Cambridge Massachusetts Building Expert Directory

Retainage: What Contractors Need to Know and Helpful Strategies

June 04, 2024 — Gerard J. Onorata - ConsensusDocs
Introduction Most, if not all, construction contracts contain a provision for “retainage.” The origin and concept of retainage dates back to the railroad boom that embraced Great Britain in the 1840s. In its simplest terms, retainage is a mechanism by which an owner or general contractor withholds disbursement of funds from the payment of a requisition in order to secure future performance of a contract and/or to pay for repair of defectively performed work. Retainage typically ranges from five to ten percent, with the amount being reduced as the project progresses to substantial and final completion. One of the reasons for withholding retainage is to incentivize a contractor to complete its work in accordance with the contract terms and conditions. While this may be well-intentioned in concept, it all too often leads to abuse that impacts project cash flow and raises tension between the parties. This typically happens on projects that have delay issues, deficient drawings, and/or claims of defective work. When a project has “gone bad,” the withholding of retainage is one of the first things that an owner will latch onto in order to leverage its position against a contractor. In order for a contractor to put itself in the best position possible, the following negotiation techniques and protective measures should be kept in mind. Know Your Applicable Statute Every state except West Virginia has statutes in place that govern the payment of retainage on public projects. On federal projects, the amount of retainage withheld shall not exceed ten percent as set forth in the Federal Acquisition Regulations (“FAR”). The common thread running through these statutes is the payment of interest as a remedy when the retainage is not timely paid. Historically, most retainage statutes were applicable only to publicly funded projects. This has recently changed with a substantial number of state legislatures recognizing that the payment of retainage on private projects was a serious enough problem to warrant regulation. These include Alabama, Arizona, California, Colorado, Connecticut, Idaho, Illinois, Kansas, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Missouri, Montana, Nebraska, Nevada, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, and Vermont. New York’s retainage laws relating to private projects were enacted only this past November. Read the court decision
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Reprinted courtesy of Gerard J. Onorata, Peckar & Abramson
Mr. Onorata may be contacted at gonorata@pecklaw.com

Let’s Give ‘Em Sutton to Talk About: Tennessee Court Enforces Sutton Doctrine

July 24, 2023 — Gus Sara - The Subrogation Strategist
In Patton v Pearson, No. M2022-00708-COA-RC-CV, 2023 Tenn. App. LEXIS 231, the Court of Appeals of Tennessee (Court of Appeals) considered whether the lower court erred in dismissing an insurance carrier’s lawsuit against its insured’s tenant for damages sustained in a fire. While the lawsuit was filed in the name of the landlord (i.e., the insured), discovery revealed that the lawsuit was actually a subrogation lawsuit, brought by the landlord’s insurance carrier. The lower court granted the tenant’s motion for summary judgment based on the Sutton Doctrine, holding that the tenant was an implied co-insured under the landlord’s policy. The Court of Appeals affirmed, finding that although the lease agreement did not reference insurance, the Sutton Doctrine applied, which barred the landlord’s carrier from subrogating against the tenant. In 2016, Anita Pearson (Ms. Pearson) signed a lease agreement to rent a home in Nashville, Tennessee, which was owned by John and Melody Patton (collectively, the Pattons). The lease stated that the Pattons were not responsible for the tenant’s personal property. The lease also stated that the tenant would be responsible for any damage caused by her negligence or misuse of the home. The lease was silent as to which party would maintain property casualty insurance and regarding implied co-insured status on any policy. Ms. Pearson purchased renter’s insurance for her personal property. The Pattons secured a property casualty insurance policy for the home. Read the court decision
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Reprinted courtesy of Gus Sara, White and Williams
Mr. Sara may be contacted at sarag@whiteandwilliams.com

SB800 Is Now Optional to the Homeowner?

August 30, 2013 — James Ganion - Ulich & Terry, LLP
The following communication republished courtesy of James Ganion, Ulich & Terry, LLP Dear Builders, Colleagues, and Interested Parties: I attach for your review a copy of this week’s opinion of the California Court of Appeal in our case of Liberty Mutual v. Brookfield. This opinion represents a significant change to the right of California builders to repair homes under SB800, California’s Right to Repair Act. In a nutshell, the Court determined that SB800 was not intended to replace prior applicable law, but merely be supplemental to prior law. Thus, a homeowner, or in this case the homeowner’s insurer, can pick and choose among SB800 and prior law, or even allege both in the alternative. In so deciding, the Court of Appeal reversed the holding of the trial court which had held, as so many trial courts have since 2003, that SB800 was intended to be the new exclusive remedy for construction defect claims. While we of course take issue with most of what the Court of Appeal has to say, the real life net effect is that SB800 is now optional to the homeowner, meaning the “right” to repair now lies in the hands of the homeowner who can elect to simply bypass that law and proceed with the filing of a lawsuit under prior law. Hardly what any of us believe the legislature intended. ULICH & TERRY LLP as counsel for Brookfield in this case will be filing a petition for rehearing with the Court of Appeal by September 6, 2013. Anyone interested in supporting the petition may file a letter with the Court of Appeal, preferably by September 13, 2013. Thereafter, assuming the Court of Appeal does not grant rehearing, we will be filing a petition for review with the California Supreme Court. Our firm, as appellate counsel, has established a website libertymutualvbrookfieldcrystalcove.com and through it will be providing information regarding the case, including copies of pleadings, orders, deadlines, and information on how to provide support for this case, which is of interest to the home building industry. Read the court decision
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Reprinted courtesy of James Ganion
James Ganion can be contacted at jganion@ut-law.com

PA Supreme Court to Rule on Scope of Judges' Credibility Determinations

April 20, 2016 — Max Kimbrough – White and Williams LLP
In IA Construction v. WCAB (Rhodes), the Commonwealth Court reversed the WCJ’s decision to deny the employer’s Modification Petition on the basis that the employer’s medical expert was not credible. In the underlying case, the claimant was determined to have sustained compensable work injuries to his head, neck and back. The employer subsequently filed a Modification Petition, seeking to modify benefits to Partial Disability based on an Impairment Rating Evaluation (IRE) which found that the claimant had a 34% whole body impairment. The WCJ ultimately denied the employer’s Modification Petition, finding that the IRE physician's categorization of the claimant's injuries and interpretation of the claimant's impairment level from his brain injury was not credible. Read the court decision
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Reprinted courtesy of Max Kimbrough, White and Williams LLP
Mr. Kimbrough may be contacted at kimbroughm@whiteandwilliams.com

Real Estate & Construction News Round-Up 04/20/22

May 02, 2022 — Pillsbury's Construction & Real Estate Law Team - Gravel2Gavel Construction & Real Estate Law Blog
Construction defects emerge in pandemic-era buildings, investor confidence is improving in China’s real estate market, the proptech field continues to show significant signs of growth, and more.

Investor confidence in China’s real estate market is improving, with bond trading volumes and prices rising over the last few weeks, but the market is not projected to resume its high growth rate of the past. (Weizhen Tan & Evelyn Cheng, CNBC)
The economic shock caused by soaring mortgage rates over the past few weeks has dramatically increased mortgage payments for new homebuyers. (Lance Lambert, Fortune)
With the metaverse economy projected to be worth between $8 and $13 trillion by 2030, blockchain technology serves as a key driver for virtual real estate sales, allowing for “true” ownership of a property. (Robert Koonin, Dan Jasnow, & Kinnon McDonald, TFL)

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Reprinted courtesy of Pillsbury's Construction & Real Estate Law Team

Clean Energy and Conservation Collide in California Coastal Waters

March 19, 2024 — Nadia Lopez & Josh Saul - Bloomberg
Two of President Joe Biden’s biggest priorities — conservation and the switch to clean energy — are colliding in the ocean off California’s quiet Central Coast. Located halfway between San Francisco and Los Angeles, Morro Bay boasts a rich ecosystem of fish, otters and migrating whales that the Indigenous Chumash people want to protect with a new marine sanctuary. But 20 miles (32 kilometers) out, developers plan some of the West Coast’s first offshore wind farms, where 1,100-foot-tall turbines (335 meters) tethered to the seabed will help California cut its carbon emissions. One US government agency appears poised to approve the sanctuary. Another already leased 376 square miles of ocean for wind development, just outside the sanctuary’s boundaries. Now, a fight is brewing over whether the scenic bay itself should be left out of the sanctuary, to give undersea power cables from the wind farms a place to come onshore. Reprinted courtesy of Nadia Lopez, Bloomberg and Josh Saul, Bloomberg Read the court decision
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Certificate of Merit to Sue Architects or Engineers Bill Proposed

May 03, 2011 — CDJ STAFF

North Carolina may become the twelfth state to require a Certificate of Merit to sue an architect or engineer. If North Carolina Senate Bill 435 (SB435) passes, then plaintiffs when filing a complaint will need to also attach an affidavit of a third-party licensed professional engineer or architect stating that the case has merit.

SB435 is a short two pages in its current form. The bill states that the “third-party licensed professional engineer or licensed architect shall (i) be competent to testify and hold the same professional license and practice in the same area of practice as the defendant design professional and (ii) offer testimony based upon knowledge, skill, experience, education, training, and practice. The affidavit shall specifically state for each theory of recovery for which damages are sought, the negligence, if any, or other action, error, or omission of the design professional in providing the professional service, including any error or omission in providing advice, judgment, opinion, or a similar professional skill claimed to exist and the factual basis for each such claim. The third-party licensed professional engineer or licensed architect shall be licensed in this State and actively engaged in the practice of engineering or architecture respectively.”

A few of the amendments allude to disciplining design professionals who certify civil actions that are without merit. The bill has been referred to the Committee on Judiciary I.

While North Carolina is considering enacting a Certificate of Merit law, eleven other states already require one, including Arizona, California, Colorado, Georgia, Maryland, Minnesota, New Jersey, Oregon, Pennsylvania, South Carolina, and Texas. Christopher D. Montez, a partner with Thomas, Feldman & Wilshusen, LLP, has written a useful summary for each state’s certificate of merit scheme.

Read the text of SB435

Track the progress of SB435

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Toll Brothers Faces Construction Defect Lawsuit in New Jersey

October 10, 2013 — CDJ STAFF
Toll Brothers is facing a construction defect lawsuit from homeowners in West Windsor, New Jersey. The homebuilding company had a lengthy battle with the town over its intention to build the community they named the Estates at Princeton Junction, now its residents are alleging defects in the construction of their homes and the common infrastructure. The community is close to Princeton University, parts of which are also in West Windsor. Toll Brothers states that they are “working very closely with the HOA Board to investigate the claims that have been alleged in the lawsuit.” Andrea Marushack, the spokesperson for Toll Brothers would not elaborate due to the lawsuit. Among the allegations are claims that the townhomes in the development are prone to water intrusion. The complaint also claims that there were defects in the construction of sidewalks, roads, and other common features. Read the court decision
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