Womble Carlyle Construction Industry Blog

Following the construction industry and related legal topics in the United States.

Tuesday, May 30, 2006

Immigration Reform Redux

Early Thursday evening the Senate approved a sweeping immigration reform bill that would create a guest-worker program popular among the American business community, enhance border security, and provide a legal way for undocumented workers to eventually gain U.S. citizenship.

The Senate version of the bill allows up to 200,000 foreign workers to obtain guest-worker permits each year with the option to apply for permanent U.S. residence after four years. The bill also beefs up workplace enforcement, requiring use of an employment verification system and levying up to a $20,000 fine for each undocumented worker hired by an employer.

The Senate bill is in sharp contrast to the heavier-handed approach of the House bill, which does not provide for a guest-worker program, requires a similar employment verification system and imposes fines of up to $40,000 for each undocumented worker hired by an employer.

The two sides will now enter a conference to reconcile differences between the bills.

For a discussion of the Senate bill, see here and here. For a discussion of the impact of immigration reform on construction, see my previous post here.

Thursday, May 25, 2006

Building Green at Home

To continue the theme of Karen Carey's post last week on building "green" in China, the Winston-Salem Journal today reports that Family Services' new headquarters, a $4 million, 20,000 square foot facility in the Southeast Gateway development (located between downtown Winston and Old Salem) will be the first building in Forsyth County to be certified "green" by the U.S. Green Building Council.

What make's "green" buildings special? They "are constructed using materials and building practices that are renewable, don't harm the environment and use less energy than traditional construction methods."

For the full story, see the Winston-Salem Journal.

Tuesday, May 23, 2006

Tackling the Broadband challenge

Do the phrases broadband, fiber optics, hybrid fiber coaxial, and DSL make you cross-eyed? Not to worry, for builder/developers who are interested in meeting the sophisticated needs of tenants or residents, complying with an ever-changing regulatory framework, and also maximizing returns on investment, experts exist who can help you accomplish all of these goals. One of the greatest challenges, says Womble Partner Greg P. Skall is developing "a sustainable technology offering bandwidth rates sufficient to meet not just today's needs - but tomorrow's as well." This is known as "the broadband challenge." For more information on this timely subject, access this link for a brief and cogent analysis that applies to anyone in the single or multi-family housing business.

Thursday, May 18, 2006

Building Green in China

In this week's ENR, we read that despite the hot construction market in China, foreign contractors still have a hard time gaining access -- few are given Class A certificates or the superclass licenses needed to build large scale projects in the country. But in China Business, a Wall Street Journal Briefing published May 11, we read that going green can make these hurdles disappear. Local authorities evidently went out of their way to help speed the approval processes along for one U.S. company that built a green factory in China. To read more about green construction in the United States, go to the U.S. Green Building Council's website.

Wednesday, May 17, 2006

Enforceability of "Pay-When-Paid" Clauses

What are the status of "Pay-if" and "-when" clauses in North Carolina? Clearly the traditional "Pay-if-paid" clause, which attempts to shift the credit risk of the owner to subcontractors, is out. But what about the traditional "pay-when-paid" clause, which only provides for timing of payment (or cash flow terms)? Some commentators appear to speak of the "pay-when-paid" clause as if it were one in the same as the "pay-if-paid" clause.

Many, if not most, jurisdictions clearly make a distinction. A careful reading of Section 22C-2 of the North Carolina General Statutes would seem to limit it to the traditional "pay-if-paid" situation. It would seem that contractors should still be able to negotiate a reasonable term for the time for payment with its subcontractors, to the extent it has not yet received payment from the Owner. However, once payment is received by the contractor from the owner, Section 22C-3 requires prompt payment within 7 days of such receipt. Note should be made of these provisions inapplicability to certain residential projects. See N.C. Gen. Stat. Section 22C-6.

Tuesday, May 16, 2006

The Project Management Technology Dilemma

Debra K. Rubin is quite accurate when she discusses the dilemmas Construction managers face with new Technology. Have you seen the new building information modeling (BIM) and 4D Design technology now available? It can be phenomenal. But care must be taken on what you get and what you may be getting into. While the technology allows for greater design, coordination and implementation participation, all parties involved must give careful attention to who owns what part of the design and process. Rights of ownership and potential liability for errors and omissions must be thoughtfully addressed up front to avoid unintended consequences.

Friday, May 12, 2006

Update: Georgia General Assembly Bills

Georgia Governor Sonny Perdue has signed into law several bills affecting construction and development in Georgia:

  • Mechanic's and Materialmen's liens on easement and right-of-way work. SB 530 expanded the subject matter of a lien to include the value of work done and materials furnished in any easement or public right of way adjoining the lien real estate to the extent that the work done in the adjacent easement or right of way "is for the benefit of [the] real estate and is within the scope of the owner's contract for improvements to [the property liened]." Statute affected: OCGA 44-14-361(b).

  • Eminent Domain. In final form, HB 1313 redefined "blighted property," restricting its use as a ground for condemnation to property that is either: (a) a threat to health or safety; or (b) criminally misused on a repeated basis. Esthetics cannot be considered in determining blight. For Georgia governments to exercise eminent domain, the intended "public use" must be for the "possession, occupation, or use of the land by the general public, [state entities, and certain public utilities.]"

  • Private plan review and inspections. HB 1385 allows owners to hire "private professional providers" to review plans for permitting and to inspect work under construction - where the public authority notifies the owner that is cannot review the submitted plans within 30 days. Owners must pay both the normal plan review fees to the governmental agency and the fees required by the private professional provider. Government may still exercise its power to stop work where codes and standards are not being met. Certain projects (like airports, hospitals, jails, nursing homes, and projects potentially affecting homeland security) are ineligible for private review. Reviewers may not have any financial interest in the project - and the same professional who designed the project cannot provide the review and inspection services. Professional providers are accountable professionally for their services, and the same standard of care applies to those services as would apply to other professional services rendered. Professionals must provide professional liability insurance coverage not less than $1 million per claim and $1 million in aggregate coverage.

  • Debarment statute will not become law - to the relief of many. Although it was earlier reported on the General Assembly's website that the House Conference Committee Report had been adopted, HB 1090 was not passed, and will not become law. The bill's latest form would have effectively debarred a contractor from work for state and local government if the contractor was found to be behind schedule on two or more state projects. Whether the contractor was "behind" was left to employees of the government - although it was judicially appealable. This bill was not well-draft and was not favored by contractors. It will not be missed.

  • Land Conservation Tax Credit. HB 1107 (codified at OCGA 48-7-29.10) allows a state income tax credit to be taken for donations of land for conservation purposes to state or local government or to a bona fide charitable non-profit organization. The credit is generally limited to $500,000 or 25% of fair market value of the property. The credit cannot exceed the taxpayer's total tax liability for a given year; but the act does provide some conditional carry-over in limited circumstances. There are limited provisions for carry-over. The credit is further limited where tax liability is calculated under OCGA 48-7-20.

You can read the earlier client alert here.

Thursday, May 11, 2006

Builder Must Pay Homeowners 5X Value for Out-of-Square House

A Wayne County builder constructing a $131,500 home with a foundation that was 8 inches out of square must pay the homeowners an award of $696,500. That is over $87,000 per inch! The Daniel v. Moore (Wayne County Superior Court No. 00-CvS-2386) judgment was for $790,800, which included treble damages for unfair and deceptive trade practices. The court subtracted an award of $94,600 that the homeowners received from Wayne County building inspections; however, attorneys fees and costs will be added.

Why did the builder have to pay damages that are more than five times the value of the house? The builder was aware that the front of the house was 8 inches longer than the back side during the early stages of construction. The builder actively covered up this fact and knowingly proceeded to build over the defective foundation assuring that the remaining construction would be replete with additional errors and defects.

The lesson for contractors is not to violate the building code and not to knowingly cover up major mistakes. The lesson for the homeowners is that it pays to persistently fight to have their day in court, since they had to appeal to the North Carolina Court of Appeals an earlier unfair and improper consent judgment that was entered in October 2002.

The jury found the builder liable for negligence, fraud and negligent misrepresentation. In April 2001, the North Carolina Licensing Board of General Contractor's revoked the contractor's license for incompetence, gross negligence and misconduct in connection with this case. See May 1, 2006, issue of North Carolina Lawyers Weekly.

Tuesday, May 9, 2006

Mold is Gold for Dizzy Wake County Employee

A Wake County employee was recently awarded around $1.8 million for permanent dizziness and memory problems caused by mold. Cameron v. Merisel Properties, Inc. (Wake County Superior Court; 01 CvS 013529) appears to be the first North Carolina case resulting in damages for such neurological injuries, which in the past has been limited to allergy and respiratory problems. For construction lawyers, the legal rub is the ruling by the Court that the scientific majority view that neurological injuries from mold is less proven and needs more study goes to the weight of the evidence, not its admissibility.

Water intruded into the windows for several years. The building owner and employer were aware of the leaks and reports of obvious microbial growth and significant levels of toxigenic molds, yet concealed the information from the employee. For building owners and employers, the business rub is to not conceal known mold problems from employees and to act more promptly to protect employees.

The defendant building owner and employer report they are trying to set aside the verdict, and will appeal if unsuccessful. See the April 17, 2006, issue of North Carolina Lawyers Weekly. Stay tuned.

Tuesday, May 2, 2006

Immigration Reform

In light of yesterday's immigration rallies throughout the U.S., the debate over immigration should heat up again on Capitol Hill. The House recently approved a hardline reform bill centered around border security, with a provision that makes it a felony to be in the U.S. illegally. The Senate bill that included a version of the temporary guest-worker program proposed by President Bush stalled on the floor, but Senate Leadership recently met with President Bush and promised to work to revive the bill.

Immigration reform is an important topic in the construction industry, an industry in which one out of four workers is an immigrant. With the increased demand for new construction and an estimated 185,000 workers needed over the next 10 years to maintain the current level of growth, key industry players are lobbying hard for a guest-worker program. For a recent discussion of the potential impact of immigration reform on the construction industry, see the Dallas Morning News. [registration required].

The employment of undocumented workers will also become more costly. The Greensboro News & Record reports that the Department of Homeland Security plans to crackdown on employers of undocumented workers.
"We are going to move beyond the current level of activity to a higher level in each month and year to come," Homeland Security Secretary Michael Chertoff said Thursday. He pledged to "come down as hard as possible" on violators.