News to Know – 10 Things That Can Go Wrong on Construction Projects

10 Things That Can Go Wrong on Construction Projects

C. Jaye Berger, Esq.

C Jaye Berger head shot

C. Jaye Berger, Esq. is the founder of Law Offices C. Jaye Berger, a New York City law firm specializing in real estate, construction law and litigation. Berger handles construction contracts, disputes and litigation; commercial and residential closings; leases, business contracts and other business related matters. She is a member of CREW New York.

 


 

There are certain types of problems that seem to arise with regularity on both residential and commercial construction projects without regard to the city or state. If you see the warning signs of any of these problems, you may be able to prevent the problem or do something to mitigate it before it escalates. Here are some situations to consider:

 1. The general contractor and the subcontractors stop showing up regularly and little work is being done. Sometimes there is just one lonely painter showing up on the job site. This can mean that these companies are angry about not being paid or that they are busy on a new project and are not giving your project the time and attention it needs, but want to make an “appearance.” This can result in the project falling into the “grey zone” where it lingers on and on and never seems to end. This situation cannot continue and requires immediate consultation with knowledgeable legal counsel to review the contract and any options.

“Slow or stalled payment is rarely due to lack of funds. Usually it is a sign that something bigger is wrong on the project.”

2. The owner slows down with paying the contractor. Slow or stalled payment is rarely due to lack of funds. Usually it is a sign that something bigger is wrong on the project. It may not be progressing on time or is costing more than expected and the client is silently brooding about it by not paying the contractor. As a contractor, the problem should not be brushed aside. Sitting down and trying to talk it out can be more productive than filing mechanic’s liens, slowing down the work or using threats.

3.The general contractor tries to quit. He sits the owner down at a meeting and says he wants “out” and tries to make it sound as though the owner is really at fault. This is usually a sign that he has underbid the job and it is taking longer than he planned. He wants to start a new, more lucrative job. Sometimes this is met with enthusiasm from the owner who can make better and sometimes less expensive arrangements to finish. This strategy only works when there is so little work left on the job that the owner makes a judgment call that litigation would not be worth it. However, usually there is still a lot to be completed and re-done and it often does lead to litigation, because it will probably cost a lot more to finish the job with a new contractor due to this breach of contract.

Construction crane

 4. A leak occurs and the project site and other areas in the building are damaged as a result. Everyone on the project should have their certificates of insurance and alteration agreements ready in their files. There may be multiple insurance policies that might apply, since there are various subcontractors, tenants, shareholders and others in the mix. There may be overlapping policies and the project still needs to be completed and the damage repaired. Sometimes the original contractor handles the completion of the project while the insurance companies are sorting out the damages. Legal counsel must be contacted immediately to handle communications with the insurance companies and counsel to the various parties involved.

5. A mechanic’s lien is filed against the building by the general contractor, a subcontractor, materialman or an architect. This is usually the tip of the iceberg. It may mean that the general contractor is using the money he has been paid by the client for purposes other than the project and is not paying the subcontractors and suppliers on this project. It also shows that the owner has not been obtaining waivers of mechanic’s liens throughout the project.

6. The owner is unhappy with the quality of the work. Walls are crooked. Doors don’t close well. The millwork does not fit properly. This may indicate that shop drawings have not been prepared and reviewed. The architect or interior designer may not be coming by to observe the work frequently enough. This may be due to the owner not wanting to pay for this service and services may need to be added.

7. The general contractor and the architect do not get along. The general contractor is refusing to follow instructions and thinks he knows better and that the architect is being too fussy. Architects and contractors are not paired up based on compatibility. Often they have very different styles of working. Sometimes this can lead to problems, since a key player cannot be fired just because someone cannot get along with them. This is a good reason to consider interviewing professionals who may have worked together successfully in the past.

Construction vertical

8. The job never ends. A six-month job turns into a “one year and counting” job. Often the owner has not consulted with an attorney yet. This goes back to the provision in the contract for completion time. Sometimes it turns out that the parties do not have one or have not included liquidated damages. This is important not only for the owner, but may relate to provisions in the Alteration Agreement in a co-op or Work Letter in a commercial lease for per diem damages to the building due to late completion.

9. An accident occurs on the job and a workman is injured. Legal counsel should be contacted immediately for guidance. Prompt notice to the appropriate parties is crucial in order to comply with certain insurance policy requirements and prevent disclaimers of coverage due to late notice. Sometimes people think the problem is not that bad and that nothing will come of it, so they do not report it to the insurance carrier. When a lawsuit is commenced a year later and the insurance carrier is contacted, they may claim they did not have appropriate notice of the “occurrence” and will likely disclaim coverage.

 10. Having insurance does not mean that there will be coverage for every situation. A common example is when an employee of the contractor or subcontractor is injured. There may be a policy exclusion. Other times there may be a disclaimer due to late notice. In certain situations, an attorney will need to commence a special lawsuit to ask the court to determine the rights and obligations of the parties.

This article was originally posted on CREW Network.