Virginia Real Estate, Land Use & Construction Law

Update on Virginia Proposed Tax Reform: The Art of Punting

Heidi Meinzer — Wed, 10 Mar 2010 07:00:00 -0500

It looks like “Punt” is the name of the game with Virginia tax reform. In a January 5, 2010 blog post and a January 20, 2010 blog post, I discussed four tax reform proposals – all of which the General Assembly has managed to put off until a later date.

Apparently, HB 57 got the most traction. This was the bill proposing to prohibit any locality that had not already imposed a BPOL tax from doing so and prohibiting any increase in BPOL tax rates. The House passed that bill with a resounding 88 to 8 vote, but the Senate referred the bill to the Committee on Finance and continued a vote on the bill until 2011.

The other three votes never even made it to a vote by the House. HB 2 recommended a tax credit for small business taxpayers equal to 10% of eligible investments in personal property and real estate improvements. HB 47 proposed tax credits for companies with telecommuting employees. HB 110 would have allowed localities to decide whether to impose BPOL taxes on a taxpayer’s business’s gross receipts or on its Virginia taxable income. All three of these bills got stuck in the House Committee on Finance and were continued to 2011 by voice vote.

I have to admit that, of the four bills, I had the highest hopes for HB 110. I'm sorry to see the General Assembly has put off voting on what would have been a welcome amendment to the BPOL tax statute. Hopefully the General Assembly will agree in 2011!

Here is a piece of good news for Virginia taxpayers and Delegate Mark Cole, who sponsored both HB 57 and HB 110. Delegate Cole also sponsored HB 17, which proposed to reduce the limitation period for collection of state taxes from 20 years to 10 years. HB17 passed in both the House and the Senate, and was just approved by the Governor last week. This law will take effect on July 1, 2010.

Modular Homes: Wave of the Future, But Currently Risky

Timothy R. Hughes — Mon, 08 Mar 2010 06:05:55 -0500

Modular home construction presents significant potential improvements to home construction: significantly reduced construction time; less material waste; and reduced expense. If not handled appropriately in terms of contracts and risk, modular homes can translate to a gigantic headache for both the designers, contractors, and the owner.

Last Thursday, Lisa Rein of the Washington Post wrote an article on mansions turning to modular construction to reduce time and costs. The article caught my eye - while I have noticed this trend over the last 5 years or so, it was the first time I saw local mainstream press pick up on this. My friend Jamie Baker Roskie at the always interesting Land Use Prof Blog picked up on the article and connected the thread towards local codes discouraging use of shipping containers as building materials.

Adaptive reuse of discarded materials is one of the best ways to improve our economy's sustainability, and using shipping containers for modular construction is really an interesting approach. Don't believe shipping containers make good construction materials? Browse through a search of the articles at the highly informative Jetson Green blog that address containers and you will see some remarkable uses of containers, from emergency shelters for recovery in Haiti to very sweet, upscale small footprint breach structures.

Turning from containers to wood based modular construction, count me as a believer that we will see industry move towards more pre-fabricated assemblies to reduce cost and time of construction. Despite my views on the future, I have particiated in some pretty ugly cases involving modular construction. Based on the repetitive nature of these problems, I draw some conclusions about risks involving modular home construction that may help put the Washington Post's article into a legal context:

Prefabricated assemblies are sales of goods governed by Uniform Commercial Code not construction
Sales of goods involve different potential warranty theories and defenses than construction implied warranties
Sales of goods potentially have different statutes of limitations
While the install time may be shorter, manufacturing and delivery time may be a very different story
Most owner/contractor agreements involving modular construction are very weak on defining the remote manufacturer's role and responsibilities
Similarly, most owner/contractor agreements poorly define timing expectations until the modular unit is delivered and set on the building pad
Simple units seem to do pretty well; however, quality control seems to vary wildly amongst manufacturers and even within specific manufacturers depending on the specifics of a projects and the design complexity
As with other manufacturer's warranties, if there are problems, owners and contractors may struggly mightily to get manufacturers to respond appropriately to warranty complaints

This may be coming from the skewed perspective of seeing these projects in litigation, what do you think? What have you seen? Finally, how has the economic downturn improved or worsened working with modular manufacturers?

Images by Terretta

Holding the Zoning Administrator Accountable: The New Vested Rights Bill

Tad Lunger — Fri, 05 Mar 2010 07:00:00 -0500

Can you imagine going to your local zoning office, asking for a formal determination from the Zoning Administrator as to whether you are permitted to build a building on your property, receiving a formal written determination that you may do so legally, providing the written opinion to your bank who then provides the financing, then paying for and constructing the building, only to be notified thereafter by the locality that they have either changed their mind or have decided to rezone your property without your consent in the interim? You complain that you were told by the locality that you could build the building, but all you get is "Sorry, we've decided you can't do that after all."

Does that stick in your craw? It should, and local officials flopping or waffling over their prior decisions happens, to some degree or another, more frequently than some might think in localities all over our Commonwealth. Well, you can stop clearing your throat and loosening your tie because the General Assembly voted this past Monday (House 92 to 4, Senate 40 to 0) to make Zoning Administrators more accountable for the decisions they make - decisions on which private citizens must rely. HB 1250 passed, and it modifies Section 15.2-2307 of the Code of Virginia to provide that formal determinations made by Zoning Administrators, after the requisite appeal or modification period has run, shall be considered "significant affirmative government acts" (aka "SAGAs") if a private party has relied upon a SAGA to the requisite extent.

Our colleagues at Sands Anderson down in Richmond and Beth Wellington blogged earlier this week that allowing private citizens to rely on a formal opinion by the Zoning Administrator (that person holding the statutorily designated office to make such determinations), might somehow allow private property owners to rezone their property "in the dark," or gain some other advantage outside of the public eye. Yes, it is true that a Zoning Administrator has the sole authority to make a formal, binding determination of what a parcel of land's current zoning classification allows; however, that is in fact the total extent of that authority. A Zoning Administrator may not grant, through a formal determination, additional rights to use land beyond what is permitted by its current zoning classification.

The other concerns raised about the bill seem to relate to lack of public notice to other potentially interested parties that such a SAGA is being made (i.e. a Zoning Administrator may issue a formal determination to a property owner without giving other potentially interested parties any notice). What if you are a co-owner not reflected in any public record, a lender, or an adjoining property owner that would be affected detrimentally by an incorrect determination? You would have no way of knowing that a determination had been made and that the clock on your appeal window is ticking away. In fact, realistically, it is very unlikely you would know anything until your appeal period had lapsed (typically only 30 to 60 days, depending on the facts).

Some of the other statutorily listed SAGAs require some kind of legally advertised public review process; however, these are only those SAGAs that are the culmination of processes that allow property owners to do things beyond what they may do by-right, such as variances, special exceptions, etc. Other by-right SAGAs do not require public review, such as subdivision approvals, plans of development, etc. Clearly, a zoning determination may not permit something illegal, but who would know until it was too late? Are we heading toward publishing legal notices that a zoning determination has been made? How would this jibe with the "A Thing Decided Doctrine" relating to oral determinations made by Zoning Administrators?

Speaking at the Green Legal Matters Conference in New Orleans, April 26-28

Timothy R. Hughes — Thu, 04 Mar 2010 10:56:33 -0500

I am very pleased to report that I will be speaking on April 27, 2010 at the Green Legal Matters Conference in New Orleans, Louisiana. The event includes a large number of talented folks, including good friends of ours from twitter and blogs such as Christopher Hill, Shari Shapiro, and Scott Wolfe. A number of general counsel of very significant entities are scheduled to participate as well, including:

Susan Dorn, General Counsel USGBC
Roberta Lang, General Counsel, Whole Foods
Steve Harmon, Sr. Dir. Legal Services, Cisco
Elaine Reilly, Corporate Counsel, DuPont
Ted Banks, Former Chief Counsel, Kraft Foods
Kurt Stepaniak, Sr. VP, Law and Acquisitions, Kone, Inc.
Allyson Willoughby, General Counsel, Method Home

This looks to be a fantastic event. Last, but not least, the event takes place in the middle of New Orleans' Jazz Fest, a particular favorite of mine. More information regarding the event is available from the press release issued by the conference organizers. You can register for the event and see more information on schedule and attendees at the conference website.

HUD Announces New Office of Sustainable Housing and Communities

Tad Lunger — Wed, 03 Mar 2010 07:00:00 -0500

I don't know how many people out there tracked the events at the sustainability forum out in Portland a few weeks ago, but one of the notable take-aways from the event was that HUD Secretary Donovan used the event as an opportunity to announce that HUD was launching it's new Office of Sustainable Housing and Communities (OSHC) under Deputy Secretary Ron Sims. OSHC is funded in HUD's 2010 budget. This follows on the heels of the announcement to create the Inter-agency Partnership for Sustainable Communities between DOT, HUD and EPA last June.

The purpose of OSHC is to work with DOT, EPA and other federal agencies to ensure coordination between housing and other departments involved with sustainable community public policies that effect transportation, utility infrastructure, jobs and environmental planning. It will also "...strengthen HUD's Energy Efficient Mortgage product and other retrofit financing options - both for single family homes and multi-family rental housing - through a $50 million Energy Innovation Fund... and will also make available an Affordability Index that measures the costs of where a home is located in relation to jobs, schools and transportation." Additionally, $100 million will be available for integrated metropolitan regional planning initiatives per the Sustainable Communities Planning Grant Program, and HUD expects to award grants to between 10 and 15 regions around the country.

HUD and OSHC are also seeking input from stakeholders related to creation of regional plans for sustainable development, execution plans and programs, implementation incentives and entities eligible for funding. You can make recommendations via HUD Wiki, is pretty easy to do. Also, Builder Magazine interviewed OSHC's Director, Shelley Poticha, last week, where she shed some light on her thoughts on how the federal government fits into regional land use planning.

Stimulus Funds, Dripping not Pouring, in Virginia??

Timothy R. Hughes — Mon, 01 Mar 2010 06:06:32 -0500

The Commonwealth of Virginia has been slow to apply for, award and perform contracts funded by the federal American Recovery and Reinvestment Act (ARRA, better known as the Stimulus bill). As the construction industry has suffered through plummeting bidding numbers and 25% national unemployment, Virginia has lagged in even qualifying its projects for funding, let alone getting the money to work. The bad news is this has slowed down much needed funding. The good news is it looks like there is a lot more money coming down the pike into the economy in Virginia.

A recent report by Peter Bacque of the Richmond Times Dispatch indicated that federal legislation provided $694.5 million in federal transportation stimulus funding and that less than half that has even been awarded in contracts. Mr. Bacque indicates the money spent to date has produced 454.4 full time jobs. This contrasts with the reported job creation in Virginia for US Department of Transportation which sets jobs created or saved at 1,335.54. Thus, the confusion over job creation and funding that we have previously discussed continues. Based on the funding numbers, the USDOT funding is clearly not the only agency source of transportation funding for Virginia as there is a minimum of another $100 million in funding.

The more important story is that while half the projects may be under contract, most of the projects have not even begun yet. The Virginia website reporting on stimulus projects indicates that the total figure for both direct and indirect transportation funding administered through VDOT is $812 million. VDOT has its own separate site with an ARRA project tracking sheet updated on February 24, 2010. Call me a glutton for punishment, but I translated that project tracking sheet into a Microsoft Excel document available here. The tracking sheet describes the percentage complete and I did a calculation of spending of ARRA funds by percentage of project completion. If that percentage tracks with dollars actually spent, the VDOT site documents only roughly $66 million spent.

There is an additional $175 million in projects that are either managed by other agencies or do not include a percentage allocation from VDOT. The roughly $57 million allocated to the Fairfax County Parkway appears allocated and contracted, but the construction appears in its early phases. Another $52 million is associated with projects in Washington and Roanoke County which are described as having anticipated contracts in May and June 2010. Finally, it appears that VDOT got a late certification for ARRA funds totalling $70 million for I-66 Pavement Rehabilitation and Reconstruction which clearly has not started yet. Thus, it appears that little of the $175 million that was not classified by project completion percentage has been spent yet either. For those in Fairfax, $120 million in future funding is obviously a boon to our transportation woes as well.

It may be that my rough estimate of funds spent based on project completion is not accurate; however, I think we can still draw some reasonable conclusions regarding stimulus transportation funding in Virginia:

While Virginia was late to the table in applying and certifying its projects, it appears that it got its work done on deadline to qualify for the ARRA funding;
Many projects have not started yet;
The bulk of funding has not streamed into many projects yet, meaning the bulk of the stimulus funding impact may be felt over the next twelve months;
Based on timing of payment applications, payment flow contractors, subcontractors, suppliers and manufacturers will lag even further behind;
Based on the foregoing, we should view estimates of jobs created or saved by stimulus funding as pure estimates until the funds actually hit the street.

Image by Sarah Rifaat

The Line Between Maintenance and Modification: What Constitutes an "Improvement" under Virginia's Statute of Repose

Heidi Meinzer — Fri, 26 Feb 2010 08:00:00 -0500

In a recent Fairfax Circuit Court case, Travelers Indemnity Co. v. Simpson Unlimited, Inc., the court wrestled with the issue of what exactly constitutes an “improvement” under Virginia’s statute of repose found in Virginia Code Section 8.01-250.

Three Flint Hill Partnership, RLLP designated Simpson Unlimited Inc. to act as in independent contractor on a building construction project, requiring Simpson to repair and replace exterior building components, including removing and replacing terrace soffits on the eighth floor, as well as cleaning other building surfaces. Simpson submitted its application for final payment on December 4, 2002, and was paid for its work on December 16, 2002.

On December 20, 2004, there was a water leak on the eighth floor, causing damage to areas of the building occupied by tenants. Travelers Indemnity did not file suit until March 18, 2009, claiming that the water leak was related to work that Simpson performed under its contract with Three Flint.

Under these facts, Section 8.01-243 (B), the statute of limitations for property damage, gave Travelers Indemnity five years from December 20, 2004, the date the water leak damaged the building and the cause of action therefore accrued. Therefore, Travelers Indemnity’s claim would survive the statute of limitations.

Getting creative, Simpson instead filed a plea in bar based on the five-year statute of repose found in Section 8.01-250. Simpson argued that its work under the contract constituted an “improvement” allowing it to take advantage of the statute of repose, which began to run upon completion of the building project in 2002. Section 8.01-250 states:

No action to recover for any injury to property, real or person, or for bodily injury or wrongful death, arising out of the defective and unsafe condition of an improvement to real property, nor any action for contribution or indemnity for damages sustained as a result of such injury, shall be brought against any person performing or furnishing the design, planning, surveying, supervision of construction, or construction of such improvement to real property more than five years after the performance or furnishing of such services and construction….

Simpson claimed that the soffit replacement was an “improvement” because it enhanced the value of the building. Travelers Indemnity argued that the soffit replacement not an “improvement” because it was akin to a repair.

Judge Bellows analyzed dictionary definitions and opinions in other jurisdictions, ultimately agreeing with Travelers Indemnity and concluding that the soffit replacement was merely part of the normal upkeep and maintenance of the building rather than a modification or addition of the building, and therefore not an “improvement” that would allow Simpson to take advantage of the statute of repose.

Affirmed! The Fourth Circuit Upholds Judge Martin's Ruling in the Granby Tower Litigation

Heidi Meinzer — Wed, 24 Feb 2010 08:00:00 -0500

The Fourth Circuit has just issued their decision upholding the district court’s ruling in Universal Concrete Products Corporation v. Turner Construction Company, the topic of a December 2009 blog post on the Granby Tower litigation.

The parties agreed that the pay-when-paid clause in the Turner-Universal contract was unambiguous. However, just as it did at the trial court level, Universal argued that the subcontract incorporated the contract between Turner and the owner, creating an ambiguity about whether Turner would pay Universal before being paid by the owner. Universal relied on language that stated the costs the owner would reimburse Turner included “[p]ayments made by the Construction Manager to Subcontractors in accordance with the requirements of the subcontracts.” Just like Judge Martin, the Fourth Circuit concluded that clause related only to the reimbursement amount and not the timing of the payments.

Universal relied on cases from two other jurisdictions – Florida and Missouri – refusing to enforce very similar pay-if-paid clauses. The Fourth Circuit concluded that Virginia would simply not follow those jurisdictions, noting that an October 2009 City of Norfolk Circuit Court decision, W.O. Grubb Steel Erection, Inc. v. 515 Granby, LLC, mentioned the Florida and Missouri cases and opted not to follow their reasoning.

Once again, this case demonstrates that Virginia courts will invariably attempt to enforce the parties’ intent when faced with contractual disputes, even when that may lead to harsh results for one of the parties. Stay tuned on this case – the word is still out on whether the federal government will successfully condemn the site to expand the federal courthouse!

Urbanism: One Size Does Not Fit All

Timothy R. Hughes — Mon, 22 Feb 2010 07:53:36 -0500

Land use policy is the fulcrum in the tug of war between the property rights of individual owners and the regulatory interest of communities in establishing and enforcing a vision of their own community. Three separate conversation and analysis threads bring home the reality that the cookie cutter approach to development and even to the ordinances and interpretations that govern development are not the best approach. Indeed, inflexibility of approach and failing to encourage a more diverse and vibrant style of development are exactly the failings that the new schools of thought of "urbanism" are seeking to replace.

On the first topic, Chris Cheatham reported last week on some criticism of the Tyson's Corner proposal to allow density bonuses to developers for reaching green certification levels. A multi-family residential developer raised what I regard as legitimate questions about whether LEED should be the only standard used. If jurisdictions are turning to third party voluntary programs and means of certification, they should develop the means to evaluate and understand these tools and avoid getting handcuffed to a single green standard fits all approach. While the LEED standards have certainly evolved and continue to evolve, there are some who believe they still reflect their roots flowing primarily from the commercial design and construction environment.

The second thread was covered by my colleague Tad Lunger last week in reporting the results of the recent Arlington Retail Task Force. Much of Arlington's success has been pinned to the concept of mixed-use development, but many developers have expressed heartburn over filling first floor retail space in areas that do not appear to support such uses. Many retailers have expressed heartburn that this land use policy creates a glut of too much retail and too much competition. It appears that the task force has reached similar conclusions. This is another thread towards the same conclusion that a cookie cutter approach of requiring the same thing in the same way on every project does not achieve the intended results.

Against this backdrop, I ran across a brilliant presentation by James Howard Kunstler posted at Aribra entitled The Tragedy of Suburbia, a video from a TEDTalks conference. Mr. Kunstler may be somewhat of a lightning rod for the vehemence of his critiques of suburbia, but he makes a lot of great points regarding architecture, community, the challenges we face regarding fossil fuels, and how to build a sense of lasting community through urbanism. I know this may be a lot to ask, but trust me: watch this video. It is worth the 20 minutes for sure. It is thought provoking, and will honestly give you multiple gut busting laughs to boot if your sense of humor is anything like mine.

Pulling this all together, developing vibrant communities certainly requires a regulatory and legislative framework that permits local government to plan areas of density, areas of commercial and residential development, and to encourage the creation of appropriate infrastructure to support those efforts. That framework should not be reduced to a cookie cutter, one-size fits all approach. That type of approach is arguably what helped foster the suburban sprawl that most planners are seeking to undo now, most notably in Tyson's Corner locally. In encouraging a more transit oriented style of development, localities should be mindful of not not crippling the development of true urban commercial cores through excessive restrictive and repetitive requirements, but instead should like to foster organic growth a much as possible.

Image: Alice and Lorina Liddell on See-saw, from Lewis Carroll photobooks

How Not To Get Sued

Timothy R. Hughes — Fri, 19 Feb 2010 05:47:26 -0500

My friend Vickie Pynchon recently posted at Chris Hill's blog, Construction Law Musings, on "How to Get Sued". On the flip side, there are some simple pointers that all individuals and entities can follow that will dramatically reduce the chances of being sued. These tips apply across a spectrum of businesses and are certainly not limited to just construction, real estate and land use.

1. Be likable. It is a lot harder to sue a friend. If you maintain a friendly, warm relationship and the other side genuinely likes you, it is very difficult to cross the threshold of considering suit, let along filing one.

2. Failing that, at least be palatable and not obnoxious. On some level, likability and personality are somewhat pre-wired and we may not all be blessed with the so-called "winning personality". It is clearly within most of our ability to avoid being confrontational, impolite or nasty. Those traits make it real easy to turn a dispute personal and into trench litigation warfare.

3. Be honest and maintain credibility. Understand that if you get caught even in somewhat meaningless falsehoods, they come at the price of your credibility throughout the deal. Many lawsuits flow from the plaintiff losing trust in the honesty of their opponent.

4. Play nice. Taking extreme advantage during a deal may feel like a good move at the time, but it can create an atmosphere that calls for payback. Building a relationship of shared mutual success and teamwork can help smooth over differences of viewpoint during performance of contracts.

5. Be organized. Expensive, protracted and risky litigation looks a lot less attractive if your opponent looks like they have their act together and can or may win. Sending the message that you are well organized throughout a contract can help create that impression.

6. Document, document, document. This may be the most important substantive point, as opposed to personality driven point, of all. My career is littered with cases fraught with peril due to the failure of clients or opponents to document decisions, conversations, agreements, or notices. In the era of instantaneous e-mail transmission, there is no excuse for why you failed to drop a quick line confirming what turns out to be the pivotal facts once you get into litigation. Sending that timely confirmation is a great investment in avoiding litigation.

Image: Yale University Art Gallery

Urban Planning, the "Retail Everywhere" Doctrine and Mixed-Use Development

Tad Lunger — Wed, 17 Feb 2010 07:00:00 -0500

A recently completed study by Arlington's Retail Task Force outlined some interesting conclusions for ground floor retail, suggesting something contrary to the status quo of conventional urban planning thought . Traditionally, in Arlington County, as well as other urban jurisdictions, it has been a moot argument that good urban planning require ground floor space to be used almost solely for retail, or other similar uses that are thought to improve the pedestrian experience and serve the immediate vicinity's every-day needs. Quite frankly, ground floor retail is simply expected by jurisdictions for almost all urban projects.

The study was a holistic review of modern retail policies that would be of value to any urban locality, focusing not just on any one piece of the puzzle, but instead on economic development/jurisdictional competitiveness, urban planning and transit goals, availability of space to both national and local retail businesses, and the cold, hard numbers that are the result of current land use policies in Arlington County. The report concluded that "[r]egional retail destinations, including Tysons Corner, Old Town Alexandria and Georgetown are siphoning sales within a very mobile and competitive market. Whereas Arlington’s land use policies have successfully concentrated development along Metro corridors, our 'retail everywhere' policy - the requirement for first floor retail in nearly all new development - has inadvertently resulted in producing marginal retail spaces in problematic locations...." as well as an overcapacity of retail space. The report provides that "[s]uccessful retail cannot be located just anywhere and everywhere. Retail needs sufficient concentrations and massing to build and benefit from synergies and to attract a solid customer base. Spreading retail away from these concentrated nodes dilutes its ability to work cohesively."

These are a pretty dramatic conclusions, given that virtually all ground floor space of virtually every project, for the past decade or so, has been absolutely required to be retail space. Clearly, empty retail space that cannot be filled fails to provide any of its intended benefits, and requiring "retail everywhere" may very well have had the opposite of its intended effects. Empty retail space is not good planning, and is hardly engaging to the pedestrian. Clearly, nobody wins when space sits empty.

So what does the report suggest as solutions? Here are the recommendations in a nutshell: (i) focus retail uses in planned retail nodes that provide the convergence of transit/accessibility options (including both walk-ability, transit, and yes, convenient parking), retail density, and retail business mix necessary for sustainable retail success (ii) broaden the definition of "retail" in the Zoning Ordinance to allow not only classical retail uses, but also other uses that would achieve and/or compliment the same intended planning and economic results, such as studio and service uses, etc., (iii) allow additional flexibility for signage necessary to allow retail businesses to succeed, and (iv) allow more flexibility in first floor building design during the County's special exception processes so that tenant space is more readily and efficiently adaptable to attract prospective tenants.

Living in Architecture: Me and Eero Saarinen

Timothy R. Hughes — Tue, 16 Feb 2010 06:00:00 -0500

Award winning design does not necessarily translate to an effective, successful or liveable built environment. My interest and passion for interesting design is somewhat tempered by my having seen the consequences of projects not matching constructability and coordination with interesting design. As I have previously revealed obliquely in my post on How to Pick a Lawyer, I am a junky for interesting technology, construction and design. I still think that instead of art for arts sake, our building environment is our living environment and at its best, design and construction integrate these two potentially disparate arenas.

I have spent a career of construction litigation crossing boundaries in the industry. I cut my teeth defending design professionals, but I have since represented contractors and subcontractors. I have worked with owners and product manufacturers. Each camp has its own shorthand description of the failures of others. I have heard the constant grumblings of the inability of contractors to follow the plans and specifications (or at worst even read them). On the other side, I have heard contractors complain that architects draw pretty pictures but are clueless about how to put buildings together. I have seen examples where each criticism was fair and others where they were totally unwarranted.

Placing all this in the context of the end user, I have lived the first hand experience of a train wreck between architecture as high design versus and living in the end product. I attended Yale University and lived on campus in the Morse College dorm my sophmore year. When most people think Yale, they envision the gothic style architecture which dominates the campus and is ably represented by the imposing shot of Harkness Tower to the above. Morse College is a little different ... designed in a distinctly modern style by architect Eero Saarinen.

I was open on some level to Saarinen's style. I grew up with his Dulles Airport design in Northern Virginia and loved that project with its suggestion of a sweeping plane's wing in the terminal. Morse College was a little different. Try living in spaces with literally no right angles in the living areas (which can be seen easily here where there are floor plans for Stiles and Morse Colleges). As Wikipedia pithily states, "This resulted, notoriously, in two rooms which have eleven walls, none of which is long enough to put the bed against and still be able to open the door."

The lack of right angles was a physical impediment that ranged from a mere minor annoyance to a constant source of fury depending on how your room lottery worked out. Luckily, our group drew well and my cozy single was pretty workable. The more complex aspect of preparing to live in Morse College was based in social structure. For every other dorm, planning for living arrangements basically called for grouping off in pairs. Sets of best friends could group up into fours for lotteries. There might be an odd person out here or there, but the numerical structure basically fit typical social conventions.

Not so with Morse. The numerical structure of the rooms was as completely incongruous as the walls. Instead of pairs forming groups of four, most room bidding centered around bizarre troups of sevens matching up with other sevens. Every year, the politics around room assignments were a bloody nightmare of hurt feelings and betrayals. Reaching up the elder food chain (and while I started in 1984, I had friends who dated back to the 1970's), I was informed that this bitter history was constant and consistently repeated each year.

Now that I litigate construction and design issues on a constant basis, I often find myself relearning the experience of living architecture first hand. I am fascinated by the tension between celebrated design and practical performance. I love the aesthetic of Frank Lloyd Wright's Falling Water, but I will admit to a chuckle regarding the near constant structural, mold and water problems at Falling Water.

The best projects are those which marry both art and application. The most successful projects are those where the architects embody the master builder concept rather than the smug artiste, where the contractors are not only master craftsman but knowledgeable about design and helping with coordination. It is perhaps utopian to expect everyone to pull the oars in the same direction, but when there are shared values, relationships and mutual respect, it can produce tremendous results in the built environment.

(Credit or blame for encouraging this post should go to my pal Laurie Meisel, social media presence for Architectural Record and Green Source Magazine, amongst other endeavors)

Images:

Harkness Tower by wallyg

Eero Saarinen Dulles Airpor by XYZ+T

Morse College Renovation by Phil Handler

Frank Lloyd Wright's Falling Water by Figuura

Construction Quick News Takes

Timothy R. Hughes — Thu, 11 Feb 2010 06:00:00 -0500

There are a number of important construction law and economic developments that I want to pass along to our readers. Given timing and the plethora of topics to address, I wanted to share these developments in a more rapid fire format so these updates remained timely.

You should be on the lookout for more information on these topics in the future. We may expand on some of these threads in the future here as well:

The Supreme Court of Virginia will hear the appeal in AMEC Civil LLC v. VDOT. This case is a very important case involving what is required for notice of claims on construction projects; any person or entity involved in Virginia construction needs to keep an eye on this case as it could have a major impact on future Virginia construction litigation
As reported by our friend Chris Cheatham, the District of Columbia has attempted to fix their green building ordinance by no longer requiring a "performance bond" guaranteeing verification of green construction ... they will instead just require a "bond" guaranteeing verification of green construction. Count me as a skeptic that this editorial change is meaningful or will fix the problem of lack of available bonds in the markets to cover this risk.
The economy is sending some mixed messages. Overall unemployment dropped from 10.0% to 9.7% in January according to the latest Bureau of Labor Statistics report
Unfortunately, that improvement did not translate to the construction industry. ENR reports a significant continued rise in construction unemployment, jumping from 22.7% in December to 24.7% in January. The Bureau of Labor Statistics indicates that the construction sector lost 75,000 jobs in January bringing the total to 1.9 million since December 2007
Associated Builders and Contractors released their latest Construction Economic Update. The skinny: private non-residential construction spending rose 0.2% in December, but was down almost 18% year over year.

The continuing sluggish economy continues to place significant bidding pressure on the construction industry. I still stand by my post last October that this bidding pressure will translate to serious claims issues over the next couple years. Put on your seat belts, it will be a rocky ride here for a while.

Image by Ian Britton courtesy of Freefoto.com

Huge Snowfall Leads to Wave of Roof Collapses

Timothy R. Hughes — Mon, 08 Feb 2010 08:51:12 -0500

So, here in the Washington, DC area we are buried under a couple feet of snow. You know we have a lot of snow when the Lincoln Memorial steps have been transformed into a good tobogan run. Unfortunately, so much snow means a ton of dead load placed on roof structures. There are a number of roof collapses reported around the area. So far, the major blessing is it appears that none of these events have led to any serious personal injuries. You can definitely expect that these significant collapse events will trigger equally significant property damage claims, business interruption issues, and perhaps threaten the long-term viability of some businesses. These events include:

The roof of the Bailey's Crossroads Volunteer Fire Department collapsed
A hangar roof at Dulles Airport fully collapsed, reportedly destroying several business jets
The roof at a commercial strip store in Forestville, MD collapsed Saturday
The roof at St. John School in Maryland collapsed, destroying six classrooms, the computer lab, library, and offices
A storage warehouse in California, MD collapsed
The scariest has to be the collapse of the Prince William Ice Center which happened with the building occupied with skaters; owners were able to clear all the occupants out when they observed a ceiling beam start to twist

Here is a news report on the Baileys Crossroads roof collapse from WJLA:

With the threat of more snow potentially on the way, the region may not have seen the last of these problems. Building owners may face some significant hurdles to full recovery, including finding out the limitations of their insurance policies, facing problems with statutes of limitations and/or statutes of repose, and finding that responsible parties are casualties of the current economic crisis and thus are judgment proof. All of these factors point to a few very important lessons:

Know and understand your insurance coverage and its limitations before you have problems
When shopping for insurance, evaluate risk and consider not just shopping for the lowest price; you may find that going cheap on insurance ultimately costs you far more
Know and understand applicable statutes of limitations and statutes of repose prior to entering into design, construction, or property purchase agreements
Factor in the impacts of these time limitation issues when you asses the appropriate levels and types of insurance your purchase
Do your homework - conducting detailed inspections prior to purchase and properly evaluating the strength and credentials of your consultants and contractors is an investment of time and money, but it is worth it in the long run rather than face a catastrophic loss in the future

Image by vpickering

Va. Stormwater Regulations: Suspended or Killed?

Timothy R. Hughes — Thu, 04 Feb 2010 06:00:00 -0500

After much back and forth, the Soil and Water Conservation Board announced on January 14th that they voted to suspend their hotly debated changes to stormwater regulations to permit an additional 30-day comment period. The stage was formally suspended on January 26, 2010 which means that the status will be stuck in suspension until a new round of comments opens from February 15 through March 17.

We reported on the both the initial regulations and later changes to the proposed regulations which eased some of their impacts on the home building industry. The Home Builders Association of Virginia indicates that they mobilized significant response and opposition to even the later round of regulations.

In addition to the underlying technical tug-of-war, there are two interesting political subtexts which may sweep this issue off the table. First, in the intervening time since the regulations were first proposed, the Republican former Attorney General, Bob McDonnell, has won the Governor's race, Governor Tim Kaine has left office, and Governor McDonnell has been sworn in. The impact of the new Governor on these regulations is unknown at this point, but the suspension may be a significant indicator of future direction.

The import of state regulation may be swept away by federal intervention. The US Environmental Protection Agency has sought comments and then transmitted a second notice on specific stormwater management regulations. Chesapeake Bay run-off continues to generate active press and political reaction, so the states may ultimately be preempted by federal action in this arena.

Never Underestimate the Value of Face Time: Kersey v. PHH Mortgage Corporation

Heidi Meinzer — Wed, 03 Feb 2010 06:00:00 -0500

In 2002, Brenda Kersey received a $71,397 mortgage loan to purchase a home in Richmond, Virginia. The loan was a Federal Housing Administration (“FHA”) loan governed by FHA regulations. PHH Mortgage Corporation was the holder of the note in connection with Ms. Kersey’s loan.

Like so many unfortunate homeowners, Brenda Kersey fell behind on her mortgage payments. PHH appointed the Professional Foreclosure Corporation of Virginia (“PFC”) as substitute trustee on the Deed of Trust securing the mortgage and instructed PFC to foreclose on Ms. Kersey’s home. PFC scheduled a foreclosure sale without having or attempting to arrange a face-to-face meeting between PHH and Ms. Kersey.

The deed of trust allowed foreclosure only if the holder of the note complies with FHA regulations. One of those regulations is 24 C.F.R. Section 203.604 (b), which states in part:

The mortgagee must have a face-to-face interview with the mortgagor, or make a reasonable effort to arrange such a meeting, before three full monthly installments due on the mortgage are unpaid. If default occurs in a repayment plan arranged other than during a personal interview, the mortgagee must have a face-to-face meeting with the mortgagor, or make a reasonable attempt to arrange such a meeting within 30 days after such default and at least 30 days before foreclosure is commenced….

Based on PFC’s failure to schedule a face-to-face interview before initiating foreclosure, Ms. Kersey filed a complaint in the Circuit Court for Richmond City seeking a declaratory judgment that PHH failed to comply with the deed of trust sufficiently to go forward with the foreclosure. PHH removed the matter to the United States District Court for the Eastern District of Virginia, Richmond Division, and moved to dismiss the action under Rule 12(b)(6) for failure to state a claim.

In a memorandum opinion in Kersey v. PHH Mortgage Corporation, Judge Williams refused to dismiss Ms. Kersey’s complaint, concluding that there was a “distinct and ripe controversy” as to whether PHH owed Ms. Kersey a face-to-face interview prior to foreclosing on her home.

PHH’s first argued that Section 203.604 and the National Housing Act (“NHA”) do not grant a plaintiff a private cause of action. Judge Williams dispensed with this argument by concluding that Ms. Kersey was not bringing a claim under the NHA and Section 203.604, but rather was seeking a declaratory judgment based on a state law breach of contract claim. Interestingly, Judge Williams hinted to PHH that perhaps it could assert that Ms. Kersey’s failure to make timely payments constituted the first material breach between the parties that would have relieved PHH from the obligatory face-to-face meeting.

PHH’s second argument was that it fell under an exception found in Section 203.604 (c), that a

face-to-face meeting is not required … if [t]he mortgaged property is not within 200 miles of the mortgagee, its servicer, or a branch office of either.

PHH has loan origination branches, but no servicing branches, within 200 miles of Ms. Kersey’s property, and pointed to an interpretation of this exception on HUD’s website that Section 203.604 relates only to mortgagors living within a 200-mile radius of a servicing office. Judge Williams refused to be swayed by the interpretation on HUD’s website, finding the exception in Section 203.604 (c) to be unambiguous. According to Judge Williams, a lender could escape the face-to-face meeting requirement only if the following are not located within 200 miles of the mortgaged property:

the mortgagee;
the mortgagee’s mortgage servicer;
a branch office of the mortgagee;
a branch office of the mortgagee’s mortgage servicer.

Judge Williams found that PHH could not therefore escape its face-to-face obligation when Ms. Kersey’s complaint alleged that PHH maintains “branch offices” within 200 miles of the mortgaged property.

It will be interesting to see if PHH ultimately prevails by alleging that Ms. Kersey committed the first material breach when she fell behind on her payments. However, stepping back from the legal analysis for a moment, maybe there is a point to these face-to-face meetings, even if they are time consuming. In the right situation, such a meeting could enable lenders and borrowers to come up with a mutual plan to avoid painful and costly foreclosure proceedings.

Local Contractor Shells Out Cash To Settle Wage Class Action Suit

Timothy R. Hughes — Mon, 01 Feb 2010 06:00:00 -0500

Rockville based contractor Hann & Hann will pay $600,000 plus the plaintffs' legal fees to settle a wage and overtime based class action suit. As reported in the Washington Post by Rubin Castaneda on January 30, 2010, Hann & Hann agreed to pay overtime plus 50% for every employee working with the company not paid overtime between May 8, 2006 and May 8 2008.

There are a couple important subtexts to this case and settlement. First, reports describe the 200 plus employees and former employees as almost all Spanish speaking immigrants. This naturally raises questions not only of immigration status, but also of whether the contractor was perceived as taking advantage of employees less able to defend themselves. In this case, the employees not only had the Immigrant and Refugee Rights Project at the Washington Lawyers' Committee for Civil Rights and Urban Affairs on the case, but also were represented by Arnold and Porter pro bono.

Second, claims by employees for unpaid overtime and wages have been a hot topic over the last several years (some more detailed discussion touching on this is available here at Daniel Schwartz' excellent blog). In many ways, the issue of classification of exempt and non-exempt employees which dictates whether overtime is required dovetails quite closely with distinctions between independent contractors and employees which we recently discussed. Back wages, penalties and attorneys' fee claims are a big risk in this arena, as is the underlying threat of more involved scrutiny as the weight of the government comes to bear. Contractors should:

Take employee classifications seriously
Understand that mistakes in classifications can translate to serious damages
The short term benefit of cutting corners can come at a cost that buries your company
As a result, handle classifications conservatively and pay out overtime accordingly

Energy Efficiency, Green Retrofits and ROI: The Empire State Building

Timothy R. Hughes — Fri, 29 Jan 2010 06:00:00 -0500

The Empire State Building retrofit project is reaching for rarefied air: improved energy efficiency, reduced carbon emissions, and rapid and healthy return on investment. Recent case study documentation for the project suggests this project will hit the ball out of the bark on all fronts. Highlights include:

An estimated 38% energy savings compared to high level class A office space

A 3.1 year payback on the incremental cost increase to fund proposed energy efficiency measures

An 9.2% estimated tenant space savings when increased project costs are weighed against the net present value of energy savings to tenant space fit-outs
Reduction of well over 100,000 tons of CO2 emissions over 15 years

This project concept directly touches on the concepts of energy efficiency, performance and return on investment that formed the backbone of the recent Trends in Building Green seminar we discussed here. The Empire State Building project also serves as not only a model, but a potential market game changer and advances many of our predictions for this next building cycle.

On a personal note, I spend a lot of work time looking "green" issues from a contracts, client or risk management perspective. I spent a lot of personal time thinking about sustainability for its own sake in the context of raising a family and working towards a sustainable future economically and environmentally. I like environmental sustainability for its own sake, but I love when creative and motivated people fuse the moral high ground with economic success.

Image by Amitmogha

What Is Our Local Delegation Up To This Session?

Tad Lunger — Wed, 27 Jan 2010 08:30:00 -0500

With well over two thousand bills filed for this session, I was curious to see what our local urban delegates and senators have chief-patroned this year. So here's what they're up to:

Delegate Brink has patroned HB 1260, which proposes that the Uniform Statewide Building Code should also apply to buildings or structures built on state-owned property and that the Department of General Services would act as the building official for all such buildings. He has also patroned HB 1314 which contemplates providing financial incentives equal to twenty percent of delinquent taxes collected by tax collectors, chargeable to the taxpayer in addition to the amount of the delinquent taxes.

Senator Whipple has also patroned two bills. SB 665 would clarify the authority of the Common Interest Community Board relating to disciplinary actions and fact finding procedures. SB 681 suggests delaying the effective date for the stormwater management regulations passed last session for a year.

Adam Ebbin, via HB 1222, proposes that electric utilities establish a fund to allow voluntary contributions by customers so that the SCC can use the money to incentivize projects that incorporate photovoltaic devices, solar water heating devices, or solar space heating. He also thinks that HOT lane shoulder widths should be wide enough to handle transit vehicles, HOV service does not deteriorate, and ingress and egress from local connector streets are adequately addressed (see HB 1223). Delegate Ebbin also thinks vehicles used in abductions should be forfeited (HB 1113) and that your income tax filings should be due on April 15 to sync up with the federal deadline, rather than May 1st (HB 1278).

Delegate Englin wants online political advertisements to be subject to disclosure requirements regardless of space to do so (HB 1261) and wants to see automatic acceptance of service members to Virginia colleges who were in the top 10% of their graduating class (HB 274).

Senator Ticer wants to amend the charter of the City of Alexandria so that the board of review of real estate assessment is composed of nine members rather than five members, with five members appointed by the circuit court and four members appointed by city council (SB 572) and to allow for TDRs in zoning ordinances in localities with the urban county executive form of government (SB 636). She also would like to see a license plate for recycling advocates (SB 709) and some careless driving offense proposals (SB 566). She also proposes relaxing campaign contribution reporting requirements for local officials (SB 723).

Delegate Hope thinks that the Commonwealth Transportation Board ought to give first priority to funding transit operating costs rather than transit capital projects (HB 421), wants to prohibit smoking in all public buildings (except certain portions of corrections facilities) (HB 1351), and most notably, is chief patron of the Green Public Buildings Act (joined by Brink and Ebbin) (HB 1264), which would require all new construction public buildings over 5,000 SF (or renovations amounting to over 50% of the value of the building) to achieve LEED Silver certification or Green Globes two globe standards, achieve energy savings that exceed ASHRAE 90.1-2004 standards by at least 15 percent for new construction and 10 percent for major renovation, and to provide water use savings of at least 25 percent over the baseline standard established in the federal Energy Policy Act of 1992.

Trends in Building Green - Update

Timothy R. Hughes — Mon, 25 Jan 2010 06:45:17 -0500

The Trends in Building Green panel last Thursday morning was a great success. There were a couple interesting take-aways from the panel's materials and presentations:

Smart property owners need to be taking energy savings seriously; Tommy Russo, Chief Technology Officer of Akridge, described their highly detailed efforts to analyze and implement projects with a reasonable return of investment horizon;
Per Tom Mawson, Executive Director of the USGBC National Capital Region Chapter, the "USGBC is all about market transformation"
Bobby Christian, CEO of Green 20 Now, LLC, and Mike Scelzi, President of Net Metering, Inc. demonstrated just how far we have come with access to energy metering information, and its implications on operations and cost savings
Chris Pyke, Director of Research for USGBC, provided a wonderful overview of where LEED has been and where it may be going, in particular in the context of on-going performance of buildings and where those measures may not match design. For Chris and USGBC, the question primary question: "Is there a commitment to demonstrated performance ... which is leadership" with regards to energy efficiency and sustainability.
I covered some of the press crititiques of LEED, what the actual projects demonstrated, and finally where the performance debate may create significant liability issues in the future

My presentation is here for those who are interested. Mike Scelzi was also kind to provide his presntation as well. Please feel free to contact me if you have any questions or are interested in tracking down some of the participants or issues we covered.