Construction Litigation, and How to Avoid It.

Lawsuits about construction defects are a big burden to the homebuilding industry. This is especially true of class action litigation. Of course, good design and construction will substantially reduce the risk of a lawsuit. Construction attorney Douglas Folk explains the problems and pitfalls in home construction and how they can be minimized in this report.

Folk’s approach is to be involved with his homebuilder clients in negotiating the construction contracts. Arizona courts have emphasized that agreements between the various parties to a construction project must be honored. Anticipating a problem in a contract will pay a dividend later if the problem actually arises and ends up in a lawsuit. Folk points out that, in a residential construction project, “the contract is an opportunity to manage risk.” Folk’s office helps the contractor identify potential problems and cover problem resolution in the contract. Folk also works to be sure that insurance will cover the cost of resolving any foreseeable problems.

Folk suggests that an upswing in construction litigation is certainly a possibility now that construction is booming again. During the 1990s, it was common for class action lawsuits to be filed on construction projects in Arizona. “We have homebuilders putting up a hundred, or five hundred, houses in a subdivision, so it becomes a very appealing target.” Folk hopes that the lessons learned during that construction boom can be put to good use during this latest construction boom.

One current problem in the industry is that homebuilders have to rebuild their labor pool. A lot of the talented workers left Arizona during the recession, and they haven’t all returned. As a result, says Folk, there are projects where the trade contractors haven’t worked together before, and that requires some planning. That means, Folk says, that there is a potential for litigation from projects that are just starting.

The Phoenix area has had a lot of home construction over the last thirty years, and “all of the easy projects have been built.” Folk says that new development involves going into land that may have been a farm and that make it less desirable to build on. This provides many engineering challenges for an industry where the pace of new construction is building rapidly. A former cotton field will probably have soil with a high clay content, making drainage a problem. Bad drainage and poor soil preparation for building the foundation can cause problems. Then, when the house settles in, there can be cracks in the foundation or flooring.

Folk also points out that a home is a unique product, not built in a factory and mass produced to fine tolerances. Building a house involves having “all these strangers coming together with construction materials and putting up a one-of-a-kind product just for you.” Sometimes, things happen that can’t be foreseen and arise once the construction process starts.

Folk says that Arizona courts have been very conservative in their approach to resolving construction defect claims. The courts in the Phoenix area are accustomed to dealing with large lawsuits. The courts have recognized that homes are unique products, not like automobiles. So courts have refused to say that homebuilders are responsible for every bad thing that happens in a construction project.

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