorporate the roof’s square footage into Unit R-4. However, the Condominium never filed the March 2010 Third Amendment with the New York City Department of Finance Office of the Register[.]

In December 2012, the Condominium filed a version of The Third Amendment, dated December 7, 2012, with the Register…Unlike the March 2010 Third Amendment, that the five current owners signed, only Stefan Benn signed the December 2012 Amendment. As of December 7, 2012, only three of the five original signers (60%) of the March 2010 Third Amendment still owned units in the Condominium. Article XII of the Offering Plan entitled “Amendments” provides, “[an] amendment shall be approved by eighty percent (80%) of the Unit Owners in number and common interest.” Article XII further provides “said amendment shall be set forth in a duly recorded amendment to the Declaration. . . . no amendment affecting any Commercial Unit, or the rights of the Commercial Unit Owner, may be made without the consent of the affected Commercial Unit Owner.

Plaintiff’s allegations:

Plaintiffs allege that the Offering Plan and Declaration do not establish that Unit R-4 has exclusive possessory rights to the roof, and that defendants Benn were not entitled to construct a rooftop structure on a Condominium common element. Plaintiffs note the documentation (regarding their purchase of Unit C-1) proffered by the defendants, including the Offering Plan, and the state-filed condominium amendments, do not disclose the Penthouse’s existence, and that they could not have known of defendants’ claims to the Condominium’s rooftop as the March 2010 Third Amendment never was filed with the Register. Plaintiffs also contend that defendant Benn misled the Unit Owners into signing the 2010 Amendment by withholding information from them.

Specifically, plaintiffs allege that the 2010 Draft Amendment included many false statements of fact that hid the true nature of the alterations to the roof and resulting violations from the Condominium, and induced the owners of Units C-1, R-1, and R-2 to execute the document…Plaintiffs likewise maintain that Benn falsely represented to the Condominium the roof alterations were performed with proper approvals under New York State law, but that the addition exceeded the scope of the June 2004 Permit when defendants Benn built a luxury Penthouse apartment instead of the permitted caretaker’s room. Plaintiffs allege Benn has unjustly reaped over $500,000 in rental income from the illegal Penthouse apartment.

Defendant’s allegations:

Defendants Benn however argue that the unit owners’ signatures on the March 2010 Third Amendment unanimously granted the limited common element of the roof deck to be incorporated into unit R-4, and that notwithstanding defendants’ failure to file the March 2010 Third Amendment, the identical language appears in both the 2010 and 2012 versions of the Third Amendment. Defendants further allege that the Third Amendments clarified the extended roof top rights owned by unit R-1 (encompassing over 3000 square feet of common elements owned by all unit owners) and defendants therefore were free to build a Penthouse apartment there. Defendants further allege that they obtained the appropriate permits from the Department of Buildings and that their renovations were performed within the scope of the DOB permit.

Denying summary judgment and concluding that:

Based on the foregoing, there are disputed material issues of fact that the court cannot determine without a trial. The parties dispute the scope of defendants’ claim of rooftop rights as delineated by the Offering Plan, the By-Laws, the House Rules and the validity of the March 2010 Third Amendment and the December 2012 Third Amendment defendant Benn filed. Issues of fact exist as to whether Benn fraudulently induced the unit owners into surrendering rooftop rights to defendants based on defendants’ alleged misrepresentations, and if any consideration was given to the unit owners for the surrender. Notwithstanding the foregoing, issues of fact exist as to whether defendants were permitted to build a Penthouse apartment (assuming the validity of the Third Amendments), and if so, whether defendant Benn built the Penthouse within the parameters of the DOB permit[.]

Rushmore v. Park Regis Apt. Corp., 2018 NY Slip Op 31335(U), Sup. Ct. N.Y. Co. (June 20, 2018)

Supreme Court was presented with various motions for summary judgment, stating at the outset that “at the core of this action to recover damages for, inter alia, breach of a proprietary lease and the by-laws of a residential cooperative housing corporation, is the parties’ dispute over the plaintiffs’ right to use and convey certain roof terrace space adjacent to their penthouse apartment.”

Supreme Court summarized the submissions:

In support of their motion, the plaintiffs submit, inter alia, the affidavits of the plaintiff Stephen Rushmore…the plaintiffs’ former real estate attorney Jesse Gordon, and an attorney’s affidavit, the pleadings, a copy of the proprietary lease, an acknowledgment agreement they were requested to and did execute in 2006, a 2014 contract of sale referable to the subject penthouse apartment, a proposed acknowledgment agreement that their prospective purchasers were requested to sign in 2014, and copies of letter and electronic mail correspondence.

In opposition to the motion, and in support of their cross motion, the defendants rely on some of the same documentation, along with affidavits from [board members] Bourque and Rachmani, the coop’s offering plan and by-laws, closing documents referable to the 2014 sale of the subject penthouse apartment, deposition transcripts of the parties, sales listing agreements, an apartment appraisal report, the final signed acknowledgment agreement between the purchasers of the plaintiff’s apartment and PRAC, photographs, and correspondence.

The plaintiffs’ submissions show that, in 2006, they purchased shares in PRAC referable to a penthouse unit on the roof of PRAC’s cooperative apartment building, and were issued a proprietary lease in connection therewith. There are two roof terraces in the building that are at issue — one terrace space above, or on the roof of, the penthouse unit, as well as a terrace on the same level, just outside the unit. The plaintiff’s claim of entitlement to the latter space arises from section 7(a) of the proprietary lease, which provides, in relevant part, that “[i]f the apartment includes a portion of the roof adjoining a penthouse, the Lessee shall have and enjoy the exclusive use of the terrace or balcony or that portion of the roof appurtenant to the penthouse.” As the plaintiffs explain in their supporting affidavits and deposition, and as set forth in the 2006 acknowledgment agreement, when they closed on their purchase of the unit, they executed a statement in which they “acknowledge[d] that we were advised by the Board of Directors of Park Regis Apartment Corporation that the Co-op intends to re-open the garden on the roof over the penthouses for use by residents of the building” (underscoring in original). The plaintiffs’ acknowledgment did not concern the terrace space level with the unit.

Subsequent developments:

It is undisputed that, when the plaintiffs later placed their unit on the market in 2014, members of PRAC’s board of directors suggested that they advise prospective purchasers that the board still had the intention of using the roof over the penthouse unit for a garden, accessible by all residents of the coop. According to the plaintiffs, on October 8, 2014, prospective purchasers executed a contract to purchase the plaintiffs’ penthouse unit for the sum of $8.75 million. The plaintiffs assert that, shortly thereafter, board members Bourque and Rachmani drafted a proposed acknowledgment agreement for signature by the prospective purchasers, pursuant to which the purchasers were to acknowledge that the “Roof and Roof Terrace are the property of [PRAC] and that pursuant to the [Proprietary Lease] or otherwise, neither is owned nor was ever intended for the exclusive use and occupancy by the [Unit] or by its owner.” The prospective purchasers declined to execute the agreement, and the sale was never consummated. The plaintiffs claim that they complained to Bourque that the required agreement reduced the market value of their unit.

Thereafter, as described by Stephen, the plaintiffs lowered their asking price and, after making attempts to negotiate new language for the acknowledgment agreement, ultimately sold their unit for the sum of $8.25 million. PRAC’s attorneys thereafter billed the plaintiffs the sum of $23,773.00 for their involvement in the final closing, and PRAC assessed the plaintiffs therefor.

Plaintiffs’ assertions:

[P]RAC breached the proprietary lease and the coop’s by-laws by compelling prospective purchasers to execute the subject acknowledgment agreement, thus causing the plaintiffs to incur damages by depressing the resale value of the subject penthouse. They argue that imposition of a new acknowledgment agreement improperly stripped away the inherent rights reserved by penthouse owners to object to PRAC’s use of a penthouse roof as a garden terrace. In addition, the plaintiffs claim that the fees charged by PRAC’s attorney were improperly assessed against them or, at the very least, excessive and unreasonable, thus constituting a further breach of the by-laws. The plaintiffs also assert that Bourque and Rachmani breached the fiduciary duty owed by board members to shareholders by drafting the proposed acknowledgment agreement to their detriment.

Defendants’ assertions:

[T]he new acknowledgment agreement simply clarified the status quo, the plaintiffs never had a right to prevent the coop’s use of the penthouse roof as a garden, subject to approval by the New York City Department of Buildings, there were no breaches of contract or fiduciary duty, and the attorneys’ fees assessed against the plaintiffs were reasonable and authorized by the by-laws.

And, after setting forth the legal template for summary judgment motions and contract disputes as to the breach of the contract claim that:

The motion is denied and the cross motion is granted to the extent of dismissing the first and third causes of action, which respectively seek to recover for breach of fiduciary duty against PRAC and the individual board members, and so much of the second cause of action as alleges that PRAC breached its own by-laws and the subject proprietary lease by requiring a prospective purchaser of the plaintiffs’ penthouse unit to acknowledge PRAC’s right to use the roof of that unit as a garden for the benefit of all tenant shareholders of the cooperative corporation. Thus, upon disposition of the motion, the only issue remaining to be tried is that portion of the second cause of action which alleges that PRAC breached its by-laws by assessing the plaintiffs an unreasonable amount in closing costs, including attorneys’ fees, upon the ultimate sale of the unit.

As to breach of contract that:

[T]he court concludes that the defendants established that the word “roof,” as employed in the proprietary lease, refers only to the roof of the building, and gives exclusive use, to the owners of a penthouse unit, of that portion of the roof of the building adjoining and appurtenant to the penthouse unit, i.e., the portion of the roof of the building which is on the same level as the floor of the penthouse unit. An “appurtenance” is a right of way that is necessary to give usable enjoyment to the conveyed premises…Here, the exclusive use of the penthouse roof by the owner of the penthouse unit is not necessary to give that owner usable enjoyment of the unit, just as the use of the roof of the building is not necessary to give the owner of the apartment units immediately thereunder usable enjoyment of those apartments. Contrary to the plaintiffs’ contention, the phrases “portion of the roof adjoining a penthouse” and “portion of the roof appurtenant to the penthouse” in the proprietary lease were not intended by the parties to refer to different areas of the roof but only the roof area on same level and just outside the penthouse…[T[he First Department reached the same conclusion in interpreting nearly identical lease provisions as that in the parties’ lease. Thus, the plaintiff’s rights extended only to the roof area on the same level and just outside the penthouse, not to any roof area on top of the penthouse.

Indeed, there is no dispute here that the former and current owners of the penthouse unit had and have exclusive use of that portion of the roof of the building that is adjacent to the floor of the subject penthouse unit, the terrace on the same level as and just outside the unit. The proprietary lease was clearly not intended to refer to the roof over the penthouse unit itself since it neither “adjoins” the unit nor is an “appurtenance” thereto. In opposition to the defendants’ showing in this regard, the plaintiffs do not show that the proprietary lease was ambiguous, and fail to raise a triable issue of fact as to whether the parties intended for the plaintiffs to reserve any rights in connection with the roof of the penthouse unit itself.

Conversely, the defendants’ submissions establish that the acknowledgment agreements executed by the plaintiffs in 2006, and drafted by Bourque and Rachmani in 2014, clearly refer to the roof of the penthouse unit itself. Contrary to the plaintiffs’ contention, their alleged retention of some unwritten, inchoate “right to object” to PRAC’s conversion of the roof of the penthouse unit into a garden terrace neither defeats PRAC’s right to such use of that roof under the by-laws, as protected by the business judgment rule…nor precludes PRAC or its board members from asking prospective purchasers to acknowledge PRAC’s right in this regard.

Thus, the plaintiffs failed to establish their prima facie entitlement to judgment as a matter of law on so much of the breach of contract cause of action as is premised on the defendants’ conduct in compelling the purchaser to execute an acknowledgment agreement. For the same reasons, the defendants have thus shown that their claim of right over the use of the roof of the penthouse unit itself, as opposed to the roof of the building adjacent to the penthouse unit, does not constitute a breach of the proprietary lease. Thus, in connection with their cross motion, the defendants have established their prima facie entitlement to judgment as a matter of law dismissing the breach of contract cause of action, except as to the claim that attorneys’ fees assessed against the plaintiffs in connection with the closing were unreasonable. In that regard, the defendants have not shown that the entirety of the $23,773 in attorneys’ fees that was billed was necessary to the consummation of the closing. The plaintiffs’ opposition, however, is insufficient to defeat PRAC’s entitlement to judgment dismissing the claim that it breached the lease and by-laws by requiring the purchasers to execute the acknowledgment agreement since, even if the plaintiff’s version of the facts are accepted as true, PRAC’s conduct does not rise to a breach of contract[.]

And as to the breach of fiduciary duty claim that:

The plaintiffs correctly point out that Business Corporation Law § 501(c) prohibits the unequal treatment of similarly situated shareholders…It is also well settled that members of a board of directors of a corporation “owe a fiduciary responsibility to the shareholders in general and to individual shareholders in particular to treat all shareholders fairly and evenly.”[.]

Like any other corporate board, the board of a residential cooperative has a fiduciary duty to the shareholders, and where violations of individual officers’ and board members’ fiduciary duties are alleged, a breach of fiduciary duty claim may be maintained against such individuals…The party challenging the board’s actions has the burden of demonstrating the breach…by showing “(1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant’s misconduct.”[.]

[T]here is no principle of corporate law that director liability arises only where the director commits a tort independent of the tort committed by the corporation itself. On the contrary, it has long been held by this Court that `a corporate officer who participates in the commission of a tort may be held individually liable, . . . regardless of whether the corporate veil is pierced.'[.]

However, the plaintiffs have failed to allege any conduct on the part of Bourque or Rachmani which would constitute a breach of fiduciary duty so as to impose individual liability upon them. They failed to show that the treatment of their unit by these defendants was unfair, that these defendants committed misconduct, or that they imposed any unauthorized restrictions on the sale of their unit.

On the other hand, in connection with the cross motion, the affidavits of Bourque and Rachmani establish, prima facie, that the treatment of the plaintiffs was no different than the treatment of any other penthouse owner, and that such treatment was fair, authorized, and within the intendment of the proprietary lease and the by-laws. For the same reasons as their failure to establish their own right to judgment, the plaintiffs failed to raise a triable issue of fact in this regard.

Behrend v. Gramercy-Tutherford Townhouse Corp., 2018 NY Slip Op 32172(U), Sup. Ct. N.Y. Co. (September 5, 2018)

Supreme Court, addressing a motion to dismiss the petition, summarized the proceeding:

Petitioner brings this Article 78 proceeding against Respondent, seeking an order annulling and setting aside Respondent’s November 21, 2017, determination denying Petitioner possession and access to the roof directly above Petitioner’s apartment; compelling Respondent to restore Petitioner’s right of possession and access to the roof by delivering all keys, to Petitioner, necessary to access the roof; declaring that Petitioner has the right to improve the subject roof amenity by building decking, subject to all applicable laws and obligations under her proprietary lease and at law; and deeming Petitioner the prevailing party and directing a hearing in her favor for an award of attorney’s fees.

The contentions of the parties:

Petitioner has been the proprietary lessee of apartment 222/#4…at Respondent Gramercy-Rutherford Townhouses Corporation, the cooperative building located at 220-222 East 17th Street, New York, New York 10003, since July 11, 2007. The residential cooperative is comprised of two buildings, 220 East 17th Street…and 222 East 17th Street…New York, NY 10003…Petitioner alleges that she is the proprietary lessee of both her apartment and the roof directly above her apartment and that the description of “Demised Premises” and Paragraph 7 of the Lease, set forth her rights and obligations with respect to the roof appurtenant to her apartment[.]

Respondent contends that Petitioner lacks standing to pursue the instant action because Petitioner never served a demand on the board prior to the commencement of this action and thus has failed to fulfill the necessary preconditions to the commencement of an Article 78 proceeding. Respondent avers that Petitioner failed to make a demand on the board with respect to her roof rights and/or the right to build a structure on the roof, and thus Respondent argues that Petitioner failed to allow the board to render a determination with respect to the issue of the Petitioner’s roof rights. The only demand Petitioner made to Respondent, that falls within the applicable four-month statute of limitations, was to approve her request to sublet her apartment “beginning in either November 2017 or December 2017, subject to the Coop’s rules and regulations”[.]

Grounds for motion to dismiss:

In support of its motion to dismiss the Petition, Respondent has submitted the affidavit of Matthew Crowe, the Treasurer of the cooperative since 2008…Crowe contends that based upon his review of the historical documents of the cooperative, the terms of the proprietary lease agreement signed by Petitioner do not give her the right of ingress and egress to/from the roof of Building 2 through the common space of the cooperative and that, prior to the roof repair in 2017, any resident in the building could have accessed the roof through the door Petitioner is demanding the keys for, as Petitioner did not have exclusive access to the roof because she did not sign the Roof Access Agreement…Respondent contends that the only historical agreement between the shareholder of the Apartment (currently Petitioner) relating to shareholder rights and obligations with respect to the roof of Building 2, is set forth in “Agreement Between Gramercy Rutherford Townhouse Corporation and the Owners of #4, 222 East 17th St. NY NY 10003 Regarding Roof Rights/Ownership”, dated November 1997[.]

Respondent admits that it was not able to secure a fully executed Roof Access Agreement between the cooperative and the prior shareholder of Petitioner’s apartment, and that none exists as between Petitioner and Respondent, but argues that the terms of the Roof Access Agreement forms the basis of the cooperative board’s understanding that the shareholder of the apartment is financially responsible for the roof in Building 2 and that the board received no compensation for allocation of the roof rights of Building 2, other than the shareholder’s promise to bear such financial responsibility…Based on this understanding and the terms of the Roof Access Agreement and Petitioner’s Proprietary Lease, Respondent contends that its request that Petitioner bear financial responsibility for the roof was made in good faith.

Petitioner’s response:

Petitioner alleges that going back to 2009, there is a history of leaks from the roof into her apartment…On May 20, 2013, Petitioner sent an email to the members of the board indicating that she had noticed further evidence that the roof was leaking into her apartment and in that email, directs several questions to the board and seeks information relative to her apparent intention to purchase additional shares allocated to the roof in exchange for the board permitting her to do construction on the roof. Specifically, Petitioner states: “Regarding share allocation for roof building, would the co-op be open to me purchasing additional share units in exchange for the right to build? I understand this would be a process, but I believe the co-op has done a share sale to Craig Samuelson for his usage for the roof on the 220 side in the past few years, so procedure should be in place already.”[.]

Petitioner claims that in 2014, the board “improperly attempting to shift all repair costs for the roof, structural and otherwise, to the two shareholders occupying the two (2) top floor apartments, respectively” and attaches “HOUSE RULES FOR GRAMERCY RUTHERFORD TOWNHOUSES CORPORATION” as an exhibit to the Petition…In December 2016, Petitioner alleges that the cooperative’s board engaged an engineer who recommended a full replacement of the Building’s roof, and the board engaged a contractor to make the structural repairs for approximately $84,00[.]

On December 13, 2016, the board’s treasurer, Mr. Crowe, sent an email to Petitioner and the other shareholder whose apartment was directly below the roof, summarizing the costs of the roof repair and indicating the board’s preference “to proceed with the $84,000 bid, which would result in a $42,000 allocation to each of you.”…Contrary to Petitioner’s allegations, there is no “demand” for payment expressed in the email, but rather a stated preference on how the board would like to proceed with the roof repairs. Indeed, at the end of the email, Mr. Crowe invites any questions and offers to go over the bids for the roof repair in detail…On January 11, 2017, the other shareholder responded to Mr. Crowe indicating that he agreed with the board’s preference…On July 6, 2017, Petitioner’s counsel, notified the board of her objection to the $42,000 chargeback for the roof replacement project, and asserted her rights under the Lease and the law[.]

Thereafter, in September, 2017 Petitioner advised the board that she wanted to sublet her Apartment beginning in either November 2017 or December 2017, subject to the Coop’s rules and regulations…On November 21, 2017 Respondent, through its attorney, approved Petitioner’s request to sublet her apartment…In that same letter, Respondent indicating that the board would be restricting access to the roof and that the board reserves all rights pursuant to contract and at law and equity relating to the roof and access to same as well as to, in the board’s sole discretion, limiting alterations to the building[.]

The standard of review:

An Article 78 proceeding may only be brought in certain circumstances, as prescribed by the statute…Specifically, here, Petitioner seeks to compel mandamus and direct the cooperative to restore Petitioner’s right of possession and/or access to the roof by immediately delivering to her all keys necessary to access the roof space, and declare that Petitioner has the right to improve the subject roof amenity by building decking and/or installing other lawful materials on the portion of the roof directly above the Petitioner’s apartment[.]

Mandamus to compel is “an extraordinary remedy that lies only to compel the performance of acts which are mandatory, not discretionary, and only when there is a clear legal right to the relief sought”…Accordingly, a writ of mandamus is not an appropriate remedy to compel performance of an act or duty for “which an officer may exercise judgment or discretion.”…Thus, “the petitioner must have a clear legal right to the relief demanded and there must exist a corresponding nondiscretionary duty on the part of the administrative agency to grant that relief”[.]

Because each of Petitioner’s causes of action set forth CPLR Article 78 mandamus to compel claims, CPLR § 217(1)’s four-month statute of limitations applies. As such, before commencing this mandamus to compel proceeding, Petitioner was required to make a demand and await refusal[.]

Dismissing the petition and concluding that:

Here, Petitioner filed this Article 78 petition alleging that Respondent had failed to deliver keys to access the roof directly above Petitioner’s apartment and to seek a declaration that Petitioner has the right to improve the roof amenity. Petitioner, however, has put the proverbial cart before the horse in that she has never made a formal demand upon Respondent to improve the roof amenity, nor has she demonstrated that she has any legal right of ownership in the roof amenity that forms the basis of her Petition. In fact, the documents submitted in support of the Petition, demonstrate quite clearly that Petitioner does not have any legal right of ownership to the roof amenity because she has not signed the Roof Access Agreement…Moreover, her own email correspondence with Mr. Crowe, makes very clear the fact that Petitioner knew she did not have ownership rights to the roof amenity because she clearly asks Mr. Crowe; “Regarding share allocation for roof building, would the co-op be open to me purchasing additional share units in exchange for the right to build? I understand this would be a process, but I believe the co-op has done a share sale to Craig Samuelson for his usage for the roof on the 220 side in the past few years, so procedure should be in place already.”[.]

Accordingly, Petitioner’s own email demonstrates the fact that Petitioner does not have a clear legal right to the relief demanded, as she has not demonstrated that she has any ownership rights to the roof amenity she is seeking to compel Respondent to grant her access to. Neither Petitioner nor Respondent provided a signed copy of the Roof Access Agreement in support of this proceeding. Moreover, Petitioner has also failed to demonstrate that the act for which she seeks the court to compel Respondent to undertake, is a “mandatory” act, and not one subject to Respondent’s discretion and judgment.

Paragraph 7 of Petitioner’s proprietary lease provides in pertinent part: “If the apartment includes…a portion of the roof…The Lessee’s use thereof shall be subject to such regulations as may from time to time, be prescribed by the Directors.”…Accordingly, the plain language of the lease demonstrates that Respondent’s Directors retain the right to promulgate regulations, from time to time, relative to the use of the roof appurtenant to Petitioner’s apartment. As such, this Lease provision aptly demonstrates that Respondent retained discretion and judgment with respect to Petitioner’s use and enjoyment of the roof amenity that is the subject of this proceeding. As such, mandamus to compel does not lie[.]

*     *     *

Here, it is clear from the Petition and the exhibits attached thereto that Petitioner has not met her burden to maintain this Article 78 proceeding. Petitioner has not established a clear legal right to access the roof directly above her apartment, nor has she established that the act she seeks to compel Respondent to perform is a ministerial duty, where the board cannot exercise judgment or discretion.

Lessons learned:

The fact that an apartment abuts the roof of a residential cooperative or condominium does not, standing alone, give the unit owner the right to use or build on, or the responsibility to maintain and repair, the roof.  The governing documents (i.e. the declaration, by-laws, etc.) control.

*  The Drifters (1963)

Dispute Resolution: Arbitration – A Better Option for Resolving Construction Disputes

Kent B. Scott | Babcock Scott & Babcock

This is the third installment in the series of articles on Dispute Resolution.

Arbitration has long been favored as a means of resolving construction disputes.  Many standard construction contract documents provide for a mandatory binding arbitration of all disputes arising under or related to the contract.

Arbitration Statutes

Both Federal and Utah law, like virtually every other state, favor arbitration as a cost-effective and timely means of resolving disputes.  Consistent with these policy considerations, both statutory law and case law support judicial orders compelling arbitration when required by statute or contract. The current Utah law is most commonly referred to as the Revised Utah Uniform Arbitration Act as set out in Utah Code Ann. §78-31a-101 through 131 (“RUAA”).  Utah’s RUAA is patterned after the Revised Uniform Arbitration Act that was approved by the National Conference of Commissioners of Uniform State Laws.  The Federal law is found in Title 9 U.S.C. §1 et seq.  This statute is known as the Federal Arbitration Act.

Commencement of Arbitration and Selection of Arbitrator(s)

Arbitration is initiated by a demand for arbitration.  The most common arbitration clause found in construction contract documents requires arbitration to proceed in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association (“AAA”).  A demand for arbitration pursuant to the AAA’s rules in a very simple document, requiring only a general and brief statement outlining the nature of the claim and a sum representing the damages sought.

The method for the selection of arbitrators is found in the AAA’s Construction Industry Rule or the Federal and Utah state statutes.  The method of selection can also be defined in the parties’ Agreement.

Case Management

The arbitrator will generally schedule, through the AAA, a preliminary hearing wherein the arbitrator and parties’ council will discuss the parties’ claims, scheduling, discovery, motions, witnesses, exhibits, the evidentiary hearing and form of award.

Discovery and Motions

In most instances, the type, amount and time frame for discovery is left to the arbitrator’s discretion.  Most arbitrators try to get the parties to agree on reasonable limits on discovery, especially depositions, but will impose such limits where the parties fail to agree.  Within this same authority, the arbitrator usually has the authority to issue subpoenas and subpoenas duces tecum upon third parties as allowed by the Rules of Civil Procedure.

In theory, arbitrators have always had authority to summarily dispose of all or portions of the claims submitted for arbitration.  Because of the limited avenues of appeal available in arbitration organizations like the AAA have discouraged summary disposition of claims except in the clearest cut of cases.

The Arbitration Hearing

At the evidentiary hearing, the procedure is in form very similar to that encountered in litigation.  It is, however, considerably less formal, particularly as to evidentiary matters.  Simply stated, the rules of evidence do not apply in arbitration.  In fact, both the AAA’s rules and most arbitration acts require the arbitrator to receive and consider evidence material to the dispute.  In short, the test by which evidence is judged in arbitration is materiality, not admissibility.

The Award

Once the arbitrator is satisfied that all other evidence is in, he or she will close the hearing and begin deliberations to the end of making an award.  Historically, arbitration awards have been extremely brief, consisting essentially of a net award of damages in favor of one of the disputants and perhaps an award of attorney’s fees and/or arbitration costs.  Currently, many arbitrators, as well as organizations such as the AAA will provide either a detailed or reasoned award upon request by the parties.

A detailed award must specifically list the arbitrator’s award as to each component of each party’s claims and culminate in a net award as to damages, attorney’s fees, arbitration costs and interest. If a contractor’s claim is comprised of a changed conditions claim, a constructive change order claim and an acceleration claim, the arbitrator must make a specific award as to each claim.  A reasoned award takes the process one step further, requiring the arbitrator to provide at least a minimal written explanation for each component of their award.

Under the AAA rules, an arbitrator must issue their award within 30 days from the date they closed the hearing.  Neither the Utah Arbitration Act nor the United States Arbitration Act has established any such time frame.

Modification of Award

Under the Utah Arbitration Act and the AAA rules, a party has twenty days from the date the AAA transmits the arbitrator’s award to the parties to seek modification of the award to correct any clerical, typographical, technical or computational errors.  The arbitrator has no authority to re-determine the merits of the award but may correct calculations or descriptions of persons or property in the award. Under the Federal Arbitration Act a motion to modify may be filed at any time within three months after the award has been filed or delivered.

Motion to Vacate Award

A motion to vacate the award under the AAA rules or the RUAA must be filed within twenty days from the receipt of the award. Under the Federal Arbitration Act, a motion to vacate may be filed at any time within three months after the award has been filed or delivered.

Once an award has been issued, it may become subject to efforts to vacate by a dissatisfied party. Reversal of an arbitrator’s award can only be done by a court.  Under both the Federal and Utah Arbitration Statutes, an arbitrator’s award will be vacated if it appears that:

  1. The award was procured by corruption, fraud.
  2. The arbitrator is guilty of misconduct.
  3. The arbitrator exceeded its powers.
  4. There was no arbitration agreement.

Again, courts have traditionally deferred to arbitrator’s awards and have been reluctant to revisit them when challenged by a dissatisfied party.  However, the Buzas decision seems to indicate that given improper circumstances, a Utah court may explore further propriety and basis for an arbitrator’s award, then one might expect by simply reading the terms of the RUAA.

Conclusion

The construction industry has used arbitration as an alternate form of dispute resolution for several years. Arbitration as a method of dispute resolution will continue to grow.

Thinking Beyond the Dispute Resolution Provision in Construction Disputes

Benjamin Pollock | King & Spalding | June 5, 2017

When parties cannot resolve a claim during a major construction project, the contracts dispute resolution provisions do not always need to read as step-by-step instructions. To the contrary, the situation may warrant a different approach that can be negotiated after the dispute arises. While agreement certainly is required to deviate from the contractual obligations which themselves reflect the parties prior and current agreement other options can be considered and proposed whenever they would be beneficial to the Project or parties needs. This article discusses alternative methods by which a resolution to a construction dispute concerning costs or delays can be found in ways not necessarily proscribed by the contracts dispute resolution provisions.

Contracts Do Not Predict Every Situation

As an initial point, by no means is this article suggesting that the contract should be ignored or disregarded. Indeed, the contract provisions should be the embodiment of the good faith negotiations of the parties, often hard-won through sophisticated bargaining. But this does not mean that one size fits all, and the individual situation and claims should be considered when an actual dispute must be managed.

This can be particularly true when circumstances change between the parties, or when the companies develop a business relationship outside of the one specific project. To be sure, the contracts dispute resolution provisions establish the original framework by which the parties are to resolve disputes arising from construction of that individual project. But the realities can change when those companies subsequently enter into additional contracts regarding multiple projects, or agree to an Operation and Maintenance Agreement that binds them to each other at the same site for multiple years following completion. Suddenly, the prospect of filing for arbitration over the one construction dispute can become a challenging or unacceptable option. Indeed, preserving the relationship and maintaining peace may prove more valuable than escalating a dispute to a jury or an independent panel. And with arbitration or litigation seen as a last-ditch option, the parties may do well to think beyond the contracts instructions in order to get the dispute resolved.

Conditions Precedent Can Be Mutually Waived or Changed

In many ways, a contracts dispute resolution provision can be seen as the designation of the ultimate deciderarbitrator, judge, or juryand a series of conditions precedent that must be followed before reaching the final stage. These conditions serve various purposes, like promoting party communication in an attempt to avoid costly litigation, or ensuring notifications are being effected internally at appropriate levels of management. These interim steps can include formal notice, a mediation or other non-binding proceeding, various waiting periods, and/or a meeting between management personnel. When a particular dispute reaches impasse, however, these actions may not always serve their intended purpose. In such scenarios, the contract provisions do not always need to be strictly adhered to, but instead should be evaluated for their perceived effectiveness under the circumstances. When it serves both parties or the Project to take different action, consider seeking a mutual agreement to waive or adjust certain of these conditions.

Take waiting periods. It is not uncommon for a contract to mandate that arbitration cannot be filed until a certain number of days after a formal notice letter is served (or other triggering event). But what if the dispute is impacting critical path activities, and a quick resolution would allow the parties to mitigate the impact or at least would provide the parties more certainty regarding the risks of a situation already affecting cost and schedule? As an initial matter, the owner may do well to instruct the contractor to continue working, or enter into a temporary agreement that maintains Project progress while the claim is addressed. But in this scenario, both parties may wish to consider waiving the required waiting period and submitting the dispute on an expedited schedule. Similarly, both sides may benefit from adding strict time limits on the selection process of nominating one arbitrator eachwho then nominate a chairpersonor even forgoing this timely process in favor of selecting a single fact-finder.

Another example is mandatory meetings between managers. Sometimes it may be patently obvious that certain disputes will not be resolved at such meetings. Perhaps the representatives designated by the contract have personality conflicts, the parties positions are extreme and irreconcilable, or the contemplated meeting would present other challenges that may actually exacerbate the situation. If the parties are entrenched in their positions, more might be at stake than a waste of time and resources: ill will can result if one party believes the other is not participating in good faith. In certain circumstances, a discussion by the designated persons about the dispute can do more harm than good.

Agreeing not to hold such a meeting is an option, although generally speaking, parties engaging in discussion before launching litigation is a good thing. If the contract requirements do not create an environment for success, they can be tweaked. Notwithstanding contractual restrictions on attendees, the parties can agree to select personnel best suited to attend, usually so long as there is someone present with decision-making authority. The presence of a mediator, expert, or third party neutral to facilitate discussions and offer opinions can be considered, regardless of whether the contract requires such a presence. And rather than meeting to discuss the merits of the disputewhich likely is encapsulated already in opinionated change documentation and argumentative claims letterscommercial settlements can be discussed instead. Indeed, such proposalsbonus milestones, additional resources, overtime, changes to the payment schedule, etc.may resolve the dispute without having to discuss, much less decide, the contentious issues, and can also benefit project progress itself. In these ways, parties can still hold the required meeting but tailor it to best position themselves for success.

Conclusion

A dispute resolution provision identifies the final arbiter of a dispute and contains other requirements meant to facilitate discussion and negotiation so that litigation can be avoided. Sometimes, however, the specific provisions will not best serve those purposes. In these situations, prudent parties will study the contracts requirements but also consider options that might more effectively resolve the particular dispute at issue, get the project back on track, and improverather than harmthe business relationship. Rather than view the various required stages as items on a checklist, parties can agree to waive or alter certain provisions and thereby adopt a procedure that may better facilitate resolution the specific dispute.

Hard To Handle

Brian L. Hill | Construction Law Musings | June 30, 2017

For the better part of twenty years, I’ve had a front row seat to over 1,000 construction lawsuits, claims and other disputes. Whether it is allegations over defective design, manufacture or installation, or claims of delay or cost overruns, or related to injuries, death, or even diminished value, there are some clear trends and patterns that have emerged over the years. The past decade in particular has seen sweeping changes to the nature of construction claims and disputes, and as a result, many veterans in the legal, insurance claims and expert services arena have struggled to adapt.

In this article, I will share some of the trends and insight I have picked up on from working with some of the top professionals in the industry when it comes to handling the increasingly complex nature of construction claims and disputes.

Single-family residential lawsuits involving dozens or hundreds of homeowners in a single tract, which at one point represented the bulk of claims in terms of both quantity and dollar value, are much more rare than ever before. The answer to why that is should be readily apparent to most: America’s home building productivity screeched to a halt during the recession and has yet to resume to previous levels. Similarly, condominium and other multifamily for sale projects just haven’t been in vogue for a decade, so we don’t see nearly as many lawsuits and claims involving homeowner associations as we used to.

Apartments, hotels, schools (K–12, and higher ed), governmental facilities, medical facilities, office buildings, skilled nursing and assisted living facilities, and other nonresidential projects are examples of the types of projects that are involved in disputes more often in recent history. Looking at that list, a common theme emerges — these are all more complex project types.

Not only that, but the stakeholders involved in these types of claims tend to have a lot more at stake, in addition to having the resources to retain top representation. The stakeholders themselves are more complex, often with sophisticated organizational structures, sometimes even involving foreign entities. For instance, one trend that insurance carriers are reporting is that more and more claims are coming forward on projects involving EB–5 Visa money.

Since insurance carriers are the entities that most often end up funding various claims, disputes and their ultimate resolution, you can be sure that insurance policy language is evolving in response to the new trends as well. Unfortunately, this means that the already high self-insured retention (SIR) requirements of many policies is only getting higher. (In case you don’t know, the SIR is like a deductible in that as an insured, your coverage doesn’t kick in until you’ve satisfied the SIR. Some publicly held builders have SIRs of $10-million.)

Because of the high SIRs, claims adjusters rarely have much if any involvement in a claim’s early stages, when early resolution is most beneficial to all parties. Another factor complicating the insurance coverage issue in today’s construction claims world is that even with the high SIRs, unless an actual lawsuit is filed, there may not be a claim for the carrier to respond to. That is a situation that can occur in an active construction project where a claim exists in absence of filing suit, or — in an increasingly common scenario — in a state where “right to repair” laws require certain criteria be met prior to actually filing a lawsuit that would trigger coverage.

The other “gotcha” that comes with the right to repair laws is that it can be extremely difficult to obtain a full release of liability in return for making repairs. Plaintiff counsel are reluctant to grant full release unless both the repair methodology and scope meets their experts’ requirements. In response, defense counsel are often reluctant to recommend their clients undertake repairs, congnizant of the additional risk that may result, without any guarantee of release of future liability.

How Best to Manage Complex Construction Claims and Disputes?

The increasingly complex nature of modern construction claims and disputes demand a completely different skill set and level of analysis in order to achieve resolution. That applies not only to the legal team, but also to the designated team of technical experts required to make sense of various claims.

With regards to the legal team, multiple layers of representation are often required, and that goes for both the plaintiffs, defendants and cross defendants. Sure, a solid understanding of contracts and construction practices is an obvious prerequisite. But you’ll also need someone on the team that has intimate knowledge of your state’s applicable legislation and case law as it applies to design and construction.

An essential resource that is needed on most cases I’ve been involved with is coverage counsel — an expert on your state’s insurance coverage policies and interpretations, with real world experience litigating such issues. One piece of advice I hear frequently is to also make sure that you have a strong line of communication with key decision makers for the parties you are representing and make sure those decision makers show up when required. (Too many cases drag on, with millions of costs/fees wasted, all because a representative of the carrier with proper signing authority failed to show up to a mandatory settlement conference, for example.)

Another critical aspect to managing complex claims and disputes is having the right technical experts, consultants and specialists on hand, as needed. Sometimes the choice of what type of expert is obvious, but not always. For example, if you are representing the architect or engineer, you obviously want an expert on standard of care for that profession, but you might also want to consider bringing in an expert on construction management standard of care to evaluate the design professional’s relationship with the rest of the team. You also need specialty experts, available on an as-needed basis, to answer the specific highly technical issues that will inevitably come up during the process.

Economic loss is often barred as a cause of action in claims involving one’s personal residence, but as more nonresidential projects end in dispute, the possibility of economic loss may become a factor. We’ve seen this come up in delay claims more commonly in recent years. Having an economic loss expert, in addition to an expert on estimated construction costs, has proven invaluable in some of those situations.

Of course there are some other economic realities that need to be considered when handling complex construction claims and disputes, such as the cost of these wonderful legal and technical experts that have now become critical. Whether you are working on behalf of the owners, the designers, the contractors, or some other party, the more manageable the costs, the happier your client will be, and the more likely you’ll get future assignments and referrals.

The biggest cost factor by far that we see in today’s claims and litigation world involving the built environment is dealing with the massive volume of evidence. In a single family home tract, besides the drawings and subcontracts, you aren’t going to typically find too much data to go through. On a $125-million mixed-use high rise however, you could easily find yourself with hundreds of thousands of documents. What’s worse is that those documents might be in hard copy spread amongst dozens and dozens of bankers boxes, or scanned into massive monolithic PDFs each containing thousands of pages, or even scanned into individual files per each page. And of course rarely are any of these document repositories ever well organized. The key is to retain a consultant or expert on document management to reduce wasted and duplicative effort on the part of your entire team.

What you don’t want to have happen is to have one of your experts miss a critical piece of evidence because they either weren’t provided with the document (in an attempt to reduce costs) or worse, because nobody knew the document existed. Having the right document on hand, at just the right moment, has been decisive in many cases I’ve worked on over the years. A six-figure cost for document management isn’t unwarranted in a high-stakes, bet-the-company claim when tens of millions of dollars are at stake.

Perhaps the most important factor in reducing the incredible cost of today’s complex construction claims and disputes comes down to plain old good project management. No one single person or even party can handle 100% of a complex claim. It is a collaboration between multiple lawyers, their staff, experts, consultants and others. Just like on an actual construction project, communication is key. Maintaining strict protocols for communication to ensure that what’s privileged remains so, while keeping everyone informed of what they need to know, is a dance that is not for the faint of heart.

What’s Next?

Just as the design and construction of the built environment has evolved greatly over the past several decades, so too has the handling of the claims and disputes associated with it. Two decades ago when I first started out in forensics, we took pictures on actual film, took notes using paper on clipboards, and stored our project case files in so many three-ring binders. Nowadays, we use digital cameras and tablets, and have terabytes of data stored in secure encrypted private clouds.

Some of the upcoming trends I see:

  • An increasing percentage of claims will be resolved in mediation and/or alternative dispute resolution, and outside of the courtroom
  • More claims related to occupant health and indoor environmental quality can be expected
  • Failure to achieve certain sustainability goals or incentives will become a cause of action in more jurisdictions
  • Operations and maintenance of facilities will play a larger role in building performance, and will thus come into play more in future claims
  • Insurance technology, particularly enhanced through artificial intelligence, will be greatly beneficial to the carriers, less so for insureds
  • As BIM and other collaborative construction technologies become more mainstream, the need for digital forensics will become more critical in e-discovery
  • Drones, robots, LiDar, 3D scanning, Infrared, and other advanced technologies will facilitate more advanced and less costsly/risky investigations

The one key factor that I have seen proven time and time again for handling complex construction claims and disputes is agility. Bamboo’s strength comes from its flexibility. By adapting and adjusting your approach to a given situation, and perhaps most importantly, by actively listening to opposing parties, even the most complex and contentious of claims can be resolved with minimal wasted expense.

Construction Disputes Becoming Faster and Cheaper, says Report

Out-Law.com | June 22, 2017

The value of construction disputes and the time taken to resolve them have both fallen over the past year, according to the annual Global Construction Disputes report from construction consultancy company Arcadis.

The global average value of disputes dropped by $42,800,000 while the time taken fell by one month, to 14 months, the report said.

Disputes in North America tend to last the longest, at an average of 15.6 months, the report said.

Asia took the top spot from the Middle East with the highest average construction dispute value at $84 million, it said, and the UK saw a double-digit increase in both average dispute value at US$34 million and dispute duration of 12 months.

The most common cause of disputes globally was ‘failure to properly administer the contract’. This has been the most common reason for four years running, Arcadis said. It is followed by ‘poorly drafted or incomplete/unsubstantiated claims’, and ’employer, contractor or subcontractor failing to understand and/or comply with contractual obligations’.

The social infrastructure and public sectors had the most disputes, Arcadis said.

When it comes to resolving disputes, party to party negotiation remains the most popular alternative dispute resolution method.

Construction law expert Fraser McMillan of Pinsent Masons, the law firm behind Out-Law.com, who contributed to the report, said: “The report highlights the most common cause of disputes. As construction contracts become increasingly complex, the allocation of risk and the administrative requirements of these contracts are not properly appreciated by those who have to operate them, at all levels of the supply chain.  Something is being lost between the contract and the site.  Parties in the process need to find a way ensure their people get the commercial understanding they need if disputes are to be avoided.”