Monthly Archives: January 2022

Ohio’s Homebuilders and Remodelers Must Improve Their Contract Forms

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James T. Dixon | Brouse McDowell

Ohio’s residential homebuilders and remodelers set themselves up to lose disputes even before projects begin because their contract forms do not comply with Ohio law. Based on the experience of the attorneys in Brouse McDowell’s Construction Practice Group, very few small contractors have compliant forms.

Residential construction is governed by a handful of Ohio statutes and a body of common law developed by Ohio’s courts. Statutes include the Residential Contractor Right to Cure Act, the Home Solicitation Sales Act, the Home Construction Service Suppliers Act, and the Consumer Sales Practices Act. Key common law decisions include those that read a nonwaivable duty of workmanlike construction into every construction contract.

These laws provide benefits while also imposing burdens, though most of what they provide is a burden. Under the Right to Cure Act, if a contractor includes the right language in its contract, then the homeowner must give the contractor the opportunity to address deficiencies before that homeowner files suit or commences arbitration. Under the Home Solicitation Sales Act, the contract form must in many circumstances, include language advising the homeowner of a right to cancel within three days.

The Home Construction Service Suppliers Act provides that contracts must be in writing and must include some very specific terminology. It also limits down payments to ten percent unless the payment is used for special order items. In 2012, the Ohio legislature passed this act to relieve contractors engaged in residential construction projects of up to three units from the burdens of the Consumer Sales Practices Act. There is still some question as to whether residential remodelers also benefit from this. The Consumer Sales Practices Act is particularly tough on contractors because it provides for an award to the homeowner of treble damages if that homeowner prevails. Additionally, its list of unfair, deceptive, and unconscionable actions is lengthy and continually changing.

Achieving legal compliance is just the initial goal when preparing contract forms. There are also great advantages to be had. Primary among these is the ability to direct disputes to mediation and arbitration. Homebuilders and remodelers should avoid placing their fate in the hands of judges and juries who are not familiar with their industry.

Most small residential contractors and remodelers use contract forms of their own making that focus more on the details of the work than on legal compliance. Standard forms are available from many Home Builder Associations and from The American Institute of Architects. Even these standard forms however, must be modified to bring them into compliance with Ohio law. Builders and remodelers who have not recently had their custom or standard forms reviewed for compliance should do so promptly. This is a regular assignment handled by Brouse’s attorneys, who also have compliant custom forms available as a starting point. This is truly a situation where an ounce of prevention equals a pound of cure.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Just Because I May be an “Expert” Does Not Mean I am Giving Expert Testimony

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David Adelstein | Florida Construction Legal Updates

On a construction project, it’s hard to argue that the involved parties — whether an architect, engineer, contractor, subcontractor, developer, etc. — are not experts in their field, i.e., they all some scientific, technical, or specialized knowledge or skill particular to their industry.  However, this does NOT mean when they testify in trial, at an arbitration, or at a deposition regarding the construction project they are offering expert opinions / testimony as it pertains to that project.  Testifying as to facts based on personal knowledge or involvement on a project makes you a fact witness and is different than evaluating and rending an after-the-fact opinion as to the work of others.   This does not minimize your knowledge or expertise; it simply means that relative to the construction project you are involved with, your testimony is that of a fact witness and not of an expert.  (It is possible to wear both the fact witness and expert witness hat, but that depends on your subsequent role in the litigation or arbitration.)

A good discussion on this premise can be found in a non-construction case, Buzby v. Turtle Rock Community Association, Inc., 47 Fla. L. Weekly D99a (Fla. 2d DCA 2022), dealing with whether a lawyer was testifying as an expert regarding his own fees. The attorney thought he should be paid for his testimony because he was a professional testifying as to his own attorney’s fees.  Yet, his testimony was not actually in the form of expert testimony, but factual testimony as to his own fees.  The appellate court held the lawyer was NOT entitled to an expert fee (being paid for this time as an expert), and this rationale can equally be extended to parties testifying on construction projects:

This distinction between testimony (i) describing historical facts from personal knowledge and (ii) evaluating the work of others is not limited to doctors; it applies to attorneys as well. 

Thus, the question of whether a witness testifies as an expert – and is thereby entitled to an expert fee – depends not only on the witness’s credentials, but also on whether the witness actually gives expert testimony.

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Like a treating physician, [the attorney] testified to facts within his personal knowledge about acts that he either took or supervised.  Even though the acts [the attorney] described involved technical matters, [the attorney’s] recollections of them “are facts nonetheless.”

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[The attorney’s] decision to volunteer an opinion about his own work did not transform the nature of the deposition or his purpose of testifying.

Buzby, supra (internal citations omitted).

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Substantial Completion Explained: What Contractors & Owners Should Know

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Travis Colburn | Ahlers, Cressman & Sleight

A project’s Substantial Completion date is a critical construction milestone for contractors and owners.  Depending on the contract, the date of Substantial Completion has project-specific contractual and statutory consequences.

Substantial Completion is an “event” – there is no universal definition of the term.  It is generally understood to be (1) a point in time (2) when work performed by the contractor is sufficiently complete (3) where it can be used or occupied for the owner’s intended purpose.  The date of Substantial Completion is generally established at the time of contract formation (either as a negotiated or a contract set date), and that date may be adjusted over the course of a project to account for excusable delays.

As a construction professional, your attorney should review and tailor any written agreement to your project-specific needs and risk tolerances prior to execution.  Savvy construction professionals often start with standard form agreements promulgated by the American Institute of Architects (“AIA”), the Design-Build Institute of America (“DBIA”), or the Engineers Joint Contract Document Committee (“EJCDC”) as the basis for their construction contracts.  The AIA, DBIA, and EJCDC standard forms each contains contract provisions relating to when and what happens once Substantial Completion has occurred, subject to any agreed-to, project-specific deviations.

As you might expect, the AIA’s, DBIA’s, and EJCDC’s definitions of Substantial Completion are remarkably similar:

  • Section 9.8.1 of AIA Document A201 – 2007, General Conditions for the Contract for Construction, defines Substantial Completion as “the stage in the progress of the Work when the Work or designated portion thereof is sufficiently complete in accordance with the Contract Documents so that the Owner can occupy or utilize the Work for its intended use.”
  • Section 1.2.18 of DBIA Document #535, Standard Form of General Conditions of Contract Between Owner and Design-Builder, defines Substantial Completion as “the date on which the Work, or an agreed portion of the work, is sufficiently complete in accordance with the Contract Documents so that the Owner can occupy and use the Project or a portion thereof for its intended purposes.” 
  • Article 1, Subsection 1.01(A)(40) of EJCDC’s C-700, Standard General Conditions of the Construction Contract, defines Substantial Completion as “the time at which the Work (or a specified part thereof) has progressed to a point where, in the opinion of the Engineer, the Work (or a specified part thereof) is sufficiently complete, in accordance with the Contract Documents, so that the Work (or a specified part thereof) can be utilized for the purposes for which it was intended.” 

Washington’s statutory language is understandably similar to the definitions of Substantial Completion in the AIA, DBIA, and EJCDC standard form agreements.  Substantial Completion is defined by statute as “the state of completion reached when an improvement upon real property may be used or occupied for its intended use.”  See RCW 4.16.310.  The fact that additional contract work remains, including punch list work, does not affect the conclusion that a project is substantially complete if it is otherwise fit for occupancy.  Dania, Inc. v. Skanska USA Bldg. Inc., 185 Wn. App. 359, 371, 340 P.3d 984, (2014).

The date of Substantial Completion of a construction project is significant for several reasons:

  • First, in Washington, the construction statute of repose bars construction-related claims not filed within the six-year repose period.  See RCW 4.16.310.  The practical effect and intent of this statute is simply to limit the period of time construction professionals are potentially liable for construction-related claims.
  • Second, the date of Substantial Completion is the date when many of the contractor’s responsibilities at the jobsite transfer to the owner.  Some of these responsibilities may include the responsibility for security, heat, maintenance, cleaning, utilities, and damage to the work.  Substantial Completion is also when the owner generally assumes responsibility for insuring the work previously covered by the contractor’s insurance policy or policies.
  • Third, the date of Substantial Completion is typically the day from which warranty periods and other periods for correction of the work run.
  • Fourth, contractors may submit an application for final payment following Substantial Completion, pending completion of any outstanding punch list work, and may be entitled to release of any retention.
  • Fifth, in the event a contractor has not achieved Substantial Completion by the agreed-upon date, the owner may be entitled to liquidated or other damages.

In practice, whether a project is “deemed” substantially complete may simply be left up to the discretion of whomever the owner and contractor have agreed to make such a determination.  In AIA’s Document A201 – 2017, General Conditions for the Contract for Construction, the architect makes that decision.  Similarly, in EJCDC’s C-700 Standard General Conditions of the Construction Contract, the date of Substantial Completions is determined by the opinion of the engineer.  In DBIA Document #535, Standard Form of General Conditions of Contract Between Owner and Design-Builder, Substantial Completion is determined after joint inspection by the owner and design builder.

The determination by the architect or the engineer is not necessarily the final say, however, as the point in time when the work is sufficiently complete for use or occupancy is, arguably, a legal question of fact.  In an unreported case, Division One of the Washington Court of Appeals referred to a California Court of Appeals opinion in which the California court remarked, “[t]he date of substantial completion is an objective fact about the state of the construction of the improvement, to be determined by the trier of fact.  It is a statutory standard, not a contractual one.”  See Puget Sound Energy, Inc. v. Pilchuck Contractors, Inc., 15 Wn. App. 2d 1004 (2020), rev. denied, 196 Wn.2d 1046, 481 P.3d 1060 (2021) (citing Hensel Phelps Constr. Co. v. Super. Ct. of San Diego County, 44 Cal. App. 5th 595, 616, 257 Cal. Rptr. 3d 746 (2020)).

Comment/Good Practice: As is often the case, legal issues can be time-sensitive, and a one-day difference could result in liability for catastrophic losses or completely bar another’s claim.  While determination of Substantial Completion may be an objective event in certain circumstances, executing a Certificate of Substantial – evidencing an agreement as to the date the work was sufficiently complete for the owner to use and occupy a project for its intended purpose – will help to eliminate disputes and costly legal action as to the project’s Substantial Completion date.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

What Is “Substantial Completion” and Why Does It Matter?

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Emily M. Coffey, Casandra M. Langstaff and J. Daniel Weidner | Koley Jessen

What is “Substantial Completion”?

In the realm of construction law, the concept of “substantial completion,” also referred to as “substantial performance,” is of critical importance. The point in time at which substantial completion is achieved for a project has a number of implications for the rights of both parties to a construction contract. Therefore, it is important to have a basic understanding of substantial completion and its potential effects.

As its name suggests, substantial completion is not the same as final completion. While the statutory definition of substantial completion varies from state to state, most agree that a project is substantially complete when it can be used for its intended purpose. A construction project need not be absolutely complete; however, any remaining work or defects must be relatively minor and unimportant. For instance, courts would likely consider an office building to be substantially complete if a company has moved in and begun to conduct business, despite that the finishing touches of the project are still being completed. The very fact that a business has occupied the building indicates that it can be used for its intended purpose. But, if the building is missing an important feature—like a functioning plumbing system—it is not yet substantially complete.

The common definition of substantial completion may seem clear, but reasonable minds—and courts—can differ as to what exactly substantial completion entails. To avoid confusion and costly litigation, many contracts mitigate risk by including provisions that explicitly detail what the parties consider substantial completion to be.

Why “Substantial Completion” Matters: Statutes of Limitation and Statutes of Repose

Substantial completion has significant implications for purposes of statutes of limitations and statutes of repose because the concept of substantial completion often signifies the point at which each begins to accrue. Both the statute of limitations and the statute of repose limit the period of time in which a builder or contractor is liable and limit the period of time in which a property owner can recover for injury and damages.

A statute of limitations restricts the period of time within which a party may file a claim. In Nebraska, the statute of limitations for claims relating to builders and contractors making improvements to real property is four years. This applies to any acts or omissions that constitute a breach of warranty or a design defect. Generally, the statute of limitations begins to run on the date of substantial completion. However, there are several exceptions: the first exception is known as the “discovery rule,” wherein the statute provides that causes of action which are not discovered within the four-year period, or within one year following the end of the four-year period, and could not reasonably be discovered within that time, may be commenced within two years of discovery of the breach or defect or within two years of the point in time at which the breach or defect should reasonably be discovered. The second exception applies to implied and express warranties. In 2015, the Nebraska Supreme Court determined that the four-year statute of limitations does not commence until the end of the warranty period, rather than at the point of substantial completion.

Similar to a statute of limitations, a statute of repose begins on a set date and acts as a complete bar to claims for breach of warranty and design defects. Unlike the statute of limitations, the statute of repose accrues regardless of the date of discovery or the reasonableness of discovery. In Nebraska, the statute of repose is ten years from the point of substantial completion. For example, in Witherspoon v. Sides Const. Co., Inc., a homeowner’s action against a contractor for damage resulting from a broken pipe was timely because it was filed within ten years of completion of the home.

In sum, contractors and builders should be aware of the length of the statute of limitations and the statute of repose in their respective jurisdictions and consider how the date of substantial completion may limit or bar a property owner from bringing a future claim.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

California Supreme Court Declines Request to Expand Exceptions to Privette Doctrine for Known Hazards

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Garret Murai | California Construction Law Blog

First things first. Happy New Year! Hope you had a good one.

To start things off in the new year we’ve got an employment-related case for you – Gonzalez v. Mathis, 12 Cal.5th 29 (2021) – a California Supreme Court case involving the Privette Doctrine. For those not familiar with the Privette Doctrine, the Privette Doctrine is named after the case Privette v. Superior Court, 5 Cal.4th 689 (1993), which held that project owners and higher-tiered contractors are not liable for workplace injuries sustained by employees of lower-tiered contractors. Since then, courts have carved out a few exceptions to the Privette Doctrine including the “retained control exception” (also known as the Hooker exception – that’s the name of the case not the occupation of the injured worker) whereby a “hirer,” that is, the higher-tiered party who hired the lower-tiered party whose employee is injured, can be held liable if the hirer: (1) retains control over any part of the lower-tiered party’s work; and (2) negligently exercises that control in a manner that affirmatively contributes to the worker’s injury.

Another exception is the “concealed hazard exception” (also known as the Kinsman exception) whereby a hirer can be held liable if: (1) the hirer knew, or should have known, of a concealed hazard on the property that the lower-tiered contractor did not know of and could not have reasonably discovered; and (2) the hirer railed to warn the lower-tiered contractor of that hazard.

In Gonzalez, the California Supreme Court was asked to create another exception to the Privette Doctrine and find that a landowner is liable for injuries sustained by an employee of a contractor where there is a known hazard on the property and there is no reasonable safety precautions that could have been adopted to avoid or minimize the hazard.

The Gonzalez Case

Defendant John Mathis lived in a one-story house with a flat, sand-and-gravel roof, with a large skylight covering an interior pool. Luis Gonzalez, an employee of Beverly Hills Window Cleaning, was a window washer who first started cleaning the skylight in the 1990s. In the mid-2000s, Gonzalez started his own professional window cleaning company. Gonzalez advertised his business as specializing in hard to reach windows and skylights and his marketing materials stated that he “trains his employees to take extra care . . . with their own safety when cleaning windows.”

In or around 2007, Mathis began regularly hiring Gonzalez’s company to clean the skylight. When cleaning the skylight, Gonzalez would climb a ladder affixed to the house to access the roof. Directly to the right of the top of the ladder, a three-foot-high parapet wall ran parallel to the skylight. Mathis constructed the parapet wall for aesthetic purpose to obscure air conditioning ducts and pipes from view. The path between the edge of the roof and the parapet wall was approximately 20 inches wide and Gonzalez would walk between the parapet wall and the edge of the roof and use a long, water-fed pole to clean the skylight. Gonzalez testified that he did not walk on the other side of the parapet wall (i.e., between the parapet wall and the skylight) because the air conditioning ducts, pipes, and other fixtures made the space too tight to navigate.

On August 1, 2012, at the direction of Mathis’s housekeeper, Gonzalez went up on to the roof to tell his employees to use less water while cleaning the skylight because water was leaking into the house. While Gonzalez was walking between the parapet wall and the edge of the roof on his way back to the ladder, he slipped and fell to the ground, sustaining serious injuries. Gonzalez did not have workers’ compensation insurance.

In the course of a lawsuit brought by Gonzalez, Gonzalez contended that the accident was caused by dangerous conditions on Mathis’s roof including: (1) Mathis’s lack of maintenance which caused the roof to have a very slippery surface made up of “loose rocks, pebbles, and sand”; (2) the roof contained no tie-off points from which to attach a safety harness; (3) the roof’s edge did not contain a guardrail or safety wall; and (4) the path between the parapet wall and the roof’s edge was unreasonably narrow and Gonzalez could not fit between the parapet wall and the skylight due to obstructing fixtures. Gonzalez testified that he knew of these conditions since he first started cleaning Mathis’s skylight although the roof’s condition became progressively worse and more slippery over time. Gonzalez also testified that he told Mathis’s housekeeper and accountant “months before the accident” that the roof was in a dangerous condition and needed to be repaired, though Gonzalez did not indicate that his work of cleaning the skylight could not be performed safely absent the roof’s repair.

Mathis later filed a motion for summary judgment under the Privette Doctrine which was granted by the trial court but later reversed by the Court of Appeal which held that a landowner may be liable to an independent contractor or its workers for injuries resulting from known hazards in certain circumstances. On petition to the Supreme Court, the Supreme Court granted review.

The Supreme Court Decision

The California Supreme Court, referencing its decision in Kinsman v. Unocal Corporation, 37 Cal.4th 659 (2005), noted that in Kinsman, which involved a concealed hazard rather than a known hazard, it had observed that “[t]here may be situations . . . in which an obvious hazard, for which no warning is necessary, nonetheless gives rise to a duty on the landowner’s part to remedy the hazard because knowledge of the hazard is inadequate to prevent injury.”

But, explained the Supreme Court, since Kinsman did not involve an obvious hazard, there was no need to address the question raised in Gonzalez whether a landowner is liable for injuries sustained when there is a known hazard on a property that the independent contractor cannot remedy or protect against through the adoption of reasonable safety precautions.

The Supreme Court, tracing a thread of reasoning in its decisions in Kinsman, Hooker v. Department of Transportation, 27 Cal.4th 198 (2002), and Seabright Ins. Co. v. US Airways, Inc., 52 Cal.4th 590 (2011), held that applying liability to a landlord for known hazards on a property, even where the independent contractor cannot remedy or protect against such hazards through the adoption of reasonable safety precautions, would turn the Privette Doctrine “on its head by requiring the landowner to affirmatively assess workplace safety”:

The landowner would need to determine whether the contractor is able to adopt reasonable safety precautions to protect against the known hazard and, if not, to remedy the hazard. This makes little sense given that a landowner typically hires an independent contractor precisely because of the contractor’s expertise in the contracted-for work and the hirer usually has no right to interfere with the contractor’s decisions regarding safety or otherwise control the contractor’s work.

While acknowledging that “financial and other real world factors” might make it “difficult for an independent contractor to raise safety concerns with the hirer or to simply walk away from a job it has deemed to be unsafe,” the Supreme Court noted that “independent contractors can typically factor the cost of added safety precautions or any increased safety risks into the contract price, that “[t]hey can also purchase workers’ compensation to cover any injuries sustained while on the job,” and that the Court’s holding “avoids the unfair ‘tort damages windfall’ that would result from adopting a rule that allows independent contractors and their workers to obtain tort damages from the landowner while the landowner’s own employees are limited to workers’ compensation.

Conclusion

Gonzalez establishes a bright line rule that landowners are not liable for injuries sustained by employees of independent contractors due to obvious hazards even if the independent contractor cannot remedy or protect against those hazards through reasonable safety precautions.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.