PROPERTY OWNERS
Construction Claims
My office represents property owners during all phases of the construction process, and if necessary, through litigation.
PRIOR TO HIRING A CONTRACTOR
For homeowners the best time to consult a construction law attorney is prior to entering into a Home Improvement Contract. Though most contractors are good people, some really know how to put the "con" in contractor. My office can work with you to ensure the construction contract is compliant with the Contractor's State Licensing Laws, and that the terms and conditions of the contract are fair. Services:
1. Contract review and analysis.
2. Background Search of Contractor, including licensing and workers compensation insurance status.
3. Building Permit search.
4. Referral to a Licensed Contractor Construction Manager to do a preconstruction plan and site review.
DURING CONSTRUCTION
If you have entered a contract and have begun to have problems with the contractor's performance. My office can assist in determining the best course of action, which may be either encouraging the contractor to honor the contract OR ending the relationship and getting a new contractor. However, sometimes the problems delaying performance are beyond the contractor's control and could be a faulty design or delay in products. Services:
1. Review and analysis of Contract Documents.
2. Correspondence with Contractor, and 3rd parties.
TERMINATING THE CONTRACT
If the relations with the contractor begin to break down, and you decide you want to terminate the contractor, it is important that you do not shoot yourself in the foot. Frequently it is determined that the party that ended the contract is at fault. It is common for homeowners to unilaterally terminate their contractor when they have decided enough is enough. However, your contract documents may require you to give the contractor Notice and an opportunity to Cure any defects before he/she is terminated. If you elected to have your contractor obtain a performance bond, the bond may be void if you terminate the contractor without Notice to both the contractor and Surety Company, provide opportunity to Cure, and tender to the Surety Company. Surety companies tend to not want to pay out on a claim, and if you give them any opportunity by a procedural misstep not to pay out then they won't.
The contract may also have a warranty clause. Generally, there is a one-year warranty for finished work per Civil Code Section 900. This one-year warranty helps keep construction cases out of Court so long as both parties comply with the warranty terms. If you find there is a defect with any of the contractor's work it is important that you contact the contractor in writing and give him/her an opportunity to repair the defect, or arguably you may have not only voided the warranty but also breached the contract, depending upon how the contract is written.
SETTLEMENT NEGOTIATIONS
Frequently my office is not contacted until after the parties have parted ways and are contemplating suing each other. The contract you signed with the contractor most likely provides information regarding dispute resolution. Typically, this will begin with Mediation and/or Private Arbitration. As over 90% of construction lawsuits settle prior to trial, and since litigation is expensive, it is usually to the parties' advantage to attempt mediation in good faith prior to filing a lawsuit.
One outlet for mediation, is for the homeowner to first contact the Contractors State Licensing Board. The CSLB may attempt a very informal type of mediation, that is free to the parties. This typically consists of correspondence with a CSLB representative.
More formal mediation may be attempted via JAMS or American Arbitration Association. Many counties also have their own mediation programs, such as the Mandell Gisnet Center in Monterey County, and Conflict Resolution Center in Santa Cruz County. The prices can vary greatly amongst the organizations and mediators but are worth attempting prior to filing a lawsuit.
If the contractor caused defects to your property, the damage may be covered by the contractor's Commercial General Liability Insurance policy. The insurance policy will only cover negligent acts by the contractor that caused harm to your person and property. Generally, the insurance company will not pay out for intentional harmful acts by the contractor, such as misappropriation of funds. Regardless, it is frequently beneficial to contact the insurance company, if known, and file an insurance claim prior to filing a lawsuit.
If the other party is unwilling to negotiate in good faith, then filing a lawsuit may be necessary.
LITIGATION
A construction lawsuit is typically based upon breach of written contract, but of course there are other common types of causes of action that may also apply: Breach of Warranty, Negligence, etc. For each cause of action, the plaintiff must have the evidence that supports that cause of action. For a breach of contract claim the plaintiff must prove there was a contract, the plaintiff did everything required under the contract, but the defendant did not, and the plaintiff suffered damages.
Filing a lawsuit should not be taken lightly, and the property owner should make sure if they do go to Court they do so with clean hands. In part, the owner should ask themself before filing a lawsuit:
- Am I the actual owner of the property?
- Do I have a copy of the signed contract?
- Did I pay for every invoice received?
- Did I offer to attempt mediation?
- Did I attempt to resolve the matter via filing a complaint against the contractor with the Contractors State License Board?
- If the amount is less than $25,000.00, did I attempt to seek a recovery from the contractor's Surety Bond?
- Has it been less than 4 years since the contractor breached the contract?
If you answered "yes" to those questions, then great! If you answered "no" to any of those questions, then resolution may take more time and/or be difficult. Whether you may prevail against the contractor may also depend on:
- Was the contractor licensed?
- Did the contractor have a workers compensation policy?
- Does the contract have a fixed price?
- Did the contractor provide signed change orders for any additional charges?
- Was there a building permit for the project?
- Did the contractor pass all inspections?
- Did the contractor have a valid excuse for any delays in the project completion?
- Did the contractor complete the project?
- Is the work free of defects?
- Is your property free of any Mechanics Liens filed by a subcontractor or supplier?
If the answer is "yes" to all those questions, then filing a lawsuit may not be a good idea. If the answer is "no" to a few of those questions, then you may be able to obtain a legal remedy if you have incurred damages.
Construction lawsuits are about compensatory damages. What compensates the homeowner financially for their loss? Typically, that is the cost of a replacement contract, less any payments remaining on the original contract. Sometimes if repairing the contractor’s work may result in economic waste, the more appropriate determination of damages is the diminished value of the property.
Consequential damages for expenses related to the breach of contract, may only be applied if those damages were foreseeable by the defendant prior to the breach, and certain to occur if the defendant breached. For example, if the homeowner is having to rent out another property while their house is being remodeled, and that was made known to the contractor, then the homeowner may be entitled to reimbursement of that rent.
Punitive damages generally do not apply to breach of contract lawsuits and are extremely rare in these types of cases. In addition, intentional harmful acts are usually not covered by a contractor's insurance policy. Pain and Suffering damages only apply if there was a physical injury that required medical treatment.
Reasonable attorney's fees may be awarded to the prevailing party, but generally only if there is an attorneys' fees clause in the contract, or an applicable statute allows for attorney's fees.
Counterclaims are frequently filed by defendants in construction lawsuits. Each party points the finger at each other saying they are the reason that the contract failed. Subjectively both parties frequently feel they are right, but what matters is the objective view of the Judge or Jury. If you are sued by your contractor and depending upon why your sued, it is possible that your insurance company may represent your defense at no cost to you. It is recommended that you immediately contact your insurance company if you receive a Summons and Complaint.
Typical course of litigation:
1. Draft and file the Summons and Complaint, which initiates the lawsuit.
2. Receive and Review the Defendant’s Answer, Demurrer, and/or Motion to Strike, and respond accordingly. If no response is timely received a Request for Default Judgment will be filed.
3. Written Discovery: Form Interrogatories, Special Interrogatories, Requests for Production of Documents, Requests for Admissions.
4. Respond to Defendant’s written discovery.
5. Subpoena Records from CSLB (Certificate of Records), Building Department, Workers Compensation carrier, subcontractors, etc.
6. Mediation, to see if matter can be settled without further litigation.
7. Deposition of Defendant, and witnesses, if matter not settled at Mediation.
8. Motion for Summary Judgment.
9. Trial.
10. post-trial motions and collections.
Typical Costs and Attorneys' Fees
My firm works on most cases at an hourly basis. The number of hours varies greatly depending upon your level of involvement, the opposing counsel’s level of involvement, the amount of discovery, and how eager the parties are to resolve the matter or proceed to trial. On average most of my cases resolve for less than $10,000.00 in fees if resolved prior to filing the lawsuit. Most cases that resolve after filing the lawsuit, but prior to trial average around $25,000.00 in attorney’s fees. If a matter proceeds to trial that amount will more than double.
My firm may take some matters on a contingency plus costs basis. Meaning no attorney’s fees are due unless the matter settles (33%) or you prevail at trial (40%). Client is responsible for costs such as: Court fees, E-filing fees, Expert witness fees, Deposition costs. Costs generally start out at $2,500.00 and increase if Expert witnesses and Depositions are necessary.
Please feel free to contact my office for a consultation.