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Construction Law Blog

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Recent Developments in New York Lien Law

  
  
  
  

Mechanic's Lien Invalid Where No Contract Payments Due

     In the recent case of Wm. B. Morse Lumber Co. v. North Ponds Apartments, LLC,[1] a supplier’s mechanic’s lien was cast into doubt by a question of whether any funds were due to the contractor for the lien to attach. There, a supplier which had filed a mechanic’s lien asked the court to determine whether its lien had priority over a construction mortgage.

     On appeal, the Appellate Division of the Supreme Court, Fourth Department, agreed that the construction mortgage was improperly filed, but it declined to state that the mechanic’s lien was valid. The Lien Law restricts an owner’s liability on a mechanic’s lien to the amount that is due and owing on its contract, and where the supplier could not prove that there were such funds owing, but the holder of the construction mortgage could not prove that payment had been made in full at the time the mechanic’s lien was filed, the appellate court remanded the matter for trial to determine the truth of the allegations.

Supervision of Site After Work Stopped
Insufficient for Mechanic's Lien

     In a condominium-related case, 8th Avenue Recoveries Corp. v. 111 Stellar 8 Owner, LLC,[2] the issue was the validity of a mechanic’s lien. A contractor performed work on a construction project and submitted its final payment application on September 2, 2010 for work through March 26, 2010 and filed a notice of mechanic’s lien for its work on February 2, 2011 alleging that the last items of work had been performed on November 2, 2010.

     The lien was later assigned, and the assignee, in a lien foreclosure lawsuit, argued that an employee of the contractor had performed work within eight months prior to the lien’s filing by supervising the site to ensure that it was safe. This was relevant because the filing of the lien on February 2, 2011 for work completed on March 26, 2010 would have been invalid, being more than eight months after that work had been performed.

     Although the court acknowledged that the supervision of construction work can form the basis for a mechanic’s lien, it nonetheless found the lien in question to be invalid because it had been filed more than eight months after the last items of work had been provided. In doing so, it observed that the “supervision”, which amounted only to checks to secure the site, had been provided voluntarily and without charge, and that no permit for construction work was active after June of 2010. The court essentially distinguished mere supervision of an inactive construction site for security purposes, which is not lienable work, from supervision of construction activity, which is. For that reason, no lienable construction work had been performed after March of 2010, and the court vacated the lien as being filed too late.

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[1] 114 A.D.3d 1215, 981 N.Y.S.2d 492 (4th Dep’t 2014)
[2] 42 Misc. 3d 1212(A), 984 N.Y.S.2d 631 (Sup. Ct. Kings Co. 2014)

     Your comments and future article topic suggestions are invited in the field below.

John Caravella, construction attorney        The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

     This is a general information article and should not be construed as legal advice, legal opinion, or the formation of an attorney client relationship.  Readers are encouraged to seek counsel from a construction lawyer for specific advice.

The Perils & Pitfalls of Mechanics Lien Waivers

  
  
  
  

     For contractors and subcontractors in New York, mechanic’s lien waivers are a part of life. That’s because owners (and, often, their mortgage holders) want to keep their properties from becoming encumbered by a lien. This means that, as a contractor or subcontractor, you will undoubtedly be asked to execute a mechanic’s lien waiver at some time or another, often in conjunction with applying for progress payments. If you do so without paying attention to the language of the waiver form, however, you might lose more than you bargained for.

     In general, there are two types of mechanic’s lien waivers: those that are part of a contract, and those that are part of a document executed later during the progress of your work (i.e. with the receipt of progress payments). As a practical matter, you don’t need to worry about waiving your mechanic’s lien rights in a contract because such provisions are unenforceable under New York law. In High Tech Enterprises & Electrical Services of N.Y., Inc.,[1] a subcontractor sued a prime contractor to recover for breach of contract and to collect under a bond that had discharged its mechanic’s lien. The court dismissed the contractor’s counterclaim for attorneys’ fees, which was based on a clause of the subcontract which provided that the subcontractor would not file any lien and would reimburse the contractor for attorneys’ fees in the event that one was filed, stating that this clause was “unenforceable as against public policy.” New York Lien Law Section 34 is clear that “any contract, agreement or understanding whereby the right to file or enforce any [mechanic’s] lien is waived, shall be void as against public policy and unenforceable.”

     There is, however, an exception in the Lien Law: a contractor, subcontractor, material supplier, or laborer can be required to execute and deliver a waiver at the same time as, or after, payment is made.[2] For that reason, you can be required to waive and release your lien rights when payment is made to you. The problem in those cases becomes satisfying your owner without waiving more of your rights than you should. Here are some of my tips to avoid common pitfalls that can be buried in the language of mechanic’s lien waivers.

  1. Use your own waiver of mechanic’s lien form. Whenever possible, submit your own waiver of mechanic’s lien, which you can develop with your attorney’s advice to guard you against the other pitfalls I mention below. In this way, you can retain control over your waiver of lien rights and ensure that you keep your waiver narrow enough to preserve other claims.

  2. Be wary of waiving subsequent lien rights in connection with partial payments. In all fairness, when you release lien rights in connection with progress payments, you should only be releasing your right to lien for the work that you have already completed. However, some owners use forms which contain wording to the effect that you waive claims that you “now or hereafter may have” to a lien on the property. This language, unfortunately, can be construed to waive your right to all liens—even those lien rights which arise due to subsequent outstanding payments. This language should be avoided: another good reason to have and use your own waiver of mechanic’s lien form.

  3. Make the waiver conditional. In today’s economy, it is possible that your project owner could file for bankruptcy sometime after paying you. This becomes an issue, however, if your project owner files for bankruptcy within 90 days of your payment clearing, because, in that case, the payment might be looked upon as a “preference”—unfairly paying one creditor at the expense of others on the eve of a bankruptcy—and can be cancelled, requiring you to repay the money. In that case, you would have waived your right to lien, but you would also not have the money. A better route is to insist on language in your waiver of mechanic’s lien that makes your waiver conditional not only on the receipt of the money but on the owner not filing for bankruptcy within 90 days of funds clearing.

  4. The waiver should apply only to lien rights. Ideally, you want to appease your owner (and their mortgage holder) with a waiver of mechanic’s lien while preserving as broad rights as possible to other claims. For that reason, avoid signing a waiver of mechanic’s lien that waives your right to “any and all claims” or that releases the owner from “all liability”. Better waiver of mechanic’s lien language waives only rights to lien but preserves rights to other claims.

  5. The waiver should relate to payment, not performance. To explain, a payment waiver waives your lien rights in a certain dollar amount (in other words, the amount of the payment that you’re receiving at the time of the waiver), while a performance waiver relates to all work performed up to a certain date. The problem with a performance waiver is that it can be interpreted to waive your right to lien for retention on the progress payment, among other things. Your best bet for a waiver of mechanic’s lien is to acknowledge receipt of your current payment and waive and release your lien rights in an amount equal to that payment: look for a specific dollar amount, and be wary of lien waivers that refer instead to “all work up to” a certain date.

     When executing mechanic’s lien waivers, following these steps is essential. Although courts do sometimes find a way around lien waivers on behalf of contractors and subcontractors, the result is not guaranteed. Starting off on the right foot is the only way to take control of your lien rights and set yourself up for a better outcome. The language in legal documents can be tricky; if a project owner will not allow you to use the waiver of mechanic’s lien form that you’ve developed with an experienced attorney, having an attorney review the owner’s form for the clauses I discussed above is essential to protecting your rights.


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[1] 113 A.D.3d 546, 980 N.Y.S.2d 387 (1st Dep’t 2014).

[2] Id.

Your comments and future article topic suggestions are invited in the field below.

John Caravella, construction attorney The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

     This is a general information article and should not be construed as legal advice, legal opinion, or the formation of an attorney-client relationship.  Readers are encouraged to seek counsel from a construction lawyer for specific advice.


New Home Warranties in New York: What Homeowners & Contractors Need to Know

  
  
  
  

     The traditional maxim of “let the buyer beware” is softened in the context of Article 36-B of the General Business Law, which imposes a warranty in favor of the buyers of new homes and holds construction contractors to a standard of skilled workmanship. Contractors, meanwhile, must be aware of the circumstances in which the law implies such a warranty, which exists regardless of whether it is stated in a contract: the warranty that arises upon a sale of a new home underscores the need for contractors to act scrupulously—and work skillfully—in transactions with residential home buyers.

     Article 36-B imposes a “housing merchant implied warranty”. But when does this warranty apply? The law imposes the warranty on “the contract or agreement for the sale of a new home.”[1] A “new home” is defined as a single family house or a for-sale unit in a multi-unit residential structure (such as a condominium) which is five stories or less, but not a dwelling constructed to be leased, a mobile home, or a house or unit in which the builder has resided for more than three years.[2] Thus, the warranty has a broad application to residential construction projects. It must be noted, however, that the Appellate Division of New York State’s Supreme Court, in Sharpe v. Mann,[3] decided that the warranty does not apply to the construction of a custom home on vacant land which the customer already owns.

     The housing merchant implied warranty guarantees that a new home will be free of certain defects for a set period of time which varies as follows:

  • The home must be free of defects due to poor workmanship (including violations of state and local building codes and deviations from accepted building practices) for one year;[4]

  • The home must be free of defects in the installation of the plumbing, electrical, heating, cooling, and ventilation systems for two years;[5] and

  • The home must be free of physical damage to load-bearing portions of the home such as the foundation, walls, floors, and roof framing for six years.[6]

     The builder or seller can exclude items from the housing merchant implied warranty by replacing it with a written limited warranty, but the standard of workmanship must nonetheless meet or exceed relevant building codes and ensure that the home is safe, and the limited warranty cannot reduce the warranty period or require the homeowner to submit to arbitration.[7] For that reason, even a business-savvy contractor with the assistance of an attorney must, at a minimum, construct a residential property in a skillful, workman-like manner and conform to the building code. However, the General Business Law is clear that the warranty excludes defects in work or materials that were not performed or supplied by the builder or its subcontractors and employees and defective designs provided by the builder’s design professional.[8] Essentially, a home buyer cannot use the warranty to hold a contractor accountable for acts or omissions that are the fault of third parties that the contractor cannot control.

     Finally, the law establishes a procedure homeowners must follow to make a claim under the warranty:

  • First, the homeowner must provide the builder of the home with written notice, which must be received within thirty days of the expiration of the relevant warranty period.[9] At that point, the builder is entitled to inspect the home and have an opportunity to repair the defect.[10] The court in Finnegan v. Brooks Hill, LLC[11] established that failure to comply with this procedure is fatal to any lawsuit, requiring dismissal.    
  • Second, the homeowner must file a lawsuit to enforce the warranty within a set period of time. This period depends, like the timeframe for written notice, on the type of defect, and requires a homeowner to file suit within one year after the expiration of the applicable warranty period or within four years of the warranty coming into effect, whichever is later.[12] This basically means that a lawsuit for a breach of the warranty involving general defects due to poor workmanship or poor workmanship in the installation of the plumbing, electrical, heating, cooling, or ventilation systems will need to be filed within four years of the purchase of the home, and a lawsuit for a breach of the warranty involving defects to load-bearing portions of the home will need to be filed within seven years. On the other hand, if the builder makes repairs after being given notice of the defect, the lawsuit must be filed within one year after the last of the repairs are performed,[13] which could, theoretically, extend the limitations period even further.

     In the event that a court finds a builder in violation of the housing merchant implied warranty, the builder could be liable for the costs of repairing or replacing the defective items, up to the value of the house, or the amount by which the value of the home is reduced by the defect, if the court finds this to be more proper.[14]

     Article 36-B of the General Business Law substantially alters the rights and responsibilities to the parties in New York contracts for the construction of new homes. For homeowners, the housing merchant implied warranty means that they have a right to expect their homes to be constructed skillfully, safely, and in conformity with applicable building codes, but they must follow a strict procedure if they wish to enforce the warranty. For contractors, the housing merchant implied warranty establishes a basic level of skill which is required in the construction of new homes but codifies their right to notice and an opportunity to cure any alleged defects. In any event, the advice of an experienced attorney is recommended both when contracting for the sale of a new home and in the event of a dispute.

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[1] N.Y. Gen. Bus. Law § 777-a(1).

[2] N.Y. Gen. Bus. Law § 777(5).

[3] 34 A.D.3d 959, 960, 823 N.Y.S.2d 623, 624 (3rd Dep’t 2006).

[4] N.Y. Gen. Bus. Law §§ 777-a(1)(a) and 777(3).

[5] N.Y. Gen. Bus. Law § 777-a(1)(b).

[6] N.Y. Gen. Bus. Law §§ 777-a(1)(c) and 777(4)

[7] N.Y. Gen. Bus. Law § 777-b.

[8] N.Y. Gen. Bus. Law § 777-a(2).

[9] N.Y. Gen. Bus. Law § 777-a(4).

[10] Id.

[11] 38 A.D.3d 491, 833 N.Y.S.2d 107 (2nd Dep’t 2007).

[12] N.Y. Gen. Bus. Law § 777-a(4)(b).

[13] Id.

[14] Id.

Your comments and future article topic suggestions are invited in the field below.

John Caravella, construction attorney The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

     This is a general information article and should not be construed as legal advice, legal opinion, or formation of an attorney-client relationship.  Readers are encouraged to seek counsel from a construction lawyer for specific advice.

 

Top 5 Tips for New York Contractors

  
  
  
  

 

     There’s no way to foresee and prevent every possible dispute that might arise from a construction contract, but there are some actions that contractors can take at the contract formation stage, during the progress of the work, and before leaving a jobsite or filing a lawsuit that will improve their positions. From my experience with construction disputes, I have come up with the following list of tips that, if put into routine practice, may serve to prevent or limit contract damages.

     1.         Be proactive throughout the project. You know that your work is good, and you expect your project owner to be pleased, but some owners are impossible to please. It’s also not unheard of for an owner to complain about construction work as a pretext to avoid paying. For that reason, don’t wait for problems with an owner to arise. You should document the quality of your work in case the owner later chooses to complain to the department of consumer affairs or pursue a legal claim.   At a minimum, you should be photographing conditions of all areas of the site within the scope of your work to show (1) existing conditions at the time you begin work, (2) inspection phases, (3) substantial completion, and (4) final completion.

     2.      Develop a good contract. There’s nothing more proactive than starting off on the right foot from the moment you contract with your project owner, and you can exercise control in the event that the unforeseen happens by using quality contracts that are efficient and provide your business with the ability to enforce them if needed. When you develop provisions for enforcing your contract, some considerations are the venue of any dispute resolution procedures (which should ideally be in your home state and county), the type of dispute resolution that will be used (in this regard, you may need to consider the respective costs and speed of mediation, arbitration, and litigation to determine which is most advantageous to your business), and the specific damages that you will be able to collect (although the contract sum is a given in a lawsuit, you will not be entitled to attorneys’ fees, court fees, and collection costs unless you specifically provide for you to collect them as part of your contract).

     3.    File mechanic's liens.  In addition to written contracts which protect your legal interests, it is important to understand the pros, cons and costs involved in the filing and removal of mechanic's lien(s).  Mechanic's liens might be considered quick and easy to file, and, by placing a lien against your project owner’s property, you may motivate him or her to make payment. However, mechanic’s liens are governed by the requirements of New York Lien Law, which vary from contract law substantially.

            The Lien Law imposes a short deadline in which to file (four months for residential projects), strictly requires certain information to be present in your lien, and restricts lienable items, excluding, among other things, attorneys’ fees and costs of collection. The use of liens also necessitates that you incur fees for title searches. For all of these reasons, you are better off starting with a good contract, although the use of mechanic’s liens remains a viable supplement to your rights under the contract.

            On complex disputes legal counsel may be adviseable for assurances that the correct lien amount and other required information is coordinated, and reducing the exposure to the lien filer for claims from the project owner for willful exaggeration of lien or potential title claims to the property.  Liens found to be in an amount not pursuant to the terms of the Lien Law may be deemed a fraudulent lien or willfully exaggerated lien, and can subject the contractor to possible legal exposure to the owner's legal fees and costs incurred as a result of contractor's lien.

     4.      Confirm verbal modifications and changes. Although it is not uncommon for an owner or representative to make verbal changes to your contract work, there is always risk when you modify a written contract. For that reason, when verbal modifications or change to your contract has been authorized, follow up by composing and sending an email or letter confirming the verbal change and authorization to proceed as stated. Your goal is to create a record at the time of the change so that you are not faced with a your-word-against-theirs situation if trouble arises later.

     5.    Require your subcontractors to protect you from liability. Another issue you should be on guard against is the possibility of liability for your subcontractors’ acts and omissions. You can address this in your subcontract agreements by requiring your subcontractors to indemnify (repay) you for any liability that you might face because of the subcontractors’ errors. You should also incorporate an insurance provision into your subcontract agreements requiring your subcontractors to maintain a policy of commercial general liability insurance and to name your business as an additional insured.  Contractors may be able to greatly increase their coverage for subcontractor liability claims through properly tailored subcontract agreements as compared to using standard purchase orders.

     Although disputes may still arise on any given project, a contractor who has been proactive through the entire project through regular photography of its work throughout, going forward with work on contracts and/or subcontracts appropriate to the project scope, understanding of Lien Law rights, and mutual written record of any verbal modifications or approvals stands to be in a position vastly better to enforce its rights if made necessary.

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Your comments and future article topic suggestions are invited in the field below.

John Caravella, construction attorney The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

     This is a general information article and should not be construed as legal advice, legal opinion, or formation of an attorney-client relationship.  Readers are encouraged to seek counsel from a construction lawyer for specific advice.

Appellate Court Upholds Contractor Indemnification

  
  
  
  

 

Indemnification is an important legal concept which impacts nearly all construction contracts. It has several forms and types, but generally amounts to a contract requirement where one party party agrees to restore the other party from any losses. Where an anticipated loss should occur, the damaged party can expect reimbursement for the loss. The use of indemnification clauses in construction contracts, when properly tailored, can often provide protection to owners or general contractors from certain claims of subcontractors.

In a recent case, Guzman v. 170 West End Avenue Associates,[1] the Appellate Division of the Supreme Court, First Department, ruled that an indemnification clause in a construction contract was not void merely because it was written in a way that could have potentially required a construction contractor to indemnify an owner for the owner’s own negligence

As a matter of background, General Obligations Law § 5-321 makes any indemnification provision in a construction contract void if it requires a party to be indemnified for its own negligence. In Guzman, a construction worker was injured when 100 pounds of electrical cable fell on him from a height of 27 stories, and the worker brought suit against the property owner, who sought indemnification from its contractor. The contract provided that the contractor would indemnify “the Owner Parties” for “liability or claims for damages [or] injuries … arising … as the result of any event or occurrence which arises in connection with the Work.” The contract provided that this indemnification would be available “to the fullest extent permitted by law”.

The First Department observed that, while the contract language might appear to indemnify the project owner even for its own negligence, the language allowing indemnification “to the fullest extent permitted by law” acted as a “savings clause”, meaning that the contract clause could be enforced at least as much as the property owner was not being indemnified for its own negligence. As the court found no evidence that the property owner had been negligent, it held that the property owner was entitled to indemnification from its contractor.

[1] 115 A.D.3d 462, 981 N.Y.S.2d 678 (1st Dep’t 2014)

Your comments and future article topic suggestions are invited in the field below.

John Caravella, construction attorney The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

     This is a general information article and should not be construed as legal advice or a legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for advice.

Subcontractor's Arbitration Action Stayed by Supreme Court

  
  
  
  

The Supreme Court, New York County, recently clarified the impact of contractual language specifying litigation as the forum for resolution in the subcontract, and impact of New York's Prompt Payment, providing for arbitration of disputes where it applies.

Again discussing the Prompt Payment Act, but this time in the context of a subcontractor’s attempt to refer a contract dispute to binding arbitration as provided for by the Prompt Payment Act, the New York County Supreme Court recently reaffirmed the validity of alternative dispute resolution clauses in construction contracts, even where the Prompt Payment Act applies. In Turner Construction Co. v. J & A Concrete Corporation,[1] a construction contractor asked the court to permanently stay an arbitration which its subcontractor had initiated under the Prompt Payment Act.

In that case, the subcontract provided that disputes that could not be resolved through voluntary and non-binding Alternative Dispute Resolution (ADR) would be resolved at the contractor’s sole option “according to law”. The subcontract also provided that the subcontractor would waive its right to a trial by jury in the event that the contractor chose litigation as the means of dispute resolution.

Although the language “according to law” suggested that the Prompt Payment Act, which allows for arbitration, would apply, the court found that the language which mentioned the contractor electing to resolve the dispute in litigation provided context.

Applying rules of contract interpretation, the court found that allowing the subcontractor to unilaterally decide to refer the dispute to arbitration would rob the litigation provision of any effect. Additionally, the court observed that the Prompt Payment Act allows “the terms and conditions of a construction contract [to] supersede the provisions of [the Prompt Payment Act]” unless the Act otherwise provides so, so there was no reason to refuse to enforce the contract provision in question. The court found that the arbitration provisions of the Prompt Payment Act could be superseded by contract and stayed the arbitration.

[1] 44 Misc. 3d 217, 984 N.Y.S.2d 579 (Sup. Ct. N.Y. Co. 2014) 

Your comments and future article topic suggestions are invited in the field below.

John Caravella, construction attorney The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

     This is a general information article and should not be construed as legal advice or a legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for advice.

Violation of the New York Prompt Payment Act Does Not Bar Defenses

  
  
  
  

General Business Law Section 756 (and the sections that follow it), commonly known as the Prompt Payment Act, establish requirements for how soon a construction contractor or subcontractor must be paid and allow expedited arbitration in the event that prompt payment is not made.

In Donninger Construction, Inc. v. C.W. Brown, Inc.,[1] a subcontractor sued a general contractor for amounts which were claimed to be due under a construction contract. The subcontractor claimed that the contractor’s failure to issue a written disapproval of the subcontractor’s invoices, as required by the Prompt Payment Act, should bar the contractor from raising any defense in the lawsuit.

Reviewing the available remedies in the Prompt Payment Act, which include the imposition of interest and referral to arbitration, the court observed that “nothing in General Business Law § 756–b provides that a contractor's failure to timely disapprove or make payment on an invoice prevents the contractor from contesting, acts as a waiver of a contractor's ability to contest, or constitutes an admission that the contractor owes the invoiced sum.”

It allowed the contractor’s defenses and deducted for, among other things, back charges, incorrect invoicing, and improper performance of certain contract work, reducing the subcontractor’s damages from $216,000.00 to $18,479.00.

[1] 113 A.D.3d 724, 979 N.Y.S.2d 133 (2nd Dep’t 2014) 

Your comments and future article topic suggestions are invited in the field below.

John Caravella, construction attorney The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

     This is a general information article and should not be construed as legal advice or a legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for advice.

New Contractor Regulation Effective December 2014

  
  
  
  

 

Residential contractors in New York will soon be required to provide certain homeowners with information relating to the benefits and costs of having automatic fire sprinkler systems installed.

The New York Legislature, this past August, passed emendments to the General Business Law and the Executive Law. These amendments will require all contractors in New York constructing single or 2 family homes, fewer than three stories, to provide the owner with written materials, to be prepared by the Office of Fire Prevention and Control.

If the buyer chooses to have such a system installed, the builder is required to install the fire sprinkler system (at the owner’s expense). These changes appear in a new Article 35-F of the General Business Law, Sections 759 and 759-a, and a new Section 156, subdivision 21 of the Executive Law.

They take effect on December 3, 2014. Although the Office of Fire Prevention and Control has not yet released the materials you will need, you can check back at their Web site at http://www.dhses.ny.gov/ofpc/ for those materials to be released in advance of the effective date of the law. The full text of the law, Chapter 201 of the Laws of 2014, is available at http://public.leginfo.state.ny.us/frmload.cgi?MENU-40526013.

Your comments and future article topic suggestions are invited in the field below.

John Caravella, construction attorney The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

     This is a general information article and should not be construed as legal advice or a legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for advice.

John Caravella awarded 2014 Leadership in Law Award

  
  
  
  

 

UNIONDALE, NEW YORK (Nov. 8, 2014) – LIConstructionLaw.com attorney John Caravella was recently named 2014 Leadership in Law Award winner in its sole practitioner category as decided by nominating members of the Long Island business community.

This is the second time in two years John Caravella has received recognition from the Long Island business community, having previously been named to its “Ones to Watch in Long Island Law” listing in 2012.

Caravella was one of 32 attorneys across various practice areas selected this year by the Long Island business community for recognition in its Leadership in Law Award, which ‘is dedicated to those individuals whose leadership, both in the legal profession and in the community, have had a positive impact on Long Island.’

“To be recognized by the Long Island business community in this way is a high honor, and I will continue working to maintain and build upon this recognition,” said Caravella. “I am extremely proud to have earned the trust and confidence of my construction industry clientele, who are the Long Island business community.”

The Leadership in Law Awards will be presented Thursday November 13, 2014, at the Crest Hollow Country Club, Woodbury New York. For further information on attending call the Long Island Business News at 631-737-1700.

Your comments and future article topic suggestions are invited in the field below.

John Caravella, construction attorney The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516) 462-7051.

     This is a general information article and should not be construed as legal advice or legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for specific advice on their concern.

Punitive Damages Claims in New York Construction Contract Disputes

  
  
  
  

     One topic that came up in my practice recently was a contractor's potential exposure to liability for punitive damages under New York law. As the name suggests, punitive damages are awarded above and beyond their contract or property damages, 'where the wrong done was aggravated by circumstances of violence, oppression, malice, fraud, ... on the part of the defendant, and are intended to address the plaintiff's mental anguish or other aggravation, to punish the defendant for its behavior.' Black's Law Dictionary 390 (6th Ed. 1991).

     Such additional damages may be awarded by New York courts against a party as a form of civil punishment or to make an example as to public policy considerations for conduct that is found to be especially wrongful. In other words, if you fail to pay a subcontractor and the subcontractor sues you, the subcontractor will be entitled to the money owed. If your conduct meets certain criteria, you might also face liability for an additional award, above and beyond what is owed, just to punish you. The purpose of this type of damage award is to deter particularly bad conduct.

     Although you need to consult an attorney to determine whether you may be exposed to liability for punitive damages in any specific situation, some general rules appear in the court decisions. First, punitive damages are generally not available in the realm of a construction contract dispute. Although failing to perform contract requirements will cause liability, it usually will not be enough, in and of itself, to susbstantiate a claim for punitive damages (although the underlying contract obligation remains uneffected).

     Additional conduct must additionally occur which is deemed especially bad, such as committing fraud, misrepresentation, or some other type of wrong—what is called a “tort” in legal circles. New York’s highest court, the Court of Appeals, affirmed some time back that a party who only wants to get what he or she is owed under a contract does not have a tort claim, and, without such a claim, a party cannot obtain punitive damages.[1]

     With respect to the construction business, plaintiffs in several cases have attempted to obtain punitive damages against a contractor, only to fail because the contractor’s conduct was not wrongful enough to justify punitive damages. In Schneer v. Bellantoni, the court declined to award punitive damages against a contractor even though he was not licensed as the building code required,[2] and, in Heller v. Louis Provenzano, Inc., the court refused to award punitive damages against a contractor that had failed to obey safety regulations when building.[3] Without getting into how morally good or bad these failures are, it seems clear that they are, if anything, careless rather than specifically calculated to do harm, and so punitive damages were not available in those situations.

     Second, even if a party acts wrongfully, punitive damages are not available for misconduct that only affects a private individual. The Court of Appeals has said that a private party seeking punitive damages has to show not only that the person they are suing acted wrongfully “but also that such conduct was part of a pattern of similar conduct directed at the public generally.”[4] Conduct that is the regular practice of a party, as opposed to isolated conduct that was only directed at one individual, is needed for punitive damages to be available.[5] On this theme, at least one court has found that claims against a construction contractor for defective and incomplete work are enough to maintain a claim for punitive damages under the state’s consumer protection statute,[6] but the courts have held that this statute, too, requires a showing that the wrongful conduct was directed at the public rather than just one individual consumer.[7] In practice, this means that you would normally not be liable for punitive damages for one isolated mistake; however, the application of the state’s consumer protection statute to construction contract disputes suggests that conduct that is directed at consumers such as residential homeowners may be monitored by the courts more strictly.

     On the other hand, there are some circumstances when one isolated act can still affect the public enough to justify an award of punitive damages. To illustrate, in H. Novinson & Co., Inc. v. City of New York,[8] the City of New York was found to have grounds for seeking punitive damages against a contractor who had billed for work that had not been performed. In that instance, public moneys were expended because of the contractor’s false billing, and the tax base—and the public—were harmed. The lesson to take from cases like this is that New York contractors must be extra scrupulous when working on public improvements because the public has an interest in those projects, so the public interest angle of a claim for punitive damages may be easier to satisfy.

     Ultimately, in the punitive damages cases, the courts seems to have distinguished between careless or unintentional conduct, which does not support an award of punitive damages, and conduct which was calculated to cause harm and which was directed either at members of the public in general or at public funds. The rule remains, however, that private contract disputes are generally not a proper case to seek punitive damages.

     Your comments and future article topic suggestions are invited in the field below.

      John Caravella, construction attorneyThe author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (631) 608–1356 or (516) 462-7051.
     This is a general information article and should not be construed as legal advice or a legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for advice on a particular circumstance.

[1] New York Univ. v. Cont'l Ins. Co., 87 N.Y.2d 308, 316 (1995).

[2] 250 A.D.2d 666, 672 N.Y.S.2d 756 (2nd Dep’t 1998).

[3] 303 A.D.2d 20, 25, 756 N.Y.S.2d 26, 31 (1st Dep’t 2003).

[4] Rocanova v. Equitable Life Assur. Soc. of U.S., 83 N.Y.2d 603, 613 (1994).

[5] Walker v. Sheldon, 10 N.Y.2d 401, 406 (1961).

[6] Ma v. Peters Const. Grp., Inc., 30 Misc. 3d 1202(A), 958 N.Y.S.2d 646 (Sup. Ct. Queens Co. 2010).

[7] C=Holdings B.V. v. Asiarim Corp., 12 CIV. 928 RJS, 2013 WL 6987165 (S.D.N.Y. Dec. 16, 2013).

[8] 53 A.D.2d 831, 385 N.Y.S.2d 317, 318 (1st Dep’t 1976).
 

 

 


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