Minneapolis Condo Shortage Blamed on Construction Defect Law
November 20, 2013 —
CDJ STAFFDemand for condos in the Minneapolis, Minnesota area is outstripping demand. Currently inventory of available condos represents less than four months’ worth of sales. But despite the demand, only three condominium buildings are under construction in the Minneapolis metropolitan area.
Some blame this on difficulty in finding financing, where some lenders are looking for projects to be sold before the builders get the money to build what they’ve just sold. Another problem is Minnesota construction defect law. “There are law firms in this town that have filed lawsuit after lawsuit on behalf of homeowners associations alleging construction defects,” said one builder, Kelly Doran, who now builds luxury apartment buildings. “”With that 10-year warranty, there’s no way I would build condos.”
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Wall Street’s Favorite Suburban Housing Bet Is Getting Crowded
February 15, 2021 —
Patrick Clark - BloombergWall Street’s zest for a corner of suburban real estate long left to small landlords is reaching new heights, attracting institutional investors, homebuilders and apartment managers during a pandemic that has ignited demand for larger homes.
The pension manager for the Canadian Mounties is the latest investor in single-family rentals, joining JPMorgan Chase & Co.’s asset-management arm and Nuveen Real Estate in a bet that there are lots of Americans who want spare bedrooms and backyards, but don’t have cash for down payments.
“It’s really an inflection point in SFR,” said Michael Carey, a senior director for Altus Group, an advisory firm. “It used to be an alternative asset class. Now people look at it as a solution.”
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Gillotti v. Stewart (2017) 2017 WL 1488711 Rejects Liberty Mutual, Holding Once Again that the Right to Repair Act is the Exclusive Remedy for Construction Defect Claims
June 05, 2017 —
Richard H. Glucksman, Esq. & Chelsea L. Zwart, Esq. - Chapman Glucksman Dean Roeb & Barger BulletinBackground
In Gillotti v. Stewart (April 26, 2017) 2017 WL 1488711, which was ordered to be published on May 18, 2017, the defendant grading subcontractor added soil over tree roots to level the driveway on the plaintiff homeowner’s sloped lot. The homeowner sued the grading subcontractor under the California Right to Repair Act (Civil Code §§ 895, et seq.) claiming that the subcontractor’s work damaged the trees.
After the jury found the subcontractor was not negligent, the trial court entered judgment in favor of the subcontractor. The homeowner appealed, arguing that the trial court improperly construed the Right to Repair Act as barring a common law negligence theory against the subcontractor and erred in failing to follow Liberty Mutual Insurance Co. v. Brookfield Crystal Cove LLC (2013) 219 Cal.App.4th 98. The Third District Court of Appeal disagreed and affirmed the trial court’s judgment in favor of the subcontractor.
Impact
This is the second time the Third District Court of Appeal has held that Liberty Mutual (discussed below) was wrongly decided and held that the Right to Repair Act is the exclusive remedy for construction defect claims. The decision follows its holding in Elliott Homes, Inc. v. Superior Court (Hicks) (2016) 6 Cal.App.5th 333, in which the Court of Appeal held that the Right to Repair Act’s pre-litigation procedures apply when homeowners plead construction defect claims based on common law causes of action, as opposed to violations of the building standards set forth in the Right to Repair Act. Elliott is currently on hold at the California Supreme Court, pending the decision in McMillin Albany, LLC v. Superior Court (2015) 239 Cal.App.4th 1132, wherein Liberty Mutual was rejected for the first time by the Fifth District. CGDRB continues to follow developments regarding the much anticipated McMillin decision closely, as well as all related matters.
Discussion
The Right to Repair Act makes contractors and subcontractors not involved in home sales liable for construction defects only if the homeowner proves they negligently cause the violation in whole or part (Civil Code §§ 911(b), 936). As such, the trial court in Gillotti instructed the jury on negligence with respect to the grading subcontractor. The jury found that while the construction did violate some of the Right to Repair’s building standards alleged by the homeowner, the subcontractor was not negligent in anyway. After the jury verdict, the trial court found in favor of the grading subcontractor.
The homeowner moved for a judgment notwithstanding the verdict or a new trial on the grounds that the trial court improperly barred a common law negligence theory against the grading subcontractor. The trial court denied the motions on the grounds that “[t]he Right to Repair Act specifically provides that no other causes of action are allowed. See Civil Code § 943.” The trial court specifically noted that its decision conflicted with Liberty Mutual, in which the Fourth District Court of Appeal held that the Right to Repair Act does not eliminate common law rights and remedies where actual damage has occurred, stating that Liberty Mutual was wrongly decided and that the Liberty Mutual court was naïve in its assumptions regarding the legislative history of the Right to Repair Act.
In Gillotti, the Third District Court of Appeal stated that the Liberty Mutual court failed to analyze the language of Civil Code § 896, which “clearly and unequivocally expresses the legislative intent that the Act apply to all action seeking recovery of damages arising out of, or related to deficiencies in, residential construction, except as specifically set forth in the Act. The Act does not specifically except actions arising from actual damages. To the contrary, it authorizes recovery of damages, e.g., for ‘the reasonable cost of repairing and rectifying any damages resulting from the failure of the home to meet the standards....’ ([Civil Code] § 944).”
The Court also disagreed with Liberty Mutual’s view that because Civil Code §§ 931 and 943 acknowledge exceptions to the Right to Repair Act’s statutory remedies, the Act does not preclude common law claims for damages due to defects identified in the Act. The Court stated: “Neither list of exceptions, in section 943 or in section 931, includes common law causes of action such as negligence. If the Legislature had intended to make such a wide-ranging exception to the restrictive language of the first sentence of section 943, we would have expected it to do so expressly.”
Additionally, the Court of Appeal rejected the argument that Civil Code § 897 preserves a common law negligence claims for violation of standards not listed in Civil Code § 986. It explained that the section of Civil Code § 897, which provides, “The standards set forth in this chapter are intended to address every function or component of a structure,” expresses the legislative intent that the Right to Repair Act be all-encompassing. Anything inadvertently omitted is actionable under the Act if it causes damage. Any exceptions to the Act are made expressly through Civil Code §§ 931 and 934. The Court concluded in no uncertain terms that the Right to Repair Act precludes common law claims in cases for damages covered by the Act.
The homeowner further argued that she was not precluded from bringing a common law claim because a tree is not a “structure,” and therefore the alleged tree damage did not fall within the realm of the Right to Repair. The Court of Appeal also rejected this argument, holding that while the tree damage itself was not expressly covered, the act of adding soil to make the driveway level (which caused the damage) implicated the standards covered by the Right to Repair Act. The Court explained that since under the Act a “structure” includes “improvement located upon a lot or within a common area” (Civil Code § 895(a)), as the driveway was an improvement upon the lot, the claim was within the purview of the Right to Repair Act. As the soil, a component of the driveway, caused damage (to the trees), it was actionable under the Act.
Reprinted courtesy of
Richard H. Glucksman, Chapman Glucksman Dean Roeb & Barger and
Chelsea L. Zwart, Chapman Glucksman Dean Roeb & Barger
Mr. Glucksman may be contacted at rglucksman@cgdrblaw.com
Ms. Zwart may be contacted at czwart@cgdrblaw.com
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More In-Depth Details on the Davis-Bacon Act Overhaul
November 06, 2023 —
Seth C. Wiseman & Angela M. Richie - Construction ExecutiveThe U.S. Department of Labor’s finalization of a
rule updating the Davis-Bacon Act, the federal law that governs how prevailing wages for federal construction projects can be determined, will have a significant impact on contractors and workers alike in the construction industry. The new rule, in effect, adopts the 30% rule, meaning that the prevailing wages must be equal to the wage paid to at least 30% of workers of a particular classification in a particular area. The new rule also implements a new anti-retaliation provision, specifically protecting construction workers who raise concerns about payment practices from adverse employment actions. The timing of this new rule is particularly significant for contractors, as it will likely raise the cost of labor for contractors at a time when the Infrastructure Investment and Jobs Act and the CHIPS Act are providing additional funding for federal projects across the country. Thus, it is important for all parties in the construction industry to understand the updated rule in order to evaluate the short-term impacts on their respective projects and long-term impact on their respective businesses.
Reprinted courtesy of
Seth C. Wiseman & Angela M. Richie, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
Mr. Wiseman may be contacted at swiseman@grsm.com
Ms. Richie may be contacted at arichie@grsm.com
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Recycling Our Cities, One Building at a Time
December 13, 2022 —
Aaron Clark & Erica Yokoyama - BloombergTakumi Osawa kneels on the narrow balcony of a wooden house outside Tokyo and describes how, 140 years ago, workers would have hoisted baskets of mulberry leaves to the second floor to feed silkworms. When they ate, it sounded like rain.
Known in Japan as minka, these locally crafted structures with characteristic pitched roofs were built for hundreds of years to accommodate farmers, artisans and merchants. This one was originally constructed in 1879 and housed a family on the first floor who tended silkworms on the second and third. Minka are typically designed like an interlocking puzzle, without nails or screws, which allowed Osawa and a team of craftsmen to take the building apart, move it about 90 kilometers (56 miles) east and reassemble it closer to Tokyo, where a couple now live in it.
The number of empty homes in Japan is rising as the population shrinks and younger generations gravitate toward the city. Government data suggests as many as 8 million houses, many built during a post-World War II construction boom that lasted into the 1980s, now lie unoccupied.
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Aaron Clark, Bloomberg and
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Tips for Drafting Construction Contracts
May 04, 2020 —
Stuart Rosen - Construction ExecutiveWhen negotiating a construction contract, a contractor and its advisers must first determine the areas of greatest concern.
For example, if the contractor believes that the drawings that were prepared by the architect and other design professionals are deficient, the contractor may want to reference those deficiencies in the contract. The contractor should emphasize that it is not responsible for the drawings and to the extent the project schedule is extended to allow the parties to address such issues with the drawings, the contractor would be entitled to additional compensation.
This article provides contractors with additional tips, with a broad focus on project delays, for their protection when negotiating and drafting construction contracts, and helps contractors understand the rationale for such tips to better prepare contractors in such negotiations.
Contractor’s liability to the owner for delay damages
It is imperative that the contract include a waiver of claims for consequential damages. AIA Document A201TM – 2017 includes such a waiver, which provides, in pertinent part, “The Contractor and Owner waive Claims against each other for consequential damages arising out of or relating to this Contract … This mutual waiver is applicable, without limitation, to all consequential damages due to either party’s termination in accordance with Article 14.”
Reprinted courtesy of
Stuart Rosen, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
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Mr. Rosen may be contacted at
srosen@proskauer.com
Mitigating the Consequences of Labor Unrest on Construction Projects
February 14, 2023 —
Cameron Lukas, Alan Winkler & Gregory Begg - ConsensusDocsUntil this past year, we have enjoyed an era of relative labor stability. It’s true, however, that labor unrest frequently coincides with inflationary pressure on prices, something that we are currently experiencing. The recent nationwide rail workers strike was averted only through the extraordinary intervention of the federal government. More recently, thousands of academic workers in the University of California system went on strike. Underscoring this development was a November 2022 New York Times article reporting that polls showed the highest level of support for organized labor since the 1960s. The same article also quoted a professor of labor relations warning that the current economy presents a high potential for strikes. This recalls the sixties and seventies when increased costs due to inflation led to a multitude of strikes.
The construction industry has been historically strike-prone with approximately 22% of all strikes during the 1960s involving construction projects, contrasted with the fact that construction workers themselves accounted for only roughly 5% of the nation’s nonagricultural labor force. Incredibly, in 1969 alone, a record number of nearly 1,000 construction strikes occurred nationwide with 20 million worker days lost, more than five times the lost working time of the rest of the economy.
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Reprinted courtesy of
Cameron Lukas, Peckar & Abramson, P.C,
Alan Winkler, Peckar & Abramson, P.C and
Gregory Begg, Peckar & Abramson, P.C
Mr. Lukas may be contacted at clukas@pecklaw.com
Mr. Winkler may be contacted at awinkler@pecklaw.com
Mr. Begg may be contacted at gbegg@pecklaw.com
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Bankruptcy on a Construction Project: Coronavirus Edition
May 25, 2020 —
Garret Murai - California Construction Law BlogExperts are warning of a wave of bankruptcies in the wake of the coronavirus pandemic. In some industries, such as the hard hit retail sector, that rising tide has already begun as J. Crew and Neiman Marcus filed for bankruptcy protection this past week.
While the federal government’s stimulus package, including the $660 billion Paycheck Protection Program which is part of the larger 2.2 trillion CARES Act, may help to stem the tide of bankruptcies, Chapter 11 bankruptcy filings increased 26% in April over the same period last year.
How the pandemic will impact the construction industry is uncertain. Anecdotally, we’ve been hearing from clients that some project owners are stalling projects that are still in the planning stages as they evaluate the situation, which suggests long term impacts that can be ridden out rather than short term impacts that can devastate on-going construction projects.
Nevertheless, with 24-7 coverage of the pandemic, project owners, contractors, material suppliers, and equipment lessors are understandably concerned with the impact a bankruptcy might have on a construction project. So, here’s a primer on bankruptcies on a construction project.
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Garret Murai, Nomos LLPMr. Murai may be contacted at
gmurai@nomosllp.com
