Construction Law: An Overview for Homeowners; Part 1 of 4 – Pre-Construction

This is a continuing article series regarding Construction Law: An Overview for Homeowners. These include four different topics, Pre-Construction (Part 1), During Construction (Part 2), Post-Construction (Part 3) and Construction Conclusion (Part 4). Each series of topics discuss informative summaries of what happens within each construction phase.

AN OVERVIEW FOR HOMEOWNERS

Most homeowners will conceive a construction project at some time in their lives, whether the construction of a new home or the remodeling of an existing home. Unfortunately, homeowners are frequently at a disadvantage because they are less familiar with the construction process and the laws that govern it that the contractors and architects with whom they deal, occasionally causing them to fall victim to unscrupulous or incompetent individuals. This article provided a brief overview of the issues faced by homeowners at each stage of a construction project, with hints that may help homeowners avoid common pitfalls.

 

PRE-CONSTRUCTION:

Many homeowners initiate a construction or home improvement project without the assistance of an attorney, but there are several key services for which the assistance of an attorney early on is essential. The nominal cost of involving legal counsel at the preconstruction stage may preserve rights that homeowners frequently lose when they allow architects and contractors to set the terms of their respective contracts.

 

Contract Review and Negotiations with Respect to Architects

 The first stage of any construction or home improvement project is its design, and only a licensed professional architect can offer design service. The architect may be retained directly by the homeowner or by the contractor on the owner’s behalf, although retaining an architect directly may be a homeowner’s best option to retain control over project design and avoid the possibility of an unscrupulous contractor illegally offering design services. The following are some concerns for homeowners during contract review and negotiation with respect to architects:

  • Licensing: As mentioned above, architects must be licensed by New York State. Do not rely on the architect’s representations; licensing status may be verified through the New York State Department of Education’s office of the Professions, which provided an online licensing verification application on its website. Visit http://www.op.nysed.gov/opsearches.htm for more details;
  • Scope of Services: Certainly, the architect will be designing the project, but the architect may assume other responsibilities which must be described in the contract. These include whether the architect will also oversee the construction process and certify payments. This is another reason why a homeowner may wish to have his or her own, disinterested architect, rather than an agent of a contractor.
  • Timing of Services: If the project needs to be completed within a specific time frame, it is important to specify a date of completion and whether time is of the essence; and
  • Dispute Resolution and Attorneys’ Fees: While no one wants a contract dispute, homeowners must always be prepared for one. The alternatives for dispute resolution are discussed in greater detail below under Enforcement of Contract Rights, and it is important to give thought to these options and incorporate them in the initial contract. Ideally, the contract should also provide that the homeowner is entitled to its reasonably attorney’s fees and cost if he or she must enforce the contract.

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Contract Review and Negotiations with Respect to Contractors

Once a construction or home improvement project has been designed, it is necessary to hire a contractor to carry out the work. Too often, homeowners find themselves the victims of unscrupulous or incompetent contractors, but few proactive steps may minimize the occurrence of such situations. The following are some concerns for homeowners during contract review and negotiation with respect to contractors:

  • Licensing: While New York State does not license home improvement contractors, New York City and the counties of Nassau and Suffolk require businesses or individuals be licensed in order to perform home improvement work, and many towns and cities independently incense home improvement contractors as well. Rather than relying on a contractor’s representations, licensing status should be verified with the county and city or town, many of which have online applications to search licensed individuals.
  • Payment Schedule: Too many homeowners have paid substantial amounts to contractors up front, only to have the contractor perform defective work or fail to perform altogether. Ideally, homeowners should pay a reasonable deposit, followed by progress payments at specific stages of completion.
  • Required Contract Terms: General Business Law establishes very specific requirements for home improvement contracts between homeowners and construction contractors with contract sums exceeding $500.00. Home improvement contracts must be in writing, signed by all parties, and include, among other things, the contractor’s license number, the project start and end dates of the project, a description of the work to be performed, and notices of the contractor’s lien law rights and the homeowner’s right to cancel the contract within three business days;
  • Provisions Regarding Payments of Subcontractors and Material Suppliers: Homeowners are occasionally left on the hook by contractors who accept the homeowner’s payments but do not pay third parties for their work; those parties may then seek payment from the homeowner. The contract should provide for the contractor to timely pay all subcontractors – and to indemnify the homeowners against demands from subcontractors and material suppliers;
  • Insurance: In the event that the contractor’s negligence creates a situation of liability, the contract must have liability insurance in palace, with the homeowner named as additional insured. Proof of insurance should be provided before work begins; and
  • Termination, Dispute Resolution and Attorneys’ Fees: It must be clear in the contract that the owner has the right to terminate the contractor in the event of deficient performance, and the contract should specify dispute resolution procedures and provide that the homeowner is entitled to its reasonable attorney’s fees and costs in the event he or she must enforce the contract.

 

Contract Review and Negotiations with Respect to House Lifters

In the wake of the massive flooding caused by Superstorm Sandy, increasing numbers of homeowners are turning to house lifting services to guard their property from damage in future storms. Unfortunately, some contractors hold themselves out as having greater expertise in house lifting than they actually do, and the resulting defective work can cause substantial injury to homeowners. The considerations for contract negotiations with house lifters are similar to those for home improvement contractors. In addition, the following may be concerns when retaining a house lifter:

  • Municipal Requirements: Many towns and cities are amending their building codes to provide standards for house elevations in response to flooding during recent hurricanes.

 

Insurance Claims

Frequently, construction projects arise after a catastrophic loss, such as a fire or floor, or which the homeowner is being reimbursed by an insurance company. Several special concerns arise in such situations, including the following:

  • Settlement Amount: It goes without saying that the insurance company makes more money if it pays less to homeowners, and it also goes without saying that homeowners get a better home if the insurance company pays more. Thus, negotiation of an optimum settlement amount, coordinating with the architect and contractor’s estimates of construction costs, is essential; and
  • Coordination with Lender: Most homeowners have a mortgage on their primary residence, meaning that insurance proceeds will be made payable to the lender as well as the homeowner and will probably be disbursed by the lender. The lender may also need to review and participate in contract negotiations.
John Caravella, Esq

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: [email protected] 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 who has experience with Long Island construction law for advice on a particular circumstance.

i Education Law §§ 730 I (defining practice of architecture to include ”design and construction of buildings”)       and 7302 (only licensed architect tq practice architecture).

ii General Business Law§ 770.

iii General Business Law § 771.

iv See. City of Elmira v. Larry Walter, Inc.. 76 N.Y.2d 912,564 N.E.2d 655 (1990).

v Barrett v. Jo hnson, 150 N.Y.S.2d 853 (App. Term 2d Dep’t 1956).

vi Remodeling Const. Servs. v. Minter, 78 A.D.3d 1677, 913 N.Y.S.2d 446 (4th Dep ‘ t 2010).

vii See, e.g., Labor Law § 240.

viii See, e.g., Ma rkham Gardens L.P. v. 511 9th LLC, 38 Misc . 3d 325, 331, 954 N.Y.S.2d 8 I l, 815 (Sup. Ct. Nassau Cty. 2012).

ix Lien Law§ 3.

x See, e.g.. B & F Bldg. Corp. v. Lieb!g. 76 N.Y.2d 689 (1990).

,; CPLR R. 5224.

xii  CPLR  § 5222.

,iii CPLR § 5231.

xiv CPLR § 5230.