Florida Construction Law Authority

Florida Council for Public/Private Partnerships Has Successful Inaugural Conference

Lee Weintraub — Tue, 21 May 2013 07:58:39 -0500

The Florida Council for Public/Private Partnerships launched to the public statewide last week at its very successful inaugural conference in Orlando. One hundred thirty attendees, representing an equal mix of public entities, builders, lenders/investors, design professionals and others heard several case studies illustrating how P3 projects have been successfully delivered. Featured projects included the Port of Miami Tunnel, Long Beach Courthouse in California, Palm Beach County Convention Center Hotel and the pending P3 expansion of Seminole State College. Other presenters included William Merck, the CFO of the University of Central Florida, Representative Greg Steube who sponsored the new P3 legislation, and the heads of P3 activities for Balfour Beatty and AECOM.

The Florida Council for Public/Private Partnerships fared well too, as attendees competed for the last founding member positions and the membership drive is now in full swing. Check out the website to learn how FCP3 can benefit you. Jump on board – P3s are hot and are destined to become the future of public construction. Join us now and get lined up for P3s. The momentum for them has been immense over the past few weeks since the legislation passed.

Court Finds Late Bid Was Not Late

Mark J. Stempler — Mon, 13 May 2013 10:10:00 -0500

By: Mark J. Stempler

The case: INSIGHT SYSTEMS CORP., and CENTERSCOPE TECHNOLOGIES, INC. v. THE UNITED STATES

The court: The United States Court of Federal Claims

A computer glitch forced disqualified proposers to challenge a U.S. government agency. Here is an abridged version of what happened. The United States Agency for International Development (USAID) advertised a Request for Quotations (RFQ). Eventually during the process, proposers were allowed to submit their revised final quotes either in hard copy form, or electronically via email. If the proposer submitted the quote electronically, it was its proposer's responsibility to send in the appropriate information, and to do so timely to the people designated to receive it.

The two Plaintiffs in this case submitted quotations in response, and did so electronically and in their opinion, before the deadline. The way the system was set up, emails from outside sources directed to the specified USAID email addresses pass from the outside mail server through a sequence of three (3) agency-controlled computer servers, before they are ultimately delivered to the recipients. To make a long story short, the emails were received by the first USAID server, but due to technical error, were not passed on to the ultimate recipients until after the submittal deadline. USAID notified the proposers that their proposals would not be considered because they were received after the deadline. Arguing that late is late, the USAID felt that it did not matter whether the perceived lateness was due to technological malfunctions with its own computer system.

FAR § 52.212-1(f)(2)(i) provides that “[a]ny offer . . . received at the Government office designated in the solicitation after the exact time specified for receipt of offers is ‘late’ and will not be considered.” During oral argument, USAID argued hypothetically that a proposal would be late even if, owing to the design of the agency’s email system, the email was not distributed to the recipient’s inbox because he or she had turned off their computer before the deadline and did not reboot until the deadline passed. The Court, however, examined an exception to the FAR provision that allowed for acceptance of a proposal if there was evidence it was received at the government installation and was under the government's control before the deadline. The Court interpreted that exception to apply to electronic communications.

As a result, the Court, in an often pointed and clever opinion, held that USAID’s refusal to accept plaintiffs’ proposals was arbitrary, capricious, and contrary to law. It then granted injunctive relief and reinstated its proposal in the procurement. Here is a link to the opinion: http://www.linkedin.com/redirect?url=http%3A%2F%2Fwww%2Euscfc%2Euscourts%2Egov%2Fsites%2Fdefault%2Ffiles%2FALLEGRA%2EINSIGHT050613%2Epdf&urlhash=NuLy&_t=tracking_anet

A lesson here is that while bidders should take all necessary steps to ensure that they have submitted their bids, proposals, quotes, etc. timely, depending on the law and rules in place, they might not be disqualified if the bid is not received due to technical error, and the bidder can show the agency had control of the submission before the deadline.

Review All of the Terms When Preparing Your Bid

William J. Cea — Fri, 10 May 2013 15:45:28 -0500

When responding to an Invitation to Bid ("IFB") or other public solicitation, it is important to review terms above and beyond the scope of the work that may impact price. For example, the solicitation may include a contract form or other contract terms that should be carefully reviewed prior to bid submittal.

Many times, an IFB will provide the form of contract that the successful bidder will be required to sign. The contract form should not be considered "boiler plate" and may have terms that directly impact the cost of the work and profitability. We have seen instances where bidders have submitted the low bid, and are awarded the work without full appreciation of some of these contractual terms. Some examples of terms to consider when preparing a bid include:

The type of insurance coverage and coverage limits;
Warranty provisions;
Time for performance and "liquidated damages" clauses; and
Termination clauses.

Generally, Florida law does not allow a bidder to raise its price to account for mistakes made in the process of formulating the bid. So it is important to factor the these terms into the price bid, and in addition to the cost of the work itself.

Producing the Condominium Association's Corporate Representative for Deposition

Kenn Goff — Tue, 07 May 2013 18:09:19 -0500

On occasion condominium associations have disputes with their contractors, which can unfortunately lead to litigation. In the course of litigation the contractor’s attorney may want to take the deposition of an Association’s corporate representative.

In one such lawsuit the contractor did just that, noticing for deposition the corporate representative of the association with the most knowledge of the allegations in the complaint, When the “representative” gave testimony that actually supported the contractor’s allegations in its complaint and negated affirmative defenses asserted in the association’s answer, the contractor filed a motion for summary judgment. The trial court thereafter granted judgment in favor of the contractor, notwithstanding the association’s filing of two affidavits (of its former president and current treasurer) in opposition. Finding the two affidavits to be inconsistent with and contrary to the previously given deposition testimony of the association’s designated corporate representative; the trial court struck the affidavits.

On appeal, however, the summary judgment in favor of the contractor was reversed and the case was remanded for further proceedings. Carriage Hills Condominium, Inc. v. JBH Roofing & Constructors, Inc., 109 So.3d 329 (Fla. 4th DCA 2013). The appellate court considered several issues, including by way of examples, that the subject matter of the requested deposition was unduly broad, the deposition was not properly noticed under the applicable rules of procedure, and the representative gave testimony that exceeded the scope of the deposition notice.

As demonstrated by the above scenario, when producing a condominium association’s corporate representative(s) for deposition, there are several matters to consider. At a minimum, the deposition notice should be examined to see what information the opposing party is seeking and if the notice presents any legal concerns. In addition, the association should select the appropriate representative(s) to testify on its behalf, being mindful of all claims and defenses in the particular case and providing testimony that ideally is consistent with the Association’s litigation positions. Other matters will likely need to be considered in such deposition preparation, depending on the facts of the particular case.

As can happen within a condominium association, members of a board and/or unit owners do not always completely agree. This reality only underscores the need for properly selecting and preparing an association’s corporate representative(s) for deposition.

The Bonus Value of Your Liability Insurance Policy: Litigation Defense

Ryan Carpenter — Tue, 09 Apr 2013 20:33:45 -0500

Your liability insurance policy has the obvious value of indemnifying you (up to the policy limit) in the event you are held liable for a covered loss. However, liability insurance policies like commercial general liability and professional liability policies have significant value beyond that principal purpose. Beyond that primary benefit, your liability insurance carrier might also be obligated to pay for an attorney to represent you in a lawsuit that involves a claim that might be covered under your policy. That would not only relieve you of that financial responsibility, but those defense costs might also be paid in addition to the policy limit, depending on the terms of your policy.

Your carrier’s obligation to defend you is generally governed by the terms of your policy and the law of the state in which you purchased the policy. Therefore, it is important for you to review your policy to make sure you comply with all notice and cooperation requirements, to avoid forfeiting benefits under the policy. Along with the terms of your policy, statutes and case law govern the particulars of an insurance company’s obligation to provide you with a defense in a lawsuit. For example, under Florida case law, your carrier will likely be obligated to defend you against the entire claim being asserted against you, even if only a portion of the claim is covered by your policy. Also, if your insurance company agrees to provide you with an attorney to defend you, a Florida statute will probably require your carrier to provide a “mutually agreeable” attorney, empowering you to object to your insurance company’s offered attorney.

Litigation defense is potentially a significant benefit of your liability policy. Not only might the defense costs be paid in addition to your policy’s limit, but if the covered claim has a relatively low dollar value, the defense costs paid by your carrier could easily exceed what would otherwise be paid under the policy. Therefore, if a claim is asserted against you that might be covered by your liability policy, it is important to not only give your insurance company notice of the claim, but also request that your carrier defend you under the policy, to make sure you get the full value of your policy.

New Version of LEED Rating System May Be Coming Soon

Mark J. Stempler — Fri, 22 Mar 2013 10:58:26 -0500

The U.S. Green Building Council's long awaited updates to the LEED Rating System are almost complete. LEED v4 has been in the works for more than a year. The likely final public comment period for the new rating system ends on March 31st, and voting on the changes is scheduled to begin June 1st.

There are some significant changes in LEED v4. It will include a new credit category, Location and Transportation. As the name suggests it focuses in part on location of buildings and connectivity to them. Some of the credits in this category, such as bicycle storage, reduced parking capacity and low-emitting vehicles are already part of the existing Sustainable Sites category, so they are just being moved. Speaking of which, a new credit for rainwater management has been added to the Sustainable Sites category in LEED V4, which will be an opportunity to earn points for capturing, treating and controlling on-site runoff.

There are some significant changes in the Water Efficiency category. There will be three prerequisites: Outdoor Water Use Reduction (applicable to projects with exterior vegetated areas); Indoor Water Use Reduction (like the former "Water Use Reduction" prerequisite, it requires 20% water use reduction, and will also require a WaterSense label for certain fixtures and fittings); and Building Level Water Metering (applicable to all projects, it calls for permanent water meters to measure usage, and the data must be shared with the USGBC for 5 years). There are also new credits for Cooling Tower Use and Water Metering.

The Innovation in Design category had required a project principal be certified as a LEED AP. LEED v4 will require the LEED AP to have a specialty most appropriate for the project. Also, the Indoor Environmental Quality category's three prerequisites have been modified. For example, the Minimum Indoor Air Quality Performance now addresses radon-resistant construction for projects containing residential units. The tobacco prerequisite now prohibits smoking on school grounds entirely, not just inside buildings and within 25 feet of building entries.

There are several other additions and changes in LEED v4 which will affect numerous types of buildings. For the complete list, check out http://new.usgbc.org/v4.

Public Procurement: Don't Forget the Protest Bond

William J. Cea — Wed, 20 Mar 2013 15:08:33 -0500

If you are considering a protest concerning a competitive solicitation pursuant to Chapter 120, Florida Statutes (the "Administrative Procedure Act"), a protest bond may be required. The bond may be due at the time of the formal protest, or even at the time of the notice of protest. It is critical that the protesting party confirm whether a protest bond is required by the particular agency's statutes and rules, and if so, the amount of the bond and when it is due. Protest bonds generally provide a guaranty that the protestor will pay any costs or attorney's fees that may be imposed against the protesting party.

The Florida Administrative Code also provides a form Protest Bond. As set forth therein, the Bond guarantees payment of all “costs and charges allowed” through both administrative and appellate court proceedings. Failure to provide the Protest Bond may result in a dismissal of the protest and a waiver of rights pursuant to the Administrative Procedure Act. Accordingly, it is very important to secure and submit the Protest Bond in the correct amount, form and by the particular deadline.

The Protest Bond is yet another example of the why the world of public procurement is all about dotting the i's, crossing the t's, and doing so within the strict deadlines required by law. Bid protests should be fully evaluated on a case by case basis, and it is important to involve legal counsel as early in the process as possible to avoid a waiver of rights and so that counsel has sufficient time to properly handle or intervene in the matter.

Update on Public/Private Partnership Legislation

Lee Weintraub — Thu, 14 Mar 2013 07:46:28 -0500

SB 84 and HB 85, as amended to reflect the merger with a competing bill, continues to pick up momentum. The House Bill passed the Government Operations Subcommittee three days ago by a vote of 11 to 1 and the Senate Bill is set for the Governmental Oversight and Accountability Committee today. Many interested parties have raised very good suggestions for changes in the statutory language and we’re addressing as many of them as we can. We’re excited that this legislation has garnered so much attention, as that indicates people are preparing themselves to implement it upon passage. Keep up the support!

I was recently interviewed by Carolina Bolado at Law360 about the legislation and the portion of her article addressing it is reprinted below. In the meantime, the newly formed Florida Council of Public/Private Partnerships is putting the final touches on our P3 conference set for May 16 and 17 in Orlando, which will coincide with the statewide launch of that trade association to the public. If you want to be on the e-mailing list to receive notice of the seminar when registration opens shortly, let me know.

In the meantime, keep up the P3 momentum! Here is the segment of the Law360 article on P3:

Focus on Public-Private Partnerships

All eyes are on S.B. 84 and H.B. 85, a public-private partnership bill that has been gaining momentum and has passed its first Senate committee with unanimous support, according to the bill's drafter Lee Weintraub of Becker & Poliakoff PA.

The bill establishes a uniform method for public-private partnerships throughout the state, which provides the stability that lenders have been looking for, Weintraub said.

It also allows private companies to pitch unsolicited proposals to government entities. Once an agency has accepted a proposal, a competitive bidding process is opened up to other companies, according to Weintraub.

Supporters say the bill could open up the state to investors and help fund some critical infrastructure needs, particularly to the state's aging water and sewer systems, Weintraub said.

“We haven't done [public-private partnerships] much because we've been a wealthy country so we've had enough money to fund this stuff,” Weintraub said. “But now we're facing a budget crunch. It's been going on as a beautiful system in Europe, Canada and Australia.”

Florida Supreme Court limits the economic loss rule to product liability matters - or not?

Kenn Goff — Fri, 08 Mar 2013 11:52:19 -0500

For the last eight (8) years, Florida’s economic loss rule has been applied to bar claims (1) where the parties are in contractual privity and one party seeks to recover damages in tort for matters arising out of the contract, or (2) where the defendant is a manufacturer or distributor of a defective product which damages itself but does not cause personal injury or damage to any other property. Indemnity Ins. Co. v. American Aviation, Inc., 891 So.2d 532 (Fla.2004).

However, in its March 7, 2013 5-2 split decision in Tiara Condominium Ass'n, Inc. v. Marsh & McLennan Companies, Inc., 38 Fla.L.W. S151A (Fla. March 7, 2013) the Florida Supreme Court has now receded from prior precedent and appears to have limited the application of the economic loss rule to product liability matters. The Court observed that the economic loss rule is a judicially created doctrine that sets forth the circumstances under which a tort claim is prohibited if the only damages suffered are economic losses. In addition, the Court noted that the economic loss rule had its origin in product liability matters

As to contract disputes, the Court observed that the economic loss rule had been applied to prevent parties to a contract from circumventing the allocation of losses set forth in the contract by bringing a tort claim. Expressing concern, however, about the over-expansion of this rule to contract matters, the Court in Tiara Condominium Ass'n held that the economic loss rule should be applied only in the product liability context.

Although a concurring opinion Justice Pariente referred to the Florida Court’s previous decision in Indemnity Ins. Co. v. American Aviation, Inc., and specifically the language which stated “when the parties have negotiated remedies for nonperformance pursuant to a contract, one party may not seek to obtain a better bargain than it made by turning a breach of contract into a tort for economic loss.” Stating that the Court’s decision in Tiara Condominium Ass'n did not change this statement of law, but it is principles of contract law, as opposed to the economic loss rule that provides this result.

Certainly, there will be much debate over the application of the Florida Supreme Court’s recent decision. Plaintiffs seeking to pursue tort claims against those with whom they are in contractual privity may argue that this decision provides further support for their ability to do so. Defendants opposing such claims may argue that not much has changed, and when substance is elevated over form, common law contractual legal principles should preclude such claims.

Ruminations on Pending P3 Legislation

Lee Weintraub — Thu, 28 Feb 2013 09:01:41 -0500

As the legislative session is only a week away, our pending public/private partnership bill looks like it’s full steam ahead. All industry participants of whom I’m aware are on board, with only a few concerns having been raised thus far, none of which appear strong enough to derail the momentum. The bill has already passed its first Senate committee unanimously and the sponsors of a competing bill agreed to merge theirs into ours in exchange for changes that will make ours a stronger bill than before. They include the appointment of a task force to create guidelines for a public agency receiving and processing P3 proposals, added flexibility in determining the amount of time for competitive bidding after an unsolicited proposal has been received, and authorizing discretionary interim agreements where appropriate, whereby the private entity can be compensated during the due diligence phase of the project as a means of ensuring issues like zoning, environmental mitigation, design, etc. are properly aligned for the job.

Keep an eye on this spot as we continue tracking SB 84 and the companion HB 85. The newly formed Florida Council for Public/Private Partnerships is planning on conducting a P3 seminar focused largely on how to implement the new legislation on May 16 and 17 in Orlando. Put this on your calendar and contact me if you wish to be notified when conference registration is available.

New Study Predicts Greener Pastures for Green Construction Industry

Mark J. Stempler — Tue, 19 Feb 2013 16:08:46 -0500

A new report says the green building market in the U.S. is gaining traction and projects greater growth ahead. McGraw-Hill Construction's 2013 Dodge Construction Green Outlook report finds green building represented 44 percent of all commercial and institutional sector construction last year, and will grow to 55 percent by 2016. The report expects that the total green building market will be worth between $98 billion and $106 billion this year, growing to about $248 billion by 2016.

Green building is also becoming more popular in the home sector. Residential green building is projected to represent about 25 percent of the market in 2013, which is worth approximately $34 billion to $38 billion, and growing to up to $116 billion by 2016.

Within this growth, some industry experts expect that the focus will shift from the construction and design of new buildings to the renovation of existing buildings to make them "greener". In fact, a growing number of cities are installing or are preparing to install new green building mandates, primarily in the commercial sector.

These projects should mean more opportunities for contractors and design professionals who know how to build green, and should also lead to healthier and more sustainable environments for all of us.

The "New" in Renew; Potential Changes to Insurance Policy Eligibility Requirements and Coverage Upon Renewal

Ryan Carpenter — Sun, 17 Feb 2013 16:51:01 -0500

While you might think that receiving a renewal notice from your insurance company means that you have the option to keep everything as it has been for another year, simply by paying the amount shown on the notice, that is not necessarily the case. To the contrary, your insurance company might have changed its criteria to be eligible for the type of policy that you have had in the past. Additionally, even if the eligibility requirements have not changed, your insurance company might have made changes to the specific terms of coverage under that type of policy.

Changes to the terms of coverage might be summarized on the renewal notice, or be detailed in the body of the policy, if a copy of the policy being offered is enclosed with the notice. However, eligibility requirements might not be described on either. I recently had a condominium association client find out that it was no longer eligible for a residential policy, but there was no way for the Association to know that based on the renewal notice that it received. Further, even though the renewal notice indicated that a copy of the new policy was enclosed, it was not.

Therefore, the Association had a decision to make. It could pay the renewal premium to prompt its insurance company to issue another less expensive residential policy, for which the Association knew it was not eligible. Alternatively, the Association could purchase a more expensive non-residential policy, for which it was eligible. If it chose not to disclose its ineligibility and simply renewed its residential policy, it faced a significant risk. Pursuant to Section 627.409(1), Fla. Stat., if the Association did not disclose its ineligibility, its insurance company could deny any claims that the Association submitted based on the Association’s failure to disclose. Luckily, the Association became aware of its ineligibility and was able to obtain an appropriate policy.

As the Association learned, it is important to have someone reevaluate your eligibility and coverage at renewal. Getting an insurance company to pay a claim is generally a difficult undertaking. Not confirming that you have an appropriate policy and adequate coverage, could make that task a losing battle.

Don't Underestimate the Importance of Repair Estimates When Evaluating Your Construction Defect Claim

Michele Ammendola — Fri, 08 Feb 2013 11:51:13 -0500

Investigating and placing potentially responsible parties on notice about the existence of construction or design defects against Developers, Contractors or Design Professionals in accordance with Chapter 558, Florida Statutes, is an important part of the claims process. As their defect claims progress, Individual Property Owners and Condominium Associations may need professional assistance from their attorneys and design consultants in calculating the potential costs to correct construction or design defects.

There are many other reasons why Owners or Associations would want to obtain repair proposals or estimates. For example, while repair estimates may help Owners and Associations budget for repairs, they may also help Owners and Associations to prioritize their claims for settlement purposes. Repair estimates enable Owners and Associations to identify any defects they may wish to withdraw from their Ch. 558 pre-litigation construction defects claims, or from litigation, during the course of settlement negotiations.

When negotiating a settlement, repair estimates are a valuable tool for attorneys to use in quantifying their clients’ settlement demands better and evaluating the economic value of any settlement offers for money or repairs which they may receive.

Sometimes, repair estimates can be used to show how a party’s monetary demands were calculated. Settlement meetings and mediations are usually more productive when all of the parties have a better understanding of an Owner’s or Association’s expectations as to what its construction or design defects claims may be worth, and how these amounts were derived.

Repair estimates may also identify portions of the claim that need further investigation or testing, such as when an Association has identified a few examples of a particular defect, but is not sure how widespread the problem actually is.

When obtaining repair estimates, Owners and Associations should consult with their attorneys. They should work together to obtain repair proposals from reputable, Florida licensed contractors or design professionals. Whenever possible, Owners or Associations should also try to procure multiple repair proposals for each defect. Doing so may illustrate whether there is a significant range in the Owners’ or Associations’ potential damages.

Ideally, repair estimates should include the scope of work, as well as costs for any permits, code upgrades, or design specifications which may be needed to effectuate the repairs. If the Owner or Association is working with a professional engineer or other design consultant, it should include the consultant in the bidding process. Among other things, a consultant can review the proposed repair methods, locations, materials and costs, and make recommendations for changes to protect the Owners’ or Associations’ interests.

A Performance Bond's Fixed and Flexible Scope.

Ryan Carpenter — Sat, 02 Feb 2013 20:07:30 -0500

Whether you are an owner or a contractor, you have likely at least considered the additional security that a performance bond offers to assure yourself that the work downstream gets done, and gets done to your satisfaction. However, if you have a downstream entity obtain a performance bond, you must keep the bond’s scope in mind throughout the course of the project. When a performance bond is issued, it likely ties the surety’s obligation to the original scope of work in the downstream entity’s contract. From that point on, you might expand the contract’s scope numerous times, but expanding the contract’s scope does not necessarily expand the surety’s obligation to the same extent.

While it might seem like the performance bond should cover all of the work that the downstream entity ultimately performs on the project, keep in mind that the surety received an amount of money for issuing the bond that was based on the original scope. Therefore, the surety will have a strong argument that it should not be responsible for work that was subsequently added.

A surety’s obligation can be expanded, however. If a change order is issued expanding the downstream entity’s contract, the surety’s obligation could be expanded through an amendment to the bond called a "rider." I recently represented a general contractor that issued numerous change orders and even entered into a second subcontract with a subcontractor, for the same project. With a completely separate contract, it might be necessary to have a completely separate bond issued.

Given how likely it is that a downstream entity’s scope of work will be expanded at some point during a project, it is important to keep the scope of the surety’s obligation in mind and make sure that it is expanded as necessary, so the surety is responsible for all applicable work, in the event you actually need the bond’s protection.

Supreme Court Issues Landmark Decision on Unlicensed Contracting

Lee Weintraub — Thu, 31 Jan 2013 09:11:10 -0500

Under Florida Statute 489.128, unlicensed contractors have no rights under their contracts or the Lien Law. However, those who contracted with unlicensed contractors, such as owners or subcontractors, retain all their legal rights to enforce the contract and claim against the contractor’s bond. A common defense raised by the unlicensed contractor to claims of unlicensed contracting was that the party with whom they contracted knew the contractor wasn’t licensed and therefore ought not benefit in a legal action from the lack of licensure. The validity of this defense was an unresolved issue until the Florida Supreme Court ruled last week in Earth Trades, Inc. v. T&G Corp., Case No.: SC10-1892 (Fla. January 24, 2013) [citation pending]. In that case the Supreme Court held the legislature put the burden of licensure on the contractor, not those with whom the contractor contracted, and therefore only the contractor bears the ramifications of unlicensed contracting regardless of whom else may have acquiesced to, or knew about, it.

Although not as clearly stated, this opinion also appears to make an unlicensed subcontractor solely responsible for its lack of licensure, even if the contractor that hired them knew of the lack of license. Previously, courts were split about whether a contractor could avoid its payment obligations to an unlicensed subcontractor, because some courts feared such an outcome would encourage contractors to hire unlicensed subs. The Supreme Court appears to rule that the contractor may indeed avoid any obligations under the contract with an unlicensed sub, since 489.128 requires the sub to be licensed and puts the ramifications of unlicensed subs solely on the subs.

Proposed Amendment to Pending Legislation Would Make Inaccurate Liens a Felony

Lee Weintraub — Thu, 24 Jan 2013 09:51:09 -0500

SB 112 would create a new statute on ramifications for claiming a fraudulent interest in property. It provides a person may not, with the intent of defrauding, file or cause to be filed for recording in the official records a document pertaining to property which the person knows contains a misrepresentation or material omission of fact. A violation would be a third degree felony. The bill specifically provides that construction liens would not fall under this law because such liens would continue to be governed by the fraudulent lien statute in the Construction Lien Law.

However, a proposed lengthy amendment recently surfaced that would make anybody who files, attempts to file, solicits or directs another to file or conspires to file any document in the public records pertaining to property knowing or having reason to know the document is false would be liable for a second or third degree felony. This amendment is problematic on a number of levels. First, it expands liability from someone intending to defraud to someone who knew or should have known the document is false, regardless of whether it’s actually fraudulent. Second, it increases the charge from a third degree felony for the first violation to a second degree felony for second or subsequent offenses. Third, the statute would cover not only the lienor, but also any lawyer or other person who advised or counseled the lienor pertaining to the lien. Finally, the exclusion of construction liens was removed, making construction liens subject to this law, thereby creating an inconsistent conflict between this law and the fraudulent lien statute, which imposes a significantly different standard of liability and ramifications for violation.

I’m not sure who’s behind this amendment, but you should keep a close eye on it and help do your part to defeat it.

Design Professional Liability Legislation (Again)

Sanjay Kurian — Thu, 17 Jan 2013 11:31:10 -0500

For the third year in a row, the state legislature has introduced legislation to protect architects, engineers and other design professionals from claims for negligence in the performance of their professional services. In 2010 a bill passed both legislative houses but was vetoed by Governor Crist. Last year the bill did not get as far, but apparently proponents of the bill believe the third time may be the charm. Unfortunately, as in prior years this legislation is anti-consumer.

Senate Bill 286, linked here, would provide that architects or engineers would no longer be personally liable for negligence arising out of their professional services. This would essentially limit people hiring these design professionals to breach of contract claims against the design professional’s business entity. This is a problem because most design contracts limit the design professional’s liability to some paltry amount that pales in comparison to the harm that comes from defective design. The steps that the design professionals would need to take to obtain such immunity would not be difficult. Basically, they need only disclose in the contract that your rights are being limited.

The legislation further provides the business entity must maintain professional liability insurance required under the contract. However, there is no requirement that the design professional or the entity maintain insurance, only that the insurance meet what is required under the contract. The majority of design professional contracts I have seen show no requirement for the entity to maintain insurance. Usually that is a provision that must be negotiated into the contract, including the amounts and duration of such policies. Unsophisticated owners will receive the short of this stick with the passage of such legislation.

No other professionals are entitled to such protection. Doctors, lawyers, and accountants cannot limit their exposure for their own negligence in this fashion. And there is no justification for singling out architects and engineers for this type of insulation.

If you are bothered by this legislation, contact your legislators now and speak out to fight this bad bill and your help and participation could strengthen the fight.

Watch out for Construction Scams in 2013

Kenn Goff — Mon, 14 Jan 2013 10:44:49 -0500

As the construction industry hopefully improves in 2013, one must always be mindful of construction scams. These scams can take many forms, including but not limited to the following:

The free test and need for a new system – An individual visited homeowners in Virginia and offered to test their water. Perhaps not surprisingly, the homeowners were then told they needed new water filtration systems. Yet, after paying for the systems the homeowners were unable to contact this individual. His so-called office address turned out to be a chiropractor’s office. Charges for construction fraud were brought against this individual in Virginia.

Advance payments for work not done - A general contractor in Texas continually got advance payments from its clients while doing minimal work in relation to the monies paid. In appealing criminal convictions determined in the trial court, the general contractor argued that it only quit the jobs after there were payment disputes. The appellate court disagreed. The evidence showed that the contractor did more than simply fail to perform the contracts and refund the money. The contractor engaged in a series of transactions with the same pattern—promising to complete the construction projects in a short time frame, demanding advance payments on a tight weekly schedule regardless of job progress, beginning a minimal amount of work and then stopping and walking off the job, leaving it unfinished after a “payment dispute” arose, while giving no refund of payments made. Although available beforehand, once the contractor got the money, he was unresponsive. The Texas appellate court affirmed the contractor’s criminal convictions for misapplication of fiduciary property and theft by deception.

The low ball bid followed by a contract with excessive change orders – Various commentators have written about the practices of some [certainly not all] contractors low ball bidding a job to get awarded the contract; to only then be followed by excessive change orders in an attempt to make up or increase the contractor’s profit margin. On government projects, at least one state, Illinois, has enacted a Public Works Change Order Act in an effort to minimize the impact of potentially excessive change orders. This Act provides that on government projects, units of local government and school districts are to re-bid change orders when such change orders increase the overall cost of a project by 50% or more of the original contract price.

Proactively addressing potential construction scams - Although there are no guarantees, there are ways to minimize the chances of being exposed to a construction scam. Some examples of items to consider include verifying a contractor’s license and credentials, checking the contractor’s references, being wary of the high-pressure contractor that claims there is an extreme urgency in getting the work done, obtaining more than one bid for the work, determining if the bids are actually responsive to the work that needs to be done, avoiding cash payments, eliminating up-front payment for the entirety of the work and instead having a payment schedule that corresponds to the work done, having a qualified individual oversee the work, and having a written contract that protects your interests. Remember that “an ounce of prevention is worth a pound of cure.”

Congressional Bill to Ban Use of Chinese Drywall

Lee Weintraub — Thu, 03 Jan 2013 08:30:05 -0500

As reported by William E. Gibson in the South Florida Sun-Sentinel today, U.S. Representative Ted Deutch sponsored a bill passed by Congress on Tuesday banning the continued use of Chinese drywall already in the United States before the ban on imports took effect. The bill also directs the Consumer Product Safety Commission to set standards for sulfur content in drywall manufactured in, or imported into, the US in the future. Finally, the bill directs the executive branch of government to use diplomatic pressure against China in hopes of subjecting Chinese drywall manufacturers to judgments of American courts ordering compensation to aggrieved homeowners. Good luck with that one. But the bit about banning recycled use of Chinese drywall already imported into this country is important. Those of you still stockpiling drywall should look at this and decide what to do with it in light of this possible legislation. Of course, you may still be liable for the effects of Chinese drywall even absent this legislation, so when in doubt seek legal counsel.

Remember to Perfect Claim and Lien Rights As the Economy Improves

Lee Weintraub — Mon, 31 Dec 2012 08:24:20 -0500

As I pointed out in my last post, things are slowly improving for the Florida construction industry, but the operative word, on so many levels, is “slowly.” The obvious implication of the slow-paced recovery is that there still is not enough work for contractors to reach their comfort zone yet. But a less obvious implication is that the money behind the projects is still more tentative than the recent boom years. Although projects are starting, the money behind them remains tight, meaning any little thing can cause a payment dispute that could turn the already small margins into losses at the blink of an eye. Change order disputes, delays and job interferences, quality of work issues and more can turn a tightly run job into litigation and loss. The contractors who will be best positioned to handle this will be those who have perfected their lien and bond claims. The comfort of claiming a secured position, combined with the possible entitlement to recover your attorney’s fees should you be forced to litigate, will put you in a better position to stand your ground when dealing with a payment conflict.

The key will be to fully perfect your claim. Follow all your contract requirements for claim perfection and notice to your client. Some contracts require claims to be submitted within a few weeks for evaluation and determination by an architect or initial decision-maker. Most contracts set deadlines by which your client must be advised in writing of the existence of a claim. Some contracts even contain onerous requirements for the contents and format of your claim. Not only should you familiarize yourself with your contractual claim requirements, but since you’re likely starting new jobs now, this is a great time to review your contract and change the claim requirements to be more favorable for you.

Make sure you’re fully perfecting lien and bond claims by sending notices to owner and contractor, respectively, and timely recording liens and serving notices of non-payment. Familiarize yourself with the other requirements of the Construction Lien Law and bond statutes that may impact you, remembering that strict compliance is often required.

On the other side of the equation, if you’re an owner or general contractor, you need to be aware that your contractor or subcontractors should be perfecting their claims and you should therefore be proactive in assessing them and determining the manner in which they should be handled. You’re better off dealing with them early in the job, even if you decide to merely address them conceptually and save final resolution until the end of the job. The sooner you address them, the easier it is to maintain the proper chain of releases and the cleaner you can keep the payment requests and similar paperwork, so the claim can either be quickly resolved or more neatly packaged for resolution at the project’s end. The longer it takes to review and assess the claim, the messier and more uncertain the paperwork becomes, making it much harder to resolve when the time comes.

No matter which side of the fence you’re on, until job flow improves to the point where the pocketbooks open a little more, money issues on construction projects will continue to be closely scrutinized. Be aware, proactive, and prompt in your handling of these claims and the process of resolution will be cleaner, more efficient and less costly for everyone.