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Articles Posted in Construction Law

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The Appellate Division of the Superior Court recently issued an opinion illustrating several important points regarding construction liens under the New Jersey Construction Lien Law and collection of payment under the New Jersey Prompt Payment Act.

Background

In that case, Prime Time Construction, LLC vs. Vimco, Incorporated, , Prime Time Construction, LLC was the general contractor on three construction projects inconstruction-machine-3412240__340-300x202 Paterson.  The properties were owned by three limited liability companies which were related to Prime Time.  Prime Time executed written subcontracts with Build Logistics, Inc. (“BL”) to do the masonry and excavation work on the projects.  BL executed a written contract with Vimco to provide materials for two of the projects.  Vimco provided the materials directly to BL; it had no contract with Prime Time or the owners.  Prime Time paid BL the full amount under the contract for all the work it performed and materials it provided.  However, BL abandoned the project and failed to pay Vimco.

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Construction Arbitration

Complex New Jersey construction law cases can be extremely expensive to litigate in court because of the amount of documents involved, the number of witnesses, and the need for experts.  Therefore, many construction contracts contain arbitration provisions.  The view is that arbitration can save money in the 352099_construction_3-002-300x225litigation process, but still provide an enforceable dispute resolution process.

However, it would not be accurate to call construction arbitration “cheap” or “inexpensive.”  Essentially, arbitration is a private litigation process with limited discovery and appeal rights.   By limiting discovery, particularly depositions, a significant source of expense is eliminated, and by limiting appeal rights, arbitration can provide more finality.  However, there is still discovery.   Documents are generally exchanged before the hearing, so there is still expense, but costs are saved because arbitration rarely involves depositions.  Likewise, while experts are not normally deposed, they are still required and must prepare pre-hearing reports about their expected testimony.  All of this entails significant expense.  In addition, while there are minimal filing fees and the services of courts are generally free, the use of an arbitration forum in construction law disputes entails significant fees, and in addition the parties have to pay the arbitrator for all his or her time.

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Hi.  My name is Rob Chewning.  I am one of the attorneys here at McLaughlin & Nardi, LLC, who practices in the field of construction law.   We receive a lot of questions about construction liens.

Constructions liens are a way in which to obtain a security interest in a property in which you might be owed money either as a contractors/subcontractor or supplier for a particular construction project.  It can be used as a way to compel payment from the contractor if they owe you money if you are a subcontractor, or if you are the general contractor and the owner owes you money, because that security interest will prevent the owner from selling that property without paying the construction lien that you might be able to obtain.

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A recent New Jersey construction law opinion by the Appellate Division in the case of CNJ Construction Corporation vs. Autobuilders General Contracting Services, Inc. illustrates just how important the precise language in a construction contracts is, and just how important itconstruction-9-10-300x225 is to have a well-written contract.

The Case of CNJ v. Autobuilders

Autobuilders General Contracting Services, Inc. was general contractor on a project for the construction of a Maserati dealership in Morris County.  Autobuilders entered into four subcontracts with CNJ Construction Corporation for demolition, concrete, steel and site work on the project.  Each of the subcontracts contained a provision that Autobuilders could terminate the contracts for cause if CNJ failed to perform, but had to give CNJ three days written notice prior to termination, during which time CNJ could cure the default and avoid termination.  The notices had to be delivered by certain specified means, which did not include regular mail.  No notice was required if CNJ abandoned the job.  The contract provided that if CNJ was terminated for cause, it would be liable for any increased cost incurred by Autobuilders for completing its work on the project with other subcontractors.

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Under New Jersey construction law, each county must establish a construction board of appeals. A construction board of appeals hears the applications of any “person who is aggrieved by any ruling, action, notice, order or decision of a local enforcing agency that enforces either the New Jersey Uniform Construction Code or the New Jersey Uniform Fire Code, including, without limitation, any refusal to grant an application or any failure or refusal to act upon an application, building-home-construction-contractor-blueprint-architecture-300x200but not including any order requiring the taking of emergency measures….”  This is an important tool under New Jersey construction law to challenge wrongful denials by local authorities of building and construction applications.

Most county construction boards of appeals have websites with information about their locations, hours and local procedures.  For example, the Passaic County Board of Construction Appeals can be found here.  The Essex County Board of Construction Appeals can be found here.  The Bergen County Board of Construction Appeals can be found here.  The Monmouth County Board of Construction Appeals can be found here.  The Morris County Board of Construction Appeals can be found here.

Appeals must be filed and received by the local county construction board of appeals within 15 days of receipt of the written notice of the action, ruling, notice or order which is to be appealed.  While the law states 15 days from receipt, we recommend that appeals be received by the construction board of appeals within 15 days from the date on the notice to avoid any later dispute over the date of receipt and the possible rejection of the appeal as untimely.

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Contractors’ Problems With Getting Paid

Our construction attorneys represent New Jersey contractors and subcontractors in construction litigation, arbitration and mediation.  One of the things we see over and over again, is that one of construction companies’ biggest worries is that they will perform all the work they pulaski-skyway-300x201agreed to and then not get paid, despite the fact that they met all the project’s specifications and did a great job.  It is a well-founded worry.  Companies or people who don’t want to pay devise many different schemes, sometimes claiming defects with the work, delay damages, failure to do proper paperwork, the excuses are as varied as is human imagination.  To be clear, sometimes these claims are legitimate, but sometimes they are not, and good contractors need to get paid to do the work and to stay in business.

Fortunately, however, New Jersey construction law provides remedies for these schemes.  Recently, the Appellate Division of the Superior Court of New Jersey issued a decision on these construction law remedies in the case of Petric & Associates, Inc. v. CCA Civil, Inc.  Although the decision was unpublished, it is important because it explores many of these remedies and lays out a roadmap for subcontractors’ remedies against unscrupulous contractors which don’t want to pay them, particularly some of the trickier issues under New Jersey’s Prompt Payment Act.

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New Home, Construction, For Sale, Buy
In October 2019, the Appellate Division of the Superior Court of New Jersey issued an opinion in the case of Becker v. Ollie Solcum & Son, Inc., examining the enforceability of an arbitration clause in a construction project.  The decision continued the trend in New Jersey of limiting enforcement of arbitration agreements, particularly where one party is a customer.

The case arose from a dispute over a residential construction project. Robert and Catherine Becker entered into a contract with Ollie Slocum & Son, Inc. (“Slocum”) to build a new home for them for $1,850,000.  Under the contract, the project was to be completed in no more than 52 weeks after excavation work started.  Substantial completion was actually about one and a half years late.  The Beckers sued Slocum in the Law Division of the Superior Court of New Jersey over the delay and alleged construction defects including water penetration and deterioration of the outdoor decking, siding, and finishing.

The contract, which contained a clause requiring arbitration of disputes, stated:

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Willful Violations Under The Fair Labor Standards Act

352099_construction_3-002-300x225The Federal Fair Labor Standards Act establishes rates of minimum wage and overtime pay which employers must pay to their employees.  Employees successfully suing their employers for violations of these requirements can recover their lost wages, and their employers will be required to pay their attorneys fees and litigation costs.  The Fair Labor Standards Act provides that willful violations of these requirements will result in double damages – ie., the employer will be required pay the employee twice the amount of wages or overtime it did not pay.  A willful violation also extends the statute of limitations for suing from two years to three.

Willfulness: The Question Facing the Third Circuit

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The Appellate Division of New Jersey’s Superior Court recently issued an important construction law decision examining the effect of New Jersey’s Consumer Fraud Act in cases also involving the breach of a construction contract or negligent construction.

By way of background, coverage under New Jersey’s Consumer Fraud Act was expressly extended to include contractors engaging in home improvements and home repair.  The New Jersey Department of Community Affairs issued regulations requiring specific items in contracts between home improvement contractors and homeowners.  Violation of these technical requirements are “per se” violations of the Consumer Fraud Act, entitling the homeowner to triple damages and reimbursement of their attorneys fees by the contractor.

Under these regulations, the  specific requirements which home improvement contracts must contain include the following.

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construction-machine-3412240__340-300x202The Appellate Division of New Jersey’s Superior Court recently reviewed the signature requirements for filing a construction lien claim prior to and after the 2011 amendments to New Jersey’s Construction Lien Law.  Our construction attorneys represent contractors in construction law matters including but not limited to filing and/or defending against construction lien claims under New Jersey’s Construction Lien Law, N.J.S.A. 2A:44a-1, et seq.

The Court’s review was in Diamond Beach, LLC v. March Associates, Inc., decided in December 2018.  The Court was required to review the signatory requirements “pre” and “post” Construction Lien Law amendments, and determine whether the amendments should retroactively apply to previously filed construction liens.  Prior to the 2011 Construction Lien Law amendments, N.J.S.A. 2A:44A-6 required that a lien claim be signed, acknowledged, and verified by “a partner or duly authorized officer” of the partnership or organization.  The 2011 Construction Lien Law amendments dropped the requirement that the lien claim be signed by a “duly authorized officer” and instead required that the lien claim comply with the N.J.S.A. 2A:44A-8 claim form which requires that a “officer/member” sign the form.

While the amendment may have lowered the filing requirements, the Court found that the 2011 changes to the signatory requirements do not retroactively apply to the lien at issue, which was filed prior to the 2011 amendments, because the amendments did not expressly state that they were retroactive.  Further, the Court found that the amendments were not “curative” because there was no evidence that they were made to “cure” a previous misinterpretation of the law.  Diamond Beach, LLC v. March Associates, Inc., 457 N.J. Super. 265, 277–78 (App. Div. 2018).

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