It is an all-too-common situation in New York: homeowners hire a home improvement contractor only to find out, after a contract dispute arises, that the contractor was unlicensed in violation of local ordinances.
While court decisions in these disputes have generally gone in favor of homeowners, a body of case law suggests that the results are by no means so favorable to homeowners when arbitration awards to unlicensed home improvement contractors come up for review. In those cases, the deference of courts to the decisions of a construction litigation attorney creates tension with the public policy of protecting homeowners from unlicensed contractors.
Much construction litigation arises from disputes over Scaffold Law liability. Simply, the Scaffold Law makes certain contractors and project owners liable for injuries to workers on construction sites. The Scaffold Law has been criticized for the burdens it imposes on contractors and owners and for allowing workers to collect even if they have ignored safety rules.
Like the strings of a marionette puppet, after the completion of a New York construction project there are various legal theories that serve as ties between the builder and the owner.
Strings of a marionette puppet
For the builder, the sooner these lingering ties can be removed the less exposure they face for claims of defects.For the owners, the longer they are able to establish these connections the longer they may have legal recourse against the builder for defects, should that be necessary.
Article 36-B of the N.Y. General Business Law establishes minimum construction warranty standards, including that the home will meet or exceed the ‘specific standards of the applicable building code’. Although only available to ‘new’ homes, it further states that a housing merchant warranty shall provide:
defects due to a failure to have been constructed in a skillful manner for one year;
defects in the installation of the plumbing, electrical, heating, cooling and ventilation systems for two years; and
material defects coverage for six years from and after the warranty date
This is provided by statute as an ‘implied’ warranty, or where there is no other written or ‘express’ warranty agreement. Where such a construction warranty is provided, it will state what items are being covered, and the length of time for such coverage. Express warranties are specifically enforced by New York Courts, meaning that courts will enforce them to the letter and not expand protections beyond what is stated.
Warranty claims, however, are generally not an exclusive remedy available to the owner and are not the only time limitations at play.
A builder can still be subject to a breach of contract claim from an owner for items such as defective workmanship and materials for a period of six years, unless there are other provisions which specifically limit the owner’s time to bring legal action.
A contractual warranty period is not a limitation of time in which a part may bring suit for defects or breach of other contractual obligations. The warranty provision is only a period of time which a contractor has a duty to correct defects through supplemental performance. A warranty period does not shorten a statute of limitation or otherwise bar suit by an owner against the builder.
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John Caravella, Esq
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 (631) 608-1346.
This is a general information article and should not be construed as legal advice or a legal opinion. The content above has been edited for conciseness and additional relevant points are omitted for space constraints. Readers are encouraged to seek counsel from a construction lawyer for advice on a particular circumstance.
Given the large number and variety of documents required to administer a construction project today (plans, specifications, contracts, etc.), the likelihood of discrepancies arising between these different sources is almost unavoidable.
To minimize potential legal problems when planning construction, whether the project is a large commercial project, a new residence, or even a renovation to an existing structure, care must be taken to have essential terms included in the contract.
In a recent client conference I was asked, “So what is arbitration, anyhow?” In the context of a construction claim or in seeking to prevent a construction claim, there are several significant advantages that arbitration can provide in lieu of litigation. In today’s challenging business environment being aware of the various options available could make a significant impact on your business.
Changes are an unavoidable aspect of construction. Although thorough effort and coordination are required in preparing the original project contract, specifications and construction drawings, there will still be changes. This is why owners are provided the right to make changes to the work under a typical contract changes clause.
The minimum wage and overtime provisions under federal and New York law affect all employers, but contractors are further subject to an additional, unique wage scheme in the form of prevailing wages.
New York Labor Law provides that the wages paid to laborers, workmen, and mechanics on public works construction projects may not be less than “the prevailing rate for a day’s work in the same trade or occupation in the locality within the state where such public work . . . is to be situated, erected or used.”
Contractors in New York may face significant liabilities on any violations and are well advised to understand these requirements under New York law in the article available for download here prior to being cited with any violations.
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 at John@LIConstructionLaw.com or by telephone at (516) 462-7051.
Arbitration is an established alternative to court litigation in construction disputes. Challenging an unfavorable construction arbitration award is so difficult that homeowners may wish to give serious thought before submitting their disputes with contractors to arbitration. Courts give great deference to the decisions of arbitrators, refusing to review arbitration awards even for errors of law or fact.[1] There are few exceptions to this rule, and courts only invoke them in rare circumstances.
Under New York law, a construction arbitration award can be vacated for (1) corruption, fraud or misconduct in procuring the award, (2) partiality of the arbitrator, (3) the arbitrator exceeding his power, or (4) failure to follow the procedures of CPLR Article 75.[2] New York courts have also found that an arbitration award should be vacated if “it violates public policy, is irrational, or clearly exceeds a specifically enumerated limitation on the arbitrator’s power.”[3] To emphasize how rarely the courts vacate an arbitration award, only one case I reviewed in preparation for this article overturned the challenged arbitration award.
Construction Arbitration Case Study
In the Matter of Omega Contracting, Inc. v. Maropakis Contracting, Inc., the court found that an arbitrator had abused his discretion when he refused an adjournment, and one of the parties was consequently prevented from presenting crucial evidence.[4] In every other instance, the court refused to vacate the award regardless of its underlying merits.
A prime example of the injustice that may be worked by this standard is the all-too-common situation when a contractor employed by a homeowner turns out to be unlicensed. While strong public policy precludes an unlicensed home improvement contractor from collecting from homeowners, the deferential standard of judicial review of arbitration awards allows for judgments that arguably violate that public policy.
One case on point is the Matter of Hirsch Construction Corp. v. Anderson, in which a homeowner sought to vacate an arbitration award in favor of a contractor whose license had temporarily lapsed during construction.[5] The homeowner argued that the amount awarded by the arbitrator included payment for work performed when the contractor was unlicensed, but the court refused to delve into the facts of the case and confirmed the construction arbitration award.[6] Since the arbitration award did not say in so many words that the award included monies sought for the time during which the contractor was unlicensed, the court could not inquire further, regardless of any evidence that the homeowner might have presented to the court.
Home Construction Arbitration
Cases such as Hirsch caution that, for all its benefits, arbitration may not suit homeowners in all situations. Keeping in mind the difficulty of vacating an unfavorable award, special care and consultation with experienced construction law counsel are necessary before homeowners agree to arbitration and in selecting an arbitrator and bringing a case through arbitration.
[1]Matter of Matra Building Corp. v. Kucker, 2 A.D.2d 732, 734 (2d Dep’t 2003). [2] CPLR § 7511(b). [3]Matter of Sheriff Officers Assn., Inc. v. Nassau County, 113 A.D.3d 620, 621 (2d Dep’t 2014) (quoting Matter of Shenendehowa Cent. Sch. Dist. Bd. of Educ. [Civil Servs. Empls. Assn., Inc., Local 1000, AFSCME, AFL-CIO, Local 864] 20 N.Y.3d 1026, 1027 [2013]). [4] 160 A.D.2d 942, 943 (2d Dep’t 1990). [5] 180 A.D.2d 604, 604 (1st Dep’t 1992). [6]Id. at 604-05.
Few topics in construction law are more controversial than Labor Law Section 240, better known as the Scaffold Law, which imposes absolute liability on contractors, property owners, and their agents for elevation-related injuries to construction workers. The number of Scaffold Law cases has increased by 500% since 1990.[1]
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