Code Green – Upgrades to Building Codes in 2012 Sideline Old Homes

Marla and John Ray relocated to Denver from Washington, D.C. in 2008, partly because of the weather. But there are days they’d never know they left the stifling Potomac lowlands because their townhouse in central Denver
is so hot.

By Melissa Baldridge

Marla, who owns Denver’s Moving Boxes, works from a third-floor bonus room in her house, a space which fries several months a year. “We’ll have the heat on in one room, and the air-conditioner on in another,” she says of the four-story townhome in the Whittier neighborhood. Unsurprisingly, her electric bills are hundreds of dollars, especially in summer when her air-conditioner runs full-tilt-boogie and triggers “peak” pricing – Xcel Energy’s slap on the hand to homeowners who use excessive power to stay cool.

Their problem isn’t old or shoddy construction, though. The house is a custom 3,100-square-foot duplex built in 2009. Instead, their issue is that the house meets the bare minimum required in building codes, and the energy codes that feed into them are insufficient. Thankfully, those energy codes – the 2009 “IECC”version – are becoming roughly 15 percent tougher next year in Denver, as well as in a number of Colorado counties and places across the country.

“Energy codes matter because people have a basic expectation when they buy a property,” says Shaunna Mozingo, Energy Code Consultant and Plans Analyst for Colorado Code Consulting. “When it snows, the roof will hold the load. When the wind blows, it won’t blow the house down. The plumbing works,” she says.


 But Mozingo says these buyer expectations also extend to energy use. “Buyers also expect to be comfortable, and they expect the home to be efficient. They expect that their first energy bill isn’t going to put them out of their next mortgage payment.”


As with computer processors, there’s a “Moore’s Law” in energy efficiency – the bar gets raised routinely in energy-efficient features and systems in homes. In the same way that old Commodore computers with 280-bit processors are now quaint relics, homes built five, 15 or even 50 years ago must step up with energy efficiency or risk devaluation when it’s time to sell.


For example, the new codes will make 80-percent furnaces museum relics. ‘Ever wait for the shower water to heat? Hot water pipe insulation will now be required. So will mechanical ventilation to keep inside air fresh and safe. And one of the more exotic and visible changes going forward is mandatory blower-door testing – energy auditors put large fans and adjustable canvas frames into doorways to measure building airtightness.

These raised codes would have helped the Rays if they built new in 2013. Increased ceiling insulation would better shield Marla’s office with 22 percent more insulation (R-38 to R-49 insulation values), more energy-efficient lighting and better windows would be required, and the heating and cooling ductwork would leak less. Not only are the Rays done with big Xcel bills, but their air-conditioner contractor made out like a bandit, installing two big units that can’t even keep up. As it stands now, the Rays are on the hook for any after-market changes so they can be comfortable.


GreenSpot energy auditor Jerry Garner shows Marla Ray how to program her thermostat shown in photo to the right.

Not only does energy efficiency affect utility bills, it also impacts property valuation. In May 2012, the Appraisal Institute officially recognized green buildings (and specifically energy savings) with higher appraisal values in commercial real estate. And this is happening in residential, too, as data from around the country is starting to show that green homes and features sell faster and for more money.


Even though raised energy codes benefit anyone buying or building a new home, Mozingo says there’s pushback and resistance to change, with some jurisdictions choosing not to play at all. “There are over 340 jurisdictions [building departments] in Colorado, and about 70 of them don’t have a code. And a number of codes were written in 1960,” she says.

Also, Colorado’s “home-rule” whereby local governing bodies rather than the state dictate policy, causes confusion for general contractors and builders working from county to county. “Home rule is a great thing, but it’s not a great thing if you’re a designer or a contractor. Or if you’re trying to be energy-compliant because no one’s doing the same thing.”


Even with raised energy codes, there are some outlier communities – a handful in Colorado – that regard the stricter 2012 codes as a nice start. Boulder, Colo., has a carbon tax, a green building code and acceptance of Kyoto Protocol greenhouse gas emission levels driving city and county policy.

“We have national codes, and in addition, many municipalities will adopt additional codes. The national building codes are pretty quiet on ‘green’ issues. Yet the City of Boulder said we’ll take a stronger position,” says architect Ron Flax of Rodwin Architecture in Boulder. Flax and his colleagues specialize in green-home building, hardly a novelty in progressive Boulder.

“They created the Green Points building codes – one of, if not the first, green building codes in the country. It’s not just insulation and air-sealing, but also green materials, material sourcing, waste and water.”

Mozingo says 50 percent of Colorado counties aren’t even up to the 2009 energy codes, and when it comes to buying a home or building, caveat emptor. “If owners would do more research, then everyone in the state would bring the code up to date because owners would throw a fit that there isn’t even a minimum,’” she says.

“I really want to stress to building owners and buyers to their homework to see what went into their house and commercial building. They know – instead of expecting, they know. Then they can make that choice whether they want to buy that [home or] building.”

Code Green – Upgrades to Building Codes in 2012 Sideline Old Homes — Colorado Energy News.

Insurance Claims For Superstorm Sandy Property Damage And Business Interruption – Insurance – United States

Mark A. Collins, Ryan S. Smethurst and Margaret H. Warner – November 19, 2012

It is estimated that Superstorm Sandy could cause up to $50 billion in losses, and up to $20 billion in insured losses.  Businesses should review their commercial property insurance policies and submit claims for Sandy-related losses, if warranted.

* * * * * * * * * *

When Superstorm Sandy struck the Northeast on October 29–30, 2012, it caused extensive losses that experts estimate in the range of $30 billion to $50 billion, with insured losses of up to $20 billion expected.  Property damage, related costs and lost business revenue all are potentially covered under commercial property insurance policies.  Businesses should review their policies and, if warranted, submit claims for Sandy-related losses.

Immediate Steps

The successful submission of a valid claim starts almost immediately after discovery of the loss.  Here are some key steps in the claim process.

  • Notice of claim: The insured should notify promptly the insurer of any physical damage or other loss potentially covered by the policy.  To the extent possible, basic facts concerning what was damaged or destroyed, and when this took place, should be provided.
  • Mitigate damages: Take reasonable steps to secure the property and prevent further damage.  Extra expense incurred for this purpose may be covered under the policy.
  • Document/photograph evidence of the damage: Doing so carries the dual benefits of creating and preserving evidence that will support the proof of loss that is submitted eventually, while fulfilling the duty to cooperate with the insurer.
  • Communication: Open a clear line of communication with the insurer’s claim examiner to speed the process.  Establish internal responsibilities so that your company speaks with one voice.  Focus on sharing facts and avoid characterizing the claim until completing an investigation of the storm loss and a review of all potentially relevant policies with your insurance advisors.
  • Proof of loss: Policies require submission of a sworn proof of loss within a fixed time period, typically 60 days.  Try to complete your investigation and evidence gathering in that time frame, but if it is not reasonably possible, request an extension from the insurer.  Most insurers are willing to grant at least a short extension if circumstances warrant.

Common Property Insurance Coverage Issues

While commercial property policies often start with industry-standard forms, individual policies can vary greatly.  Review your policy to identify how it treats issues likely to arise in a storm-related claim, including the following.

  • “All Risk” versus “Covered Cause of Loss”: Property policies typically cover “all risks,” subject to specified exclusions, or a list of expressly identified risks.  Coverage for storm-related damages potentially is available under both forms, although the latter may provide the insured with a more favorable burden of proof.  In general, the insured bears the burden of proving that loss falls within the policy’s insuring agreement, while the insurer bears the burden of proving that an otherwise covered loss is excluded.
  • Wind and flood coverage: The roles of wind and flooding in a Sandy-related loss are likely to have significant ramifications.  Virtually all property policies cover wind damage, and many cover flood damage, but policy deductibles, sub-limits and exclusions all can turn on how the loss is characterized.  In particular, “anti-concurrent causation clauses” may be cited as a basis for denial of coverage where a covered peril (such as wind) and a non-covered peril (flood, in some policies) concurrently or sequentially cause a loss.  Court decisions arising out of Hurricane Katrina restricted the scope of such clauses, but those decisions are not binding on courts in the Northeast.  The courts once again may play a prominent role in resolving disputed claims that involve both wind and flooding.
  • Hurricane deductibles: The wind versus flood issue is distinguishable from a “hurricane deductible,” predominantly a homeowners policy feature not found in commercial property policies.  In any event, applicability of a hurricane deductible to Sandy-related claims may be moot now that officials in several affected states have proclaimed Sandy did not meet hurricane criteria once the storm made landfall.
  • Other exclusions: Policies often contain exclusions for such causes of loss as mold, subsidence, collapse, pollution, etc.  But the insurer generally will bear the burden of proving that such an exclusion applies to the particular damage at issue.
  • Subsequent storms: A nor’easter storm struck parts of the Northeast on November 7, 2012, potentially exacerbating existing damage or causing fresh damage as businesses were still attempting to recover from Sandy.  Policyholders and insurers must assess whether any newly discovered damage stems from one occurrence or two separate occurrences; applicability of coverage limits and deductibles may turn on this distinction.

Common Business Interruption Insurance Coverage Issues

Most commercial property policies cover losses due to the insured’s business interruption, often referred to as “time element” coverage.  This coverage typically reimburses the insured for lost profits and extra expenses incurred to stem the loss.  Common issues include the following.

  • Physical property damage: Policies generally require that the insured’s business interruption be caused by direct physical loss or damage to the insured’s premises as a condition precedent to coverage.  But limited exceptions do exist, such as “ingress/egress” coverage, covering business interruptions when access to the insured’s place of business is rendered impossible and “civil authority” provisions, where a civil authority orders an evacuation or otherwise prevents the insured from conducting business at its undamaged premises.  Policies can vary greatly on this issue, and require careful analysis on a case-by-case basis.
  • Utility outages: Superstorm Sandy caused widespread utility outages across the Northeast, many of which continued for a week or longer.  Business interruption caused by a power, water, communication or other utility outage attributable to damage to the insured’s premises likely is covered under standard policies, but a so-called “off premises” service interruption (such as a power station failure) likely is not.  Some policies carry special endorsements covering business interruption due to off-premises service interruptions, subject to a short waiting period of up to 72 hours.
  • Contingent business interruption: Some policies cover the insured’s business interruption that is due solely to physical damage at another party’s premises, such as that of a supplier or customer.  For example, a manufacturer in California whose business is interrupted due to lack of supply from a damaged Long Island supplier may be entitled to insurance proceeds if it purchased contingent business interruption coverage.

Consult Your Insurance Advisor

While common issues likely to arise in Sandy-related claims are highlighted above, coverage could turn on still other issues depending upon the specific facts of the claim and the language of the policy (or policies) at issue.  Property insurance and business interruption claims can be surprisingly complex.  Consult your company’s insurance broker and counsel to obtain a review of your particular circumstances and ensure the best possible claim resolution.

Insurance Claims For Superstorm Sandy Property Damage And Business Interruption – Insurance – United States.

Top Five General Tips for All Construction Contracts

Spencer Wiegard – November 9, 2012

Over the past few days, I have found myself wading through the terms and conditions of a lengthy and complicated construction contract, while at the same time considering what topic I should write about. As I slogged through the legalese, I was reminded of a presentation that I gave earlier this year to the Roanoke District of the Virginia Associated General Contractors. The district’s executive committee asked me to speak to its members concerning the broad topic of “Construction Contracts 101.”  At the beginning of my presentation, I passed along my top five general tips for all construction contracts. Although some of these tips may sound like common sense, I often encounter situations where these basic rules are violated by experienced contractors, subcontractors, suppliers and design professionals.  My top five general tips for all construction contracts are:

1.         Reduce the terms of the agreement to writing.

a.         The written agreement should include all important and relevant information and terms.  If it was important enough to discuss prior to signing the contract, it is important enough to include in the written contract;

b.         At a minimum, include who, what, when, where, how, and how much;

c.         Both parties should sign the written agreement; and

d.         Don’t ignore handwritten changes to the contract, as these changes may either mean that you don’t have a deal, or they may become part of the contract when you sign it.

2.         Read the contract.

a.         Carefully read the whole contract;

b.         Read all of the “contract documents,” including all attachments and addenda;

c.         Be careful of “flow-down” or “pass-through” provisions in subcontracts;

i.          If the subcontract incorporates the prime contract documents, get them all and carefully review them;

ii.         A “flow-down” or “pass through” clause provides that the subcontractor assumes toward the general contractor all of the duties and obligations that the general contractor has assumed to the owner in the prime contract;

iii.        A “flow-down” or “pass through” clause also provides that the terms and conditions of the prime contract are incorporated by reference into the subcontract and become a part of the subcontract.

3.         Use the correct party names.

a.         If a party is a corporation, LLC, partnership, etc., use the correct full legal name of the entity;

b.         Make sure the endorsements include a statement of in what capacity a person endorses the agreement on behalf of an entity; and

c.         If the contracting entity is a sole proprietor, describe him or her as “the person’s name, d/b/a the trade name.”

4.         Note any documents or information that you must provide to the other party and note all notice periods and deadlines.

a.         Make two separate lists of these requirements, and keep the lists in a conspicuous place where project managers, officers, and/or management can quickly access this information; and

b.         Frequently refer to these lists to ensure that you comply with all of these requirements.

5.         Don’t assume that you are stuck with the language of the contract form.

a.         Even if you have little bargaining power, you may be able to negotiate changes to the most taxing or arduous clauses; and

b.         Consider what amount of risk you are comfortable taking on before you agree to an onerous term.

If you have any questions or concerns about the language in a proposed contract, call a knowledgeable construction lawyer.  Consider asking your lawyer to review any proposed construction contract, especially those for large, “business killer” projects.

via Top Five General Tips for All Construction Contracts | Construction Law Musings- Richmond, VA.

Construction Lien Payments: Trust Funds Or Not?

Vicki Harding – November 5, 2012

The trustee of a liquidating trust under a general contractor’s confirmed chapter 11 plan tried to recover pre-petition payments made to a subcontractor as either a preference or a fraudulent conveyance.  The court’s decision turned on whether the payments were trust funds under the Illinois Mechanics Lien Act.

On February 11, 2009, the subcontractor submitted an application to the general contractor which certified that the subcontract work was finished and requested payment of the contract amount less a 10% retainage.  The subcontractor recorded a lien after the general contractor failed to pay.  On June 30 the subcontractor provided an invoice for the remaining 10% balance, and the general contractor paid both invoices on July 17 by check.  The subcontractor released its lien on July 22, which was before the checks cleared on July 23.

In response to the trustee’s claim for recovery of the payments as a preference, the subcontractor conceded all of the elements of a preference (see Construction Lien Catch-22) except one – namely that the transfer involved property of the debtor.

The subcontractor argued that there is a statutory trust on funds owed by a contractor when it requires waiver of a mechanics lien in exchange for payment.  It further argued that if the funds used for payment were held in trust for the subcontractor’s benefit, then they were not part of the debtor’s property.

The Illinois statute provides:

Money held in trust; trustees.  Any owner, contractor, subcontractor or supplier of any tier who requests or requires the execution and delivery of a waiver of mechanics lien by any person who furnishes labor, services … for the improvement of a lot or a tract of land in exchange for payment or the promise of payment, shall hold in trust the sums received by such person as the result of the waiver of mechanics lien, as trustee for the person who furnished the labor, services … in exchange for such waiver.

The statute goes on to provide that there is no requirement that the trust monies be held in a separate account and that comingling of trust funds is not a violation of the statute.

The court noted that the subcontractor’s lien was released before the payments actually cleared, and that the payments were made not only for the subcontractor’s services but also as consideration for the release of the lien – which is precisely the situation the statute was intended to address.

The trustee contended that the subcontractor was required to trace the funds that it received to trust property in order to establish that it received trust funds, as this court had held in other cases.  In response, the court acknowledged that tracing is an issue in states where the funds received from the owner for payment of the project costs are to be held in trust, but concluded that the Illinois statute was different in that the trust is imposed on the funds ultimately used to paythe subcontractor.  So, no tracing was required. Rather, by definition the funds paid to the subcontractor were trust funds.

Consequently, the payments were not a transfer of the debtor’s property, and thus did not constitute either a preference or a fraudulent conveyance (which also requires a transfer of the debtor’s property as an element of the claim).

As noted in prior blog posts, bankruptcy decisions often turn on state law, particularly in determining property rights.  Although there is often a general similarity between the law in different states on matters such as construction trust funds, there are also often state specific nuances that can lead to different results.  It is important to identify and evaluate state specific law in attempting to assess the likely outcome in bankruptcy.

via Construction Lien Payments: Trust Funds Or Not? – Real Estate and Construction – United States.

Can You File A Mechanics Lien Foreclosure Lawsuit Without An Attorney?

Scott Wolfe, Jr. – November 12, 2012

If unpaid on a construction project filing a mechanics lien is a best-practice, as mechanic liens are usually successful at getting construction debts paid. In fact, based on a survey we conducted last year, over 64% of mechanic liens are paid within just 90 days of filing without any further legal or collection action whatsoever.

What if, however, the lien isn’t immediately successful?  The next step is typically a lien foreclosure action, whereby you move forward in court to enforce or foreclose upon the mechanics lien. We are frequently asked whether you can represent yourself in court and file the lien foreclosure action without an attorney.  The answer to this question is a bit more complicated than it first sounds.

Individuals Can Represent Themselves Everywhere In Court And Can File A Mechanics Lien Foreclosure Action

Representing yourself in court is a constitutional right in most states, and is a protected right when litigating in federal court. The legal term used to describe this type of representation is “Pro se,” and we’ve discussed it in the past on this blog under the tag: Pro Se Litigant.  Wikipedia defines a “Pro se legal representation” as:

…advocating on one’s own behalf before a court, rather than being represented by a lawyer. This may occur in any court proceeding, whether one is the defendant or plaintiff in civil cases…Pro se is a Latin phrase meaning “for oneself” or “on one’s own behalf.”

Pro se representation is a growing phenomena in the United States, with many court systems reporting that over 70% of litigation involves at least one pro se litigant.

Therefore, if you are an individual, you very likely have the right to represent yourself in court in a mechanics lien foreclosure action. You can prepare the foreclosure action yourself (or with assistance), you can file the document yourself, and you can litigate the claim yourself without needing to hire an attorney.  But…

You Cannot Represent Your Company In Most Jurisdictions In A Mechanics Lien Foreclosure Action

A vast majority of states have limitations on whether a company can represent itself in a court proceeding.

A corporation, limited liability company or other business entity is theoretically considered to be a separate juridical person under the law, separate and distinct from its officers, members, shareholders or employees.  Therefore, an individual who is affiliated with a business cannot represent the business in court, because the individual is not representing him or herself in the action…he or she is representing the business.  It is illegal for any non-lawyer to represent another in a court proceeding, and when an individual represents a business – even his or her own – he or she is representing “another.”

There are few exceptions to this rule. I have seen two exceptions granted by trial courts, and on both occasions it occurred in the state of Louisiana. While the trial court allowed the individual to continue representing the company, the issue was never appealed, and had it been, I think the appeals court would have been obliged to overturn the trial decision and force the company to get counsel.  The two instances in Louisiana were when:  (i) The company was small and had a single shareholder; and (ii) The company was not a business entity, but was a d/b/a (“doing business as”) of the individual.

I can certainly see where one could argue that under these two circumstances self-representation should be allowed, but I think the argument ultimately fails because even under these two scenarios the litigant will want to avail itself of the protections granted by the law separating the business (even if a closely held company) from the person.

Who Is Going To Stop You From Representing Yourself?

Okay, Maverick.  What if you just file the documents and start appearing in court, you ask, who is going to stop you?  If you just decide to give a finger to the legal system and plow through representing yourself despite the pro se limitation, one of three things will happen:

1)  No one will ever know.  The first possibility is that no one will ever realize that you are representing yourself, and shouldn’t. The case may settle quickly without a fight, or the other side may represent itself and not realize the limitation. Even if an attorney gets involved for your adversary, it’s possible this attorney will not know about the limitation.  So, you may get away with it.

2)  You’ll be refused access to file your lawsuit. The second possibility depends on the rigidness of standards at the court’s clerks office. I’ve seen this go both ways in a single court jurisdiction, meaning that it sometimes depends on the actual person you get at the clerk counter.  In a single county in California, I’ve seen a clerk steadfastly refuse to accept a lawsuit from a business trying to represent itself.  In the same county I was involved in a case against a business representing itself who not only filed the lawsuit successfully, but had acquired a default judgment!

3) You’ll get your lawsuit filed, but the other party will file a motion to throw you off the case, and potentially, to strike your lawsuit as invalid. While the beginning of this sounds okay (after all, the lawsuit gets filed), this is the most dangerous scenario.  If you get the lawsuit filed and a savvy attorney is hired to oppose your case, that attorney will file a motion to get you tossed off the case.  As part of the same motion, the attorney will ask that your lawsuit get tossed because it did not meet the rules for filing (it wasn’t properly signed).  You could lose your lawsuit’s filing date, which means, you could lose your entire claim if too much time has passed and the claim has prescribed.

Beware Of Filing In Small Claims Court

Even companies can typically represent themselves in small claims courts. Nevertheless, in the mechanics lien foreclosure setting, this is usually a no-go, as mechanic liens must usually be foreclosed upon in the regular courts and not in the small claims courts.  The small claims courts, in other words, do not have jurisdiction over the foreclosure claims because they affect title to real property.

Therefore, while you may be able to file a regular lawsuit in small claims court on behalf of your company or yourself, this may not work in the mechanics lien setting.

Can You File A Mechanics Lien Foreclosure Lawsuit Without An Attorney?.