The Brexit Effect on the Construction Industry
June 30, 2016 —
Beverley BevenFlorez-CDJ STAFFNow that the United Kingdom (UK) has voted to leave the European Union (EU)—commonly known as ‘Brexit’—much discussion has arisen on how it will affect the construction industry both in the UK and globally.
Brexit could impact the U.S. housing market in various ways, some negative and some positive. For instance, the mortgage refinancing industry is poised to receive a “glut of applications due to low interest rates,” Construction Dive reported. It’s also possible that the U.S. will receive an influx of foreign investors who may perceive the UK as being too isolationist, making the U.S. seem “more open to global business,” according to the Detroit Free Press. They also pointed out that the vote has already impacted the U.S. housing market, since it is most likely the reason the Federal Reserve decided against raising interest rates in June.
Furthermore, Construction Dive presented two different views of how home buying may be effected. On the one hand, investors who lost money in the stock market may be less inclined or able to purchase property at this time. But on the other hand, if Brexit causes home prices to decline, it may “be a relief to those homebuyers finding it difficult to come up with a down payment, particularly first-timers who are facing limited starter-home inventory in addition to steep price tags.”
Barron’s does not seem to believe that the stock market decline due to Brexit will affect the U.S. building industry. The publication maintained their “relatively favorable view of the home builders” industry for the following reasons: “1) Healthy demand trends seen in our monthly survey of real-estate agents; 2) 100% U.S. exposure and tailwinds from lower mortgage rates; and 3) Generally undemanding valuations. However, we are somewhat balanced by: 1) Rates have already been favorable, limiting incremental buyer urgency; 2) Risk that continued market volatility or broader economic fallout could hurt housing fundamentals; and 3) Industry gross margins face pressure from rising land and labor costs. We forecast accelerating order growth through the fourth quarter, driven by community count growth and easier second-half comps, and think improving trends would be a positive catalyst.”
Less positive are the predictions for the UK construction industry. CNBC reported that migrant workers currently make up twelve percent of the UK construction force, and Brexit could cause the labor shortage to worsen. According to Global Construction, Brian Berry, Chief Executive of the Federation of Master Builders agreed that the industry needs migrant workers, however, he also stated that the UK needs to begin investing in their own “home-grown talent” through increasing apprenticeships.
Another prediction is that infrastructure projects may be adversely effected. For instance, the Independent reported that an anonymous source alleged that international investors have already begun to delay future infrastructure projects in the UK due to the uncertainty of the UK and the EU parting terms negotiation. Current projects may also be in jeopardy, according to the source, since the projects are often contingent upon existing shipping trade rules—if smaller ships can no longer go straight into Europe, it could be enough to halt these projects.
According to the Architects’ Journal, projects will stop—and they have evidence that one already has been halted: “Within minutes of the Brexit news, Daniel Minsky, who works with a boutique investment and development agency in London, was told that a proposed land deal had been pulled. The buyer withdrew at 7.05am this morning because they felt the residential value ‘was too risky.’”
The Architects’ Journal also predicted that environmentally friendly projects may decline since many of the green initiatives were governed by the EU under the Energy Performance in Buildings Directive. However, James Shackleton of Eversheds LLP disagreed with the assessment. Shackleton believes that Brexit may not result in less regulation, giving the following examples: “The Construction Design and Management Regulations 2015 which essentially enact EU Directive 1992/57/EEC and require certain minimum health and safety requirements in design and construction, are unlikely to be swept away.” Furthermore, the “Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 enacting EU Directive 2002/91/EC requiring Energy Performance Certificates for buildings is unlikely to be repealed,” Shackleton claimed.
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California’s Housing Costs Endanger Growth, Analyst Says
March 19, 2015 —
John Gittelsohn – Bloomberg(Bloomberg) -- California’s high housing costs threaten the state’s economy as workers increasingly struggle to afford a roof over their heads, the state Legislative Analyst’s Office said in a report released Tuesday.
“The state’s high housing costs make California a less attractive place to call home, making it more difficult for companies to hire and retain qualified employees, likely preventing the state’s economy from meeting its full potential,” Chas Alamo and Brian Uhler, senior fiscal and policy analysts with the office, said in the study.
California was home to four of the five most expensive U.S. metropolitan markets for single-family home sales in the fourth quarter of last year, led by a median home price of $855,000 in the San Jose, Sunnyvale and Santa Clara area, according to the National Association of Realtors. San Francisco ranked second, with Honolulu and the California cities of Anaheim and San Diego rounding out the top five. The suburbs north of New York City and greater Los Angeles followed.
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John Gittelsohn, BloombergMr. Gittelsohn may be contacted at
johngitt@bloomberg.net
California Court of Appeal Finds Alleged Inadequate Defense by Insurer-Appointed Defense Counsel Does Not Trigger a Right to Independent Counsel
January 11, 2022 —
Robert Dennison - Traub LiebermanThe California Second District Court of Appeal had occasion to examine an insurer’s duty to provide independent counsel (“Cumis counsel”) to its insured in a declaratory relief action entitled Nede Management, Inc. v. Aspen American Insurance Company. The action arose from a fire on a property covered by an insurance policy issued by Aspen American Ins. Co (“Aspen”). Aspen’s insureds were sued for wrongful death and negligence by tenants and squatters allegedly injured by the fire.
Aspen defended three individual members of the family who owned the property and the family business, Nede Management, Inc. (“Nede”), which managed the property. The defense was subject to reservations of rights on the lack of an obligation to pay any judgment in excess of the $1 million policy limits and no coverage for punitive damages. Aspen appointed defense counsel to defend its insureds. The insureds sought independent counsel based on the assertion that defense counsel appointed by the insurer defended the action inadequately, failed to communicate an initial settlement demand within policy limits and failed to fully investigate the case. Aspen did provide Cumis counsel to Nede for a period but terminated the arrangement after revoking its reservation of rights to that entity. The underlying case eventually settled at no cost to the insureds.
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Robert Dennison, Traub LiebermanMr. Dennison may be contacted at
rdennison@tlsslaw.com
Gehry-Designed Project Seen Bringing NYC Vibe to L.A.
April 28, 2014 —
Nadja Brandt and John Gittelsohn – BloombergBillionaire Stephen Ross’s Related Cos. new project in the sleepy end of downtown Los Angeles is designed to invigorate Grand Avenue the way its Time Warner Center helped energize New York’s Columbus Circle.
“The notion of bringing together this diverse mix of uses, and allowing for a lot of public spaces and public events, has proven to be very powerful in the right locations and with the right planning.” said William Witte, president of Related’s California division.
The New York-based firm formed a joint venture with Los Angeles-based SBE Entertainment Group LLC to restart plans for a $650 million-to-$700 million complex with entertainment, shopping, apartments, condominiums and a luxury hotel, Witte said. After going back and forth with local officials for most of the past year, Related won approval in January for the Frank Gehry-designed project from Los Angeles County supervisors.
Ms. Brandt may be contacted at nbrandt@bloomberg.net; Mr. Gittelsohn may be contacted at johngitt@bloomberg.net
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Nadja Brandt and John Gittelsohn, Bloomberg
Differing Site Conditions: What to Expect from the Court When You Encounter the Unexpected
September 05, 2022 —
Margarita Kutsin - Ahlers Cressman & Sleight[
1]Seattle Tunnel Partners (“STP”), a joint venture of Dragados USA and Tutor Perini, entered into a $1.4 billion contract with the Washington State Department of Transportation (“WSDOT”) to replace the Highway 99 viaduct. In December 2013, a tunnel boring machine (“TBM”) bearing the moniker “Bertha,” then the largest TBM ever built, measuring 425 feet long and 57 feet in diameter, struck an underground pipe. Shortly after the impact, Bertha overheated and eventually could no longer make forward progress. A massive repair effort ensued causing a 2.5-year delay in reaching substantial completion.
WSDOT sued STP for the delay, seeking liquidated damages of $57 million. In response, STP argued its delay was excusable because it was caused by Bertha’s impact with the pipe, and the steel well casing was a Differing Site Condition (DSC) undisclosed in the contract documents. STP asserted counterclaims against WSDOT, alleging breach of contract and seeking $300 million in damages. Ultimately, a jury found that the steel well casing on the pipe was not a DSC, foreclosing STP’s excusable delay defense and counterclaims, and resulting in a $57 million verdict, plus interest, in favor of WSDOT.
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Margarita Kutsin, Ahlers Cressman & SleightMs. Kutsin may be contacted at
margarita.kutsin@acslawyers.com
Defect Claims Called “Witch Hunt”
November 20, 2013 —
CDJ STAFFSaying that “it was blatantly obvious that LAWA’s airport maintenance has culpability in this matter,” Tutor-Saliba Corp is claiming that the recent lawsuit from Los Angeles World Airports, the operators of LAX, is “an apparent witch hunt.” The airport has claimed that Tutor-Saliba’s work in building the runway was defective. The firm notes in response that their warranty against defects expired in 2009 and claims that some of the areas with problems are areas they did work.
Instead of defective workmanship, Tutor-Saliba has suggested that the problems with the runway are due to poor maintenance. Their suggestion is that LAX review its maintenance procedures.
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Federal Court Sets High Bar for Pleading Products Liability Cases in New Jersey
November 11, 2024 —
Lian Skaf - The Subrogation StrategistProducts liability is an area of law that both sides of the aisle vigorously litigate. Like in most litigation, products liability claims provide subrogation attorneys with an important means of prosecuting cases against manufacturers, sellers, and other entities in the stream of commerce. Of course, these claims also come with numerous “buyer beware” requirements.
New Jersey allows products liability claims and the United States District Court for the District of New Jersey (District Court) clarified how such claims should be plead in Cambridge Mut. Fire Ins. Co. a/s/o David Krug vs. Stihl, Inc., No. 22-05893, 2024 U.S. Dist. LEXIS 178804 (D. N.J.). After becoming subrogated to the rights of its insured, Cambridge Mutual Fire Insurance Company (Cambridge) filed suit against Stihl, Inc. (Stihl) in the Superior Court of New Jersey, Morris County, Law Division. Stihl then removed the case to federal court. Once in federal court, Stihl filed a motion to dismiss the action. The District Court granted the motion, doing so in part with prejudice and in part without prejudice.
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Lian Skaf, White and Williams LLPMr. Skaf may be contacted at
skafl@whiteandwilliams.com
Quick Note: Be Careful with Pay if Paid Clauses (Both Subcontractors and General Contractors)
October 12, 2020 —
Christopher G. Hill - Construction Law MusingsAside from waiver of lien rights (something that will be illegal in Virginia after July 1, 2015), the most troublesome contractual impediment to payment for a subcontractor or supplier on a project often is the “pay if paid” clause. As a general rule, in Virginia, these clauses where drafted in the proper fashion, are enforceable. As I have said many times, in Virginia freedom of contract almost always wins out.
While this is the case, I emphasize that such clauses must be very explicit and specific. Furthermore, and in something that should be obvious, these clauses are generally limited by the Courts of Virginia to only be enforceable and to only forgive the need for payment if the upstream contractor on the construction job has not been paid for the work that the sub claiming non payment has done.
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The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
