Architect Off the Hook for ADA Defects

Continuing a disturbing trend, another recent case finds that an architect is not liable for a design that failed to comply with the ADA and Section 504 of the Rehabilitation Act (RA). In Chicago Housing Authority v. DeStefano & Partners, Ltd. (here), an Illinois appellate court followed several other federal and state decisions in holding that only the project developer is liable for ADA and RA defects. The developer’s duty under the Acts is non-delegable, according to the courts’ interpretation of the language of the Acts, and any attempt to seek indemnity or contribution (or any other legal remedy) from the offending architect will be dismissed.  These holdings rest on flimsy support in the Acts themselves, and diverge from many other statutory and regulatory building mandates, including building codes meant to provide life/safety protection, which allow owners and developers to seek a remedy against the party(ies) they relied upon (and paid) to design and construct the buildings properly.  The better policy—and the legally correct result—would be to hold owners, developers, architects and contractors all liable for ADA and RA defects.  This result ensures proper motivation for all players to get it right, increases the availability of insurance and other assets to pay for the remedy, and allows long-standing principles of indemnity and contribution to be allocated by contract and legislated under state law.

 

On Guard: A Look at Subcontractor Default Insurance

Whether you call it SDI or SubGuard, subcontractor default insurance is yet another consideration for public and private project owners as they look at protection from subcontractor default.  But what exactly is this relatively new option and when is it most appropriate?  In my recent article for the Daily Journal of Commerce, I discuss SDI, how it works, and what you should consider when deciding if the circumstances are right for SDI coverage.  Read the full article here.

 “On Guard:  A Look at Subcontractor Default Insurance” was originally published by the Daily Journal of Commerce on August 19, 2016.

 

Oregon Construction Law Seminar

On September 22 and 23, 2016, my colleague Eric C. Grasberger will co-chair The Seminar Group’s Oregon Construction Law seminar in Portland, Oregon.  This seminar will include a panel of knowledgeable lawyers with broad experience addressing Oregon construction law.  I will be presenting and will speak about design-build contracts and the project delivery method.  Two of my colleagues will also be presenting: C. Andrew Gibson will present on Oregon statutes of limitations and repose; Richard E. Alexander will speak on ways to maximize mediation.  Click here to learn more and to register online.

Considerations Before and After the Government Comes Knocking (or Preparing for Condemnation)

The status of infrastructure throughout the United States, and the need to expand and rebuild facilities, is often in the news. Funding these improvements remains a challenge, but when funding is identified, the government often has to acquire private property. If the government and the property owner are unable to reach agreement, the acquisition may result in the use of the government’s eminent domain power.

The use of eminent domain requires that the government pay fair market value. Case law has developed, however, holding that some damages are not compensable. In many cases, for example, a taking may adversely impact access, but compensation for that element of injury will not be available. For impacts such as these, participation at the project design phase is the property owner’s best course. And, even where damages are compensable, being proactive both before and after the government comes knocking may simplify the process and minimize business disruption. Suggested steps include:

  • Reviewing Any Leases

Both property owners and tenants may be entitled to government compensation when property is acquired for a public project. To the extent compensation is owed, lease condemnation clauses are the first place the parties will go to determine who gets what. In the best case, the lease makes clear how any compensation is to be distributed. If the lease is silent or unclear, the tenant is entitled to participate in any condemnation proceedings. In Oregon, for example, the court will distribute the money awarded in a manner it determines is just and reasonable. Addressing in the lease how those dollars will be shared, if at all, may avoid a costly dispute down the road. The parties may also want to consider identifying with specificity in the lease the owner- versus tenant-owned fixtures.

  • Ground-Checking Any Cost-to-Cure Numbers

In many cases a condemnation action does not acquire the entire property but rather takes a strip of property for a road expansion or a utility easement. In a partial take, the just compensation paid by the government will include the fair market value of that strip of land or easement. If the taking reduces the value of the property the landowner will retain, the compensation owed includes severance damages, the difference in the value of the property before and after the take. If, however, it is possible to remedy the severance damages with a physical fix, the compensation owed is the lesser of the severance damages or the cost to cure. If the government offer includes a cost to cure, it is often a worthwhile investment to consult with engineers, land use planners and other relevant experts on the feasibility of the fix and to ensure that the government’s cost estimate includes all the items likely to be required by permitting agencies.

  • Developing a Relocation Strategy

In many instances, relocation benefits are available to reimburse some of the cost associated with being displaced by a public project. Displacement may mean the move of personal property off a strip of land being acquired. If, for example, the strip of property being acquired is used as storage for nursery plants, the owner of the plants likely has a claim for the reimbursement of certain costs associated with moving those plants out of the path of the public project.

Displacement may mean the relocation of an entire business from a site because the entire property is taken by the government. Moving an entire business is a time-consuming enterprise. In addition to finding a new site, the business may, while endeavoring to meet the government’s move deadline, have to navigate a local land use permitting process for the new site. Certain permit-related costs are reimbursable as relocation expenses.

The relocation regulations include caps on reimbursement of certain types of expenses, documentation requirements and claim deadlines. Not all costs associated with having to move—whether it be a few plants or an entire business—are reimbursable. Understanding

  • how to document a claim
  • how to optimally structure a move and claims and
  • how to evaluate whether to even move personal property as opposed to utilizing benefits to help finance replacing that property in the new location

can all help to substantially reduce costs often associated with a condemnation but not addressed within the condemnation proceeding or related negotiations. Relocation benefits also receive beneficial tax treatment.

Laws may vary by state but these are generally applicable rules. Understanding what is and is not compensable and who will be compensated, ensuring that mitigation proposed by the government is feasible and the cost accurately estimated, and understanding the relocation benefit options available will help minimize business disruption and best position the business to succeed post-project.

Going Green in a Big Way.

As the new State Route 520 floating bridge nears completion in Seattle, the 31 original bridge pontoons are ready for removal. Rather than breaking them up, the Washington Department of Transportation (WSDOT) will tow them through the Seattle ship canal and Ballard Locks to Puget Sound.  In an epic display of recycling, they will be delivered to True North Projects, which will market them around the world as floating docks, storage platforms, or breakwaters.  The WSDOT website has background about the SR 520 project in general and the True North website has lots of information about the pontoons’ construction and potential uses.  If you want a pontoon, this is your opportunity.  Even if you don’t, you may be interested in how pontoons are built and how they can be used when not supporting a highway.

Lake Washington Bridge 7-25-16

The pontoons for the new bridge were built in various places, as far away as Aberdeen on Washington’s Pacific Coast, and towed to Seattle. Upon arrival, some were found to be cracked and leaking.  A panel of experts studied the problem and recommended a solution.  A combination of repairs and modified casting methods was implemented, with the result that the new pontoons are in place and in use.  This is a reminder that what might at first appear to be a relatively simple task (make a big concrete box to support a bridge) can lead to unexpected and complex problems.  But smart and experienced people can solve problems, for which we should all be grateful.

 

Negotiating by a Thousand Texts: LOL? Think Again.

The law may be slow to evolve, but courts are beginning to embrace 21st century communication methods.  The prospect of negotiating a deal by text message may seem like a laughing matter, but a Massachusetts court recently relied on parties’ email and text communications to determine the essential elements of an agreement for the sale of land.

In a time when parties are increasingly relying on alternative methods of communication, it is important to be mindful of the fact that when communications are reduced to writing (by email, text, tweet, or otherwise), they may be used to determine the existence and terms of a contract. In a perfect world, carefully drafted contracts would ultimately replace and supersede these informal communications.  Nonetheless, parties should be careful when using alternative means of communication to negotiate a deal and they may want to consider including disclaimers with such messages, for example, “No binding agreement will be formed by this exchange.  Only a mutually signed final contract will be binding on the sender.”  At a minimum, a party conducting substantive negotiations via text message should consider capturing and recording those conversations and negotiations as some evidence of its discussions.

For readers interested in exploring this issue in more depth, I recommend reviewing the Court’s decision in St. John’s Holdings, LLC v. Two Electronics, LLC, No. 16 MISC 000090 (RBF), 2016 WL 1460477 (Mass Land Apr. 14, 2016).

Subcontractor Costs May Become Public Record in Federal Aid Contracts

Contractors who bid on public projects that utilize federal money  can be surprised by additional administrative requirements they do not usually find in their contracts.  In my recent article for the Daily Journal of Commerce, I discuss one of those requirements that may require you to disclose  subcontractor agreements, and what you can do to clarify how the agency plans to implement the federal aid requirements. Read the full article here.

“Subcontractor Costs May Become Public Record in Federal Aid Contracts” was originally published by the Daily Journal of Commerce on July 15, 2016.

 

“Without Performance Specifications, Green Building Can LEED to Disputes

It’s been more than 20 years since the LEED standard was introduced, and green building has now become a significant percentage of new U.S. commercial real estate construction.  The benefits of green building techniques and products have made LEED certification a hot commodity and changed the construction industry.  But there are also risks involved if these new techniques and products don’t meet building users’ expectations.  In my recent article for the Daily Journal of Commerce, I discuss how incorporating accurate performance specifications into contracts can help address expectations before construction begins. Read the full article here.

 “Without Performance Specifications, Green Building Can LEED to Disputes” was originally published by the Daily Journal of Commerce on June 17, 2016.

 

KIRO 7 Interviews Joe McCarthy on Pitfalls of Washington Condo Act – Developers Beware!

Joseph McCarthy, a real estate attorney in Stoel Rives’ Seattle office, was recently interviewed by television station KIRO 7 in Seattle for a segment titled “Law meant to protect Wash. homeowners instead pushing up condo prices.” The piece discusses how the consumer warranties contained in the Washington Condominium Act, found at Chapter 64.34 RCW, fostered excessive construction defect lawsuits that have caused developers to avoid condominiums and to instead build apartments, which are not subject to the act.

In the last five years, 1,235 condo units were registered by developers in King County, while 34,100 apartment units were registered. Some advocates for condo owners (many of whom bring suits against condo developers) have argued the act provides important protection for the consumer, but developers, many of whom have been sued by condo associations, believe that the act, which McCarthy says is vague and does not explicitly state what is warranted, should be revised to clarify the warranties required by the developer.  “It’s vague, uninsurable, and expensive,” he said.  You may view the KIRO 7 news segment here.

The warranty provisions of the condo act are disliked by developers, because they are quite broad, and they are imprecise. The warranties require that each condo project is:

  • Free from defective materials;
  • Constructed according to sound engineering and construction standards;
  • Constructed in a workmanlike manner; and
  • Constructed in compliance with all laws.

These standards are open-ended, so it is easy for any hired expert to testify that some aspect of the building construction violates them. Neither the developer nor the condo owner can know what is warranted until a lawsuit is brought, the experts testify and the judge or jury decides whether the construction violated one of these standards.

When compared to the single-family construction industry, where warranties almost always contain specific measurable parameters for construction items, the condominium warranties are unpredictable and difficult to insure. Many developers have stories of projects built to very high standards that were nevertheless (and in their view unjustifiably) criticized by an expert hired to increase the value of a lawsuit.  This situation has consequently driven up condominium prices as high insurance premiums are required to deal with the construction defect claims that are routinely asserted against condo projects.  Some industry insiders estimate that a developer has more than a 90% chance of being sued on a condominium project, due to the ease of bringing a warranty claim. With the prevalence of construction defect claims that inevitably appear to follow from condominium developments, one can readily appreciate the chilling effect that the act has on developers considering condominium construction.

The Washington Condominium Act attempts to balance the interests of the claimants with at least some protection to the owner/developer community, such as specific condo defect claim limitations periods and detailed notice requirements.  For instance, RCW 64.34.452 requires that claims for breach of the express and implied warranty obligations under the act be brought within four years after the cause of action accrues.  A claim regarding the common elements (such as the building envelope) accrues at the time of the first unit sale. A claim as to a unit (such as interior flooring) accrues on the closing of the unit.  (This is shorter than the six-year statute of limitations period for general breach of contract claim.)  Additionally, the condominium declarant’s potential third party claims against its contractor and architect may be impacted, if not foreclosed, by the ultimate six-year statute of repose.  Under the act, the claim accrual (and hence the limitations) periods differ and very much depend on the type of claim being asserted (e.g., breach of warranty as to an individual condo unit or breach of warranty as to each common element) and such periods may not be reduced by either an oral or a written agreement.

These claim filing limitations also may be subject to the construction defect claims notice requirements of RCW 64.50.020, which could add another layer of complexity to the procedure for asserting causes of action arising from residential construction projects. The statute of limitations and statute of repose periods for construction-related claims appear to be tolled under the Washington Condominium Act (see RCW 64.34.452(4)) for 60 days after the period during which the filing of an action is barred under the construction defect notice statute (RCW 64.50.020).  However, provided the claimant has received, upon contract execution, a notice from the construction professional regarding the pre-litigation notice and the contractor/builder’s right to cure pursuant to RCW 60.50.050(1), a claimant may only enjoy the benefit of any tolled limitations period if the written notice of defect(s) is served within the applicable time for filing an action under the act, which, again, is greatly influenced by the particular factual basis for the claim. See RCW 64.34.452(4).

Based on the requirements and claims procedures of the Washington Condominium Act, condominium developers should work with their legal, marketing, sales and construction team to develop a robust risk management strategy as part of any condominium construction.

Construction Successes in the Seattle Area

It seems that lawyers spend a lot of time dealing with problems and crises, but it is healthy to celebrate successes as well. Here are a few things around Seattle that we can celebrate.

Sound Transit continues its expansion of the light rail system. The station next to Husky Stadium opened in March, connecting folks from the University of Washington to downtown and the airport.  Work is under way to extend the system further, through the University District and up to Northgate and eventually Lynnwood.  North of 90th Street, the line will emerge from its tunnels and proceed on or above the surface, but that is years in the future.

In April, most of the new and improved State Route 520 floating bridge opened to traffic with a celebration that included a fun run and bicycle events. The new bridge is elevated to minimize the need for closures during storms and to accommodate a water collection and treatment system that will help keep Lake Washington clean.  Challenges remain, including arrangements for disposing of the old bridge pieces and concerns about road noise, but after years of watching the new bridge gradually take shape, we can finally drive over most of it.

Even the troubled project to replace the Alaskan Way Viaduct with a highway tunnel seems to be gaining momentum. After a two-year stoppage to repair the tunnel boring machine, the contractor has resumed mining and successfully passed beneath the existing viaduct.  Now the tunnel boring machine will mine under the downtown core, so significant challenges remain.  The viaduct remains open, but its days appear to be numbered, which is a good thing because it is considered vulnerable to earthquakes.

Looking farther afield, work is progressing on I-90 through Snoqualmie Pass. Travelers over that route have had to cope with detours and narrow lanes for a long time, which made for difficult driving conditions during bad weather.  Now a large part of the work is completed from Hyak to the Keechelus Dam and it’s a much more comfortable drive.

Many more projects are getting done and put into service, to the advantage of all of us around Seattle. Others are in the planning stages.  It takes a lot of smart and experienced people to accomplish this work, and it’s a pleasure to acknowledge and applaud their efforts.

 

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