Posts Tagged ‘Louisiana’

Release the Lease

On March 22, 2012 Author By Seth Smiley        

A topic that is tangential to the construction industry is property law. Just recently here at Wolfe Law Group, I had a client come to me with some ownership issues involving leases. Typically after a construction project is complete, especially in the commercial realm, there will be a lease of some type. Many times owners will complete the construction project and then get involve in complex leases with tenants. Landlord / Tenant issues happen often because there are natural opposing positions created by the document and the occupancy.

There are many types of leases out there and it is very important to know the difference and to make sure that you have the power or at least have a fair shake. There are residential, commercial, industrial, green, month-to-month, oral, and a host of others. Just as in any legal contract, the devil is in the details.

I have clients who have disputes over 30 year commercial leases all the way down to those with month-to-month residential leases and the key to successfully getting what you want is to anticipate any issues when drafting the lease and before it is executed.

The Louisiana Civil Code has an entire section on leases which starts with article 2668. The State of Louisiana publishes this helpful brochure for parties to a lease.

There are a number of hot button topics contained in leases, such as notice clauses, termination clauses, lessor responsibilities, lessee responsibilities and duty clauses. If the lease is silent to such matters then the Civil Code will govern. This may or may not be favorable to your position.

I write this blog article because I see so many disputes out there when it comes to leases. As with all contracts (and medicine) an ounce of prevention is worth a pound of cure. If you get your documents reviewed before entering into them, you will be in a much better position if a dispute arises.

Posted in:     About Our Services, Disputes, Louisiana, Uncategorized  /  Tags: , , , , ,   /   2 Comments

Construction Contracts – Pay Now to Save Later

On March 9, 2012 Author By Seth Smiley        

All to often in my job I am faced with clients who end up in a dispute on a construction project. Whether it be a public or private, commercial or residential, and no matter how large or small the project or contractor, the first question I ask any potential client is – where’s the contract? The contract is the cornerstone of any construction project and eventual dispute. It contains the scope of work and all provisions which govern when disputes arise.

Construction contract defined:

Construction Contract:A legal document which specifies the details of a construction project. A good construction contract will include: 1.The contractors registration number. 2.A statement of work quality such as ‘Standard Practices of the Trades’ or ‘according to Manufacturers Specifications.’ 3.A set of blue prints or plans. 4.A set of specifications. 5.Any allowances. 6.A construction timetable including starting and completion dates. 7.A fixed price for the work, or a time and materials formula. 8.A payment schedule. 9.A written warrantee. 10.A clause which outlines how any disputes will be resolved.

Any savvy contractor will have a custom tailored contract for each job that will help put that company in a good position when the dispute arises and its time to call the lawyer. A thousand dollar contract upfront can save a contractor thousands upon thousands later on in the project. Properly written ADR clauses and indemnity clauses can save a contractor thousands in legal fees and court/administrative costs.

All to often, I will have contractors operating on oral agreements, (just a handshake and a man’s word!) or I have contractors who download a form off the internet, not knowing what provisions lie within. In these current times, form documents and oral agreements are unacceptable. Parties who operate like this will lose money over the long haul, especially those who want to operate on a large scale and actually make money. Otherwise, the big boy contractors will make you use their contracts which are so lopsided that the other contracting party will never prevail in any dispute.

If you as a contractor are considering using  or signing a contract given to you by a contractor you are subbing to, then you should have that agreement reviewed by a professional so as to make sure the sub’s rights are protected. For more information see Wolfe Law Group’s website regarding contract drafting and contract review.

Posted in:     About Our Services, Construction Contracts  /  Tags: , , , ,   /   3 Comments

Louisiana Contractors & State Licensing – Home Improvement

On March 6, 2012 Author By Seth Smiley        

Just the other day here at Wolfe Law Group, I had to do so research for a client on the licensing rules for contractors. I deal with these rules daily but this client’s issue helped to refresh me. This got me thinking that many contractors and hiring parties do not necessarily know the rules that govern contractors of all types. Here in Louisiana, contractor licensing law is governed by the State Licensing Board for Contractors (SLBC). The actual statues are codified in La R.S. 37:2150 et seq.

Today’s post focuses in on a classification called Home Improvement Contracting. Home Improvement Contractors (La R.S. 37:2175.1 et seq) need to have a “certificate” (not a full license) with the SLBC to perform any home improvement contracting services in excess of $7,500 but below $75,000. These contracts need to be in writing and include: 1) full agreement between owner and contractor, 2) full name, address and registration number of the contractor, 3) detailed list of work and materials, 4) total to be paid & how the costs will be paid, and 5) finally signatures of all parties. Finally the owner needs a copy of the contract documents before any work can start. See La R.S. 37:2175.1 for complete list.

This seems like a very commonsensical list, but you will be surprise how many parties get this wrong and/or miss out on critical elements. The contract will not be deemed invalid if an aspect is missing but the rules need to be followed.

Residential contractors need to be registered with the SLBC. The contractor needs to make a written application with the SLBC, under oath. The application needs to include the following information in addition to proof of workers compensation insurance:

(B)(1) The applicant’s name, home address, business address, and social security number.

(2) The names and addresses of any and all owners, partners, or trustees of the applicant including, in case of corporate entities, the names and addresses of any and all officers, directors, and principal shareholders. This Section shall not apply to publicly traded companies.

(3) A statement whether the applicant has ever been previously registered in the state as a home improvement contractor, under what other names he was previously registered, whether there have been previous judgments or arbitration awards against him, and whether his registration has ever been suspended or revoked.

La. R.S. 37:2175.2

The requirements for granting this certification are more relaxed than the normal contractors license but there are grounds for denial and/or revocation.

If contractors are performing projects that fall within the $7,500-$75,000 window on residential improvements and they get caught for not being registered or not having the proper certification there are penalties. Penalties include administrative costs for hearings and a maximum of 25% of the contract price for the violating party. This could essentially mean thousands of dollars in addition to any causes of action that the homeowner may have against the violating contractor.

Finally, and most importantly for contractors, it is easy to get this certification. If a contractor is not properly licensed to be a home improvement contractor, and that contractor is not paid on the home improvement project, that contractor is legally prohibited from filing a lien on the project! (See La R.S. 37:2175.6) This is very important if you are a contractor trying to get paid. The homeowner can rip you off with very little recourse.

Bottom line: if you are a contractor who deals in home improvement, it is easy to get your home improvement license with the state. It will give you protections and keep you legal. Further, if you are a homeowner and know or suspect your contractor is not properly licensed, you have the SLBC to help protect you and penalize the offending contractor. I help contractors get this registration and I’ve also helped homeowners turn in violating contractors.

Posted in:     Construction Contracts, Construction News, Filing Requirements, Licensing, Louisiana, Regulations  /  Tags: , , , ,   /   Leave a comment

Louisiana Suppliers – Extra Notice Needed for Lien Rights

On January 4, 2012 Author By Seth Smiley        

Over the past holiday season, I was at a Christmas party discussing with a friend of mine who runs an electrical supply company here in South Louisiana, the intricacies of notice provisions before a company like his can file a lien on a private project. Others party-goers probably thought our conversation boring, but we were intrigued. This conversation got me thinking that I should report to the supply world what my friend did not understand…

Here at the Wolfe Law Group we love liens. We file them for clients and recommend them to all others out there as a tool to preserve rights if, and often when, funds dry up and you are not paid on a construction project. Part of the privileged class under the Louisiana Private Works Act (La R.S. 9:4801 et al), are suppliers.

There are two types of suppliers protected under this act. Suppliers who lease equipment to contractors (“Lessors”) and suppliers who provide the materials to be used in the project (“Suppliers”).

EQUIPMENT RENTAL (see La R.S. Art. 9:4802(G)(1))

For Lessors, these companies need to deliver a copy of the lease agreement to the property owner and contractor within ten (10) days of when the leased equipment is delivered to the site. This notice is required as in most states to put all relevant parties on notice of potential future claims. So for companies who deliver equipment to job-sites as a rental, it is PARAMOUNT that you send out this notice so that you can file a valid lien after not getting paid. Then with your properly filed lien you can go after the party you have a lease agreement with and the property owner, general contractor and as a last resort you can foreclose on the property! Very strong rights indeed.

MATERIAL SUPPLIERS (see La R.S. Art. 9:4802(G)(2-3))

Next, for supply houses, such as plumbing materials, and electrical supplies – these companies also need to send out a notice to the property owner and the general contractor after delivery of goods. The Supplier needs to send notice of non-payment to the owner at least ten (10) days before filing a lien. Notice needs to be sent by certified mail return receipt and needs to have the name, address of the Supplier, description of materials provided, description of the property and the total amount owed, plus interest and fees. Also the Supplier needs to put the hiring party, general contractor and owner on notice of the items list above within seventy-five (75) days of the last month that the materials were delivered to the project via certified mail return receipt – or no later that then lien period. Strategically it may be best to send out one notice after the goods are delivered to all the parties above with the required information, just to preserve the right to file your lien.

These notice provisions can be tedious and if not followed to the letter of the law, will result in an invalid lien. The notice practice should become a staple in the administration of the aforementioned types of companies.  My office constantly invalidates liens that were not filed correctly. We also file a number of notices and liens which are filed correctly. General contractors and owners pay lien holders typically first because of the added security.

Bottom line – all of the successful rental and supply companies have these notice mechanisms in place. If you are a company who plans on competing in this arena, then following notice laws is always a smart plan.

Other resources on the topic: Zlien.com, reasestatelawyers.com, levy-law.com,

Posted in:     Construction News, Filing Requirements, Louisiana, Mechanics Lien  /  Tags: , , , , , , ,   /   Leave a comment

Litigation Topics for Prime / Subcontractor Contracts

On November 2, 2011 Author By Seth Smiley        

I had a speaking engagement today here in Kenner, Louisiana (a suburb of New Orleans) whereby I had the pleasure of speaking to a group of contractors and architects regarding construction contracts. The bulk of the discussion focused on the most contested provisions within construction contracts.

The information is very helpful to contractors and can be used a resource when a contractor begins the contracting phase of a construction project to help get a better understanding of what is going on within the contract documents.

Prime/Subcontractors Contracts

Contracts between prime/general contractors and their subcontractors make up a vital link in the construction project chain. Here both parties need to negotiate terms to better protect when a dispute arises. A well crafted contract can better protect a prime and/or a sub when default arises. Typically subcontractors are at the mercy of the prime. A good subcontractor will have his attorney review any agreement to make sure that the deal is an even one.

AIA – American Institute of Architects is the most common standard form contracts in the construction industry. AIA contracts are a good starting point and offer contracts for Prime/sub relationships, Architect/owner, Owner/Prime, and any other design professional/contractor relationship that may exist.

• Commonly litigated subcontract provisions

There are a number of provisions which could be contained in a prime/subcontractor contract that need to raise a red flag when present and should be negotiated by either party so as to keep the contract from becoming one-sided.

1. Incorporation by Reference Clauses: (flow-up & flow-down provisions)

  • a Flow-down provision in a prime/sub contract will incorporate by reference terms and provisions of the owner/prime contract;
  • conversely, a Flow-up provision incorporates the duties owed by the owner to the prime into the prime/sub contract;
  • Many times parties enter into these agreements with out ever seeing the referenced document making them susceptible to unknown provisions;
  • Enforcement depends on the reciprocality of the provisions and lack of ambiguity

2. Scope of Work Provisions

  • Prime contractors want a broad scope of work provision with subs so that they can pin other work to them later on if needed;
  • Subs should demand very specific scope of work provisions so as to know exactly what work is expected and what exactly they have bid on;
  • This provision can incorporate other documents such as plans and specifications;
  • Provision needed for extra work or change order if work called for is outside of the scope;

3. Change Order and Extra Work Provisions

  • Very popular area for dispute in construction contracts – changes are always happening
  • There should be a clear provision in the contract outlining the process whereby CO’s are made and approved;
  • Define change order – modification to work already contemplated by the agreement; (ie different materials)
  • Define extra – item of work beyond the original scope of work that is added during construction;
  • MAKE SURE change orders and/or extras are in writing;

4. Notice Provisions

  • Found in various places within a prime/sub contract
  • Very important risk-shifiting devices – can determine a win or loss regarding a claim

5. Indemnity Clauses

  • Typically these trickle down the line Owner -> Prime -> Sub
  • These are generally enforceable, Subs should be careful and not allow indemnity for negligence of another party
  • Insurance can be purchased by prime or sub to cover the indemnity obligation

6. No Damages for Delay Clauses

  • Owners and Primes try to insert “no damage for delay” provisions in contracts for protection against unforeseen delays
  • Parties want to check all referencing documents to see if this provision is in there

7. LD’s – Liquidated Damages Provisions

  • Very helpful provisions because the pre-determine delay damages, usually on a per day basis;
  • Enforceable unless determined to be a penalty or if they are a “one- size fits all” provision;
  • LD’s are a good way to measure delay damage but can enhance the need for Contractor/Sub to accelerate work to avoid further damage, leading to defects and workmanship issues;
  • For LD’s to apply the contractors work must be a substantial factor in the delay;

8. Lien Waivers

  • reduce the chance for encumbrances to be placed on the title of the property;
  • Usually not enforceable if lien waiver required before work performed;
  • A good tool for Prime and Owner to reduce exposure;
  • Can be used in an incremental fashion as payments are distributed

9. “Pay-when-paid” v. “Pay-if-paid”

  • Pay-if-paid is defined as a subcontractor gets paid by the general contractor only if the owner pays the general contractor for that subcontractor’s work.” Requires a condition precedent.
  • Pay-when-paid in contrast to the pay-if-paid; a pay-when-paid clause does not establish a condition precedent, but merely creates a timing mechanism for the general contractor’s payment to the subcontractor.

10. Retainage

  • Typically 5%-10% of each payment will be withheld by the Owner/Prime until a later date, such as substantial completion
  • Its purpose is to keep a pool of money to remedy any defects in workmanship by that sub

11. Termination provisions

  • Termination for Cause
  • Usually nonpayment, excessive delay, insolvency, or convenience are reasons to terminate the contract

12. ADR Clause (Arbitration/Mediation clauses)

  • Arbitration (most popular) – binding way to avoid litigation;
  • Mediation – non-binding way to avoid litigation;
  • Both can be effective, typically arbitration can be more intimidating due to its binding and no (very limited) ability to appeal

13. Attorney fee provisions

  • Very popular as no one likes to pay an attorney!
  • Many provisions will say that the unsuccessful party must pay attorney fees but others to be careful will put the burden on one party
  • Primes and subs should include an attorney fee provision in all contracts
  • Good to be specific on the provision and include for litigation and ADR

14. Forum selection & choice of law

  • If working out of state, make sure you know which venue a dispute will be held in;
  • This can be a very costly provision

(list partially obtained from the ABA’s Fundamentals of Construction Law)

 

Posted in:     Arbitration & ADR, Change Orders, Construction Contracts, Construction News, Damages, Delays, Dispute A Lien, Disputes, Insurance, Litigation, Louisiana, Mechanics Lien  /  Tags: , , , , ,   /   2 Comments
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