The Project in Las Vegas A Large-Scale Example of Typical Construction Dispute
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A mega-project in Las Vegas is having real problems; mega-problems. But when you look past the large numbers, all that is left is a simple construction dispute that is played out everyday across the nation between contractors, subcontractors and owners. The dispute – reported recently by the Wall Street Journal – serves as a good, large-scale example of how things can go wrong in a construction project.
Here are three key components of this dispute:
- The general contractor claims the owner hasn’t paid according to the payment schedule, and the owner claims it is owed money because of construction defects.
- Failure to pay the prime trickled down to the subs, and they have filed liens.
- The owner further refuses to pay the prime because (i) they have a contractual duty to keep the project lien-free; and (ii) The liens are causing the owner damages in that it is more difficult to sell the condominium units.
Sound familiar? Of course it sounds familiar, this is a summary of nearly every owner / prime contractor dispute across the country.
As your construction project approaches completion, keep these issues in mind. Owners very frequently get tighter on the final payments because they’re afraid the prime contractor will bail before work is 100% complete. But the budget squeeze results in subcontractor liens, animosity, catch-22s and the spark of a litigation war.
We usually recommend two ways to handle these frequent problems.
First, handle it in the contract. Think about these issues before you sign anything, and make the contract clear about how the contract will reach final completion.
Second, set up a way to resolve the dispute out of court (mediations, initial decision makers, and the like).
What do you guys think? Any other recommendations?
