Construction Litigation Law Blog

The Appellate Division recently denied a landscaping contractor’s suit to collect amounts due for extra work in addition to that called for in his contract for complete landscaping of the defendants’ home. Online Contracting, Inc. v. Tripucka, No. A-2622-06 (App. Div., December 6, 2007). The defendants counterclaimed for treble damages and attorneys’ fees under the Consumer Fraud Act (N.J.S.A. 56:8-1 to 116). The court concluded that the contractor’s failure to secure a written agreement for extras totaling $32,994 violated N.J.A.C. 13:45A-16.2(a)(12), which requires all home improvement contracts exceeding $500 to be memorialized by a writing signed by the parties, specifying the work to be performed and the materials to be used, and identifying the start and end date.

The contractor argued that the following language, included within the underlying agreement for landscaping purposes, authorized verbal change orders:

Any alteration or deviation from the description of the work listed above will be executed upon a written change order issued by the contractor and signed by the owner. The change order, whether it be verbal or in writing, will become an extra and will be billed to the owner at the daily rate provided in the [attached] equipment and labor price list.

Because the work was performed pursuant to the equipment and materials price list attached to the underlying contract, the contractor maintained that the contract clause did not violate the Consumer Fraud Act. Further, argued the contractor, the defendants should be estopped by their own conduct in verbally requesting the extras (a putting green and associated structures).

The court disagreed. Citing Scibek v. Longette, 339 N.J. Super. 72 (App. Div. 2001), an auto repair case, it pointed out that since the defendants had not induced the contractor to proceed with the extras without a writing, estoppel did not apply. “Defendants’ verbal directions to [plaintiff] to get the extras ‘done’ cannot be fairly characterized as ‘the intentional relinquishment of a known right,’ or a clear unequivocal ‘act from which an intention to relinquish’ a right can be drawn.” Online Contracting, Inc., supra, No. A-2622-06 at 4, citing Scibek, supra, 339 N.J. Super. at 82. In the absence of the required written agreement for the extras, the defendants could not be said to have intentionally relinquished their right to a written contract by a clear, unequivocal and decisive act.

The court added that the contractor could have preserved its right to collect for the extras simply by providing a written estimate and securing the defendants’ written authorizations. Accordingly, it affirmed the trial court’s grant of attorneys’ fees in accordance with the Consumer Fraud Act ( N.J.S.A. 56:8-19).

World famous architect Frank Gehry, and his firm Gehry Partners is a defendant in a recent lawsuit brought by the Massachusetts Institute of Technology alleging design and construction defects in a $300 Million building on the Cambridge, Massachusetts campus. MIT also sued the contractors who built the building, alleging that design and construction defects caused leaking, cracking, and poor drainage, and that MIT will have to pay millions to fix the problems.

Gehry, when interviewed about the lawsuit, said that construction problems in complex buildings are inevitable, and “The chances of it getting done ever without something colliding or some misstep are small.” Gehry, like most architects surely believes that his design is fine, and that the builder made mistakes in execution.

The builder, a the New Jersey arm of a Swedish firm called Skanska AB, when asked for comment, stated “This is not a construction issue, has never been.” So, the builder believes, of course, that the design is faulty, and he did nothing wrong.

As is typical, both the architect and the builder also fault the owner, in this case MIT, for making changes during construction that they say led to problems. Gehry also commented that he thought that “value engineering” was also responsible for some of the problems.

It is disconcerting to see that a superstar architect, a global construction company and a world-class institute of higher learning, with $300 Million to spend cannot seem to create a water-tight building. Mr. Gehry seems to think that construction defects are par for the course. In that context, it comes as no surprise that we find problems with much simpler, mass-produced homes and condominiums.

You can read the New York Times article discussing the case here.

Plaintiff WHP9, the developer of a multi-building residential project in North Bergen, secured a builder’s risk policy from defendant Centennial Insurance and liability insurance from another carrier before beginning construction. WHP 9, Inc. v. Centennial Ins. Company, A-1454-06T1 (App. Div. October 23, 2007). Plaintiff’s application for the builder’s risk coverage stated the development’s value when complete as $6 million, without reporting the municipality’s sewer pipe or its cost in any way.

While driving piles for footings, a subcontractor punctured a 36-inch cast iron sewer line that ran beneath the property. The damage was discovered in 2002, and the municipality issued a stop work order in March 2003. Plaintiff’s liability insurer defended plaintiff in the municipality’s damage suit, ultimately settling with the municipality.

Asa a result of the stoppage, Plaintiff incurred lost rental income and other expenses exceeding $3 million. Defendant denied coverage under the builder’s risk policy, maintaining that the sewer pipe was not covered property within the policy’s terms:

Covered property means your property or the property of others for which you are liable, consisting of

a. Buildings or structures as described in this Coverage Form Declarations while under construction, erection, or fabrication, including the cost of foundations and underground property such as pipes, flues, drains, electrical wires, piers, and pilings; and excavation, grading, and filling; if such costs are included in the completed value of the project.

But this does not include existing buildings or structures to which improvements, alterations, repairs or additions are being made.

Plaintiff contended that the sewer pipe was covered as “property of others for which you are liable.” The trial court disagreed, and the Appellate Division affirmed, noting that the sewer pipe was not declared as property under construction, erection or fabrication and that the policy explicitly excluded coverage for “existing . . . structures to which . . . alterations, repairs or additions are being made . . . . “ Finding the policy language to be clear and unambiguous, and within an insured’s reasonable expectations, the appellate court confirmed the trial court’s denial of coverage.

Judge Noel L. Hillman of the United States District Court for the District of New Jersey, sitting in Trenton, recently dismissed a case before her on the grounds that the New Jersey court was an inappropriate place to hear the dispute. The case is First Colonial Insurance Co., et. al, v. Custom Flooring, Inc., et. al., 2007 WL 1651155 (D.N.J. June 4, 2007). The claims in the case involved a flooring project in a building in Minnesota. The general contractor on the job was a New Jersey Corporation named Stone Cor. There was a suit filed in Minnesota over defects in the flooring installation against Stone Cor and its subcontractor Custom Flooring, Inc. This suit was eventually settled, with participation from one of Custom Flooring’s insurance companies, First Colonial. Stone Cor was also an additional insured on a policy issued by Farmer’s Insurance Exchange, which denied coverage in the Minnesota case and declined to provide a defense. The New Jersey action was filed by First Colonial and Stone Cor against Farmers, seeking a declaratory judgment on coverage, e.g. that Farmer’s was obligated to provide a defense to Stone Cor in the Minnesota action, and that it owed a share of the settlement. There was also pending litigation in Illinois, which Stone Cor and First Colonial were parties to, which involved many of the same claims.

In examining the case under the doctrine of forum non conveniens, Judge Hillman saw a case about construction in Minnesota, governed by Illinois law, against Farmers, a California corporation, and where the majority of evidence was located outside New Jersey. Farmers argued that the New Jersey case should be dismissed, because the concurrent Illinois action involved the same parties, the subject matter of the claims and the evidence are all outside New Jersey, and it would be easier for all involved to resolve all the issues in a single alternate forum, in Illinois.

Stone Cor argued that the alternate forum was not an adequate forum, since its claims would be subject to a Statute of Limitations defense there. In fact, Stone Cor had filed a claim against Farmers in Illinois, and had voluntarily withdrawn it, rather than face a motion to dismiss on Statute of Limitations grounds. The New Jersey action was begun shortly thereafter. The Judge found that, other than the fact that Stone Cor was located in New Jersey, nothing else about the case had any connection at all with the state. None of the other parties were citizens fof New Jersey, and none of the events underlying the lawsuit took place in New Jersey. The fact that Stone Cor may not be able to recover on its claims in Illinois was insufficient to avoid dismissal. Stone Cor’s withdrawal of its claims in Illinois suggested forum shopping, and the court was not inclined to reward that behavior. The case was dismissed in favor of the still-pending action in Illinois.

As the real estate market contracts, contractors, subcontractors and suppliers with unpaid balances will need to protect their interests by, among other things, taking advantage of applicable lien laws. In construing New Jersey’s lien laws, definitions of “residential” and “commercial” construction have long been considered by many to be a gray area.

The Bankruptcy Court for the District of New Jersey recently addressed the distinction. It held that agreements with general contractors or developers in which contractors, subcontractors, and suppliers agree to provide work, services, material or equipment to large-scale residential developments are residential construction contracts. In re: Kara Homes, ____ F.Supp. _____ (D.N.J. August 29, 2007).This means that such contractors, subcontractors and suppliers must follow the more complex provisions applicable to residential construction contracts when they wish to secure an unpaid balance with a construction lien.

In New Jersey, the Construction Lien Law (“CLL”) (N.J.S.A. 2A:44A-1 et seq.) distinguishes residential construction contracts from construction contracts that are commercial in nature. The CLL defines a residential construction contract as

any written contract for the construction or improvement to a one- or two-family dwelling, or any portion of a dwelling, which shall include any residential unit in a condominium subject to the provisions of P.L.1969, c. 257 (C.46:8B-1 et seq.), any residential unit in a housing cooperative , any residential unit included in a fee simple townhouse development, any residential unit contained in a horizontal property regime as defined in section 2 of P.L.1963, c. 168 (C. 46:8A-2), and any residential unit contained in a planned unit development as defined in section 3.3 of P.L.1975, c.291 (C. 40:55D-6).

N.J.S.A. 2A:44A-2.

No lien shall attach for work, services, material or equipment provided as part of a residential construction contract unless the provider strictly complies with the requirements of N.J.S.A. 2A:44A-20 and 21, which impose additional requirements for liens filed on residential construction. N.J.S.A. 2A:44A-5c. The Legislature premised the additional requirements for perfecting liens on residential construction on the need to preserve and enhance the State’s economy, promote a stable marketplace in which families can purchase homes with expedience and certainty, allow lending institutions to conduct their business in a stable environment. N.J.S.A. 2A:44A-21a.

The defendants in Kara Homes, which were various contractors and subcontractors of Kara Homes and/or one or more of its affiliated entities, contended that contracts relating to construction of numerous homes within Kara’s developments were not residential construction contracts in that Kara’s construction of homes for resale was commercial in nature and in that the scope of Kara’s developments exceeded the “one- or two-family dwelling” that was the target of the additional lien-filing requirements. Kara Homes and its affiliates argued that, because the developments were residential, their contractors and subcontractors needed to have strictly followed the provisions of N.J.S.A. 2A:44A-20 and 21 for a valid lien claim to have been filed and perfected.

After observing of the few available unpublished cases considering the question “that the issue of whether a large scale construction project is residential or commercial in nature is unsettled and the analysis arbitrary,” the Bankruptcy Court concluded that the literal language of the statute was not dispositive of its intended scope. In light of the legislative purpose articulated in N.J.S.A. 2A:44A-21a, said the court, large scale residential projects must be included among residential construction contracts. Accordingly, contractors, subcontractors and supplier should be careful to observe the additional requirements applicable to residential construction contracts when working on large scale developments.

There are often instances during construction projects where someone, a field superintendent, a manufacturer’s representative, a salesman, a consultant, etc. will “stop by” a job site and “inspect” work that is being done. Sometimes the inspection is needed before the manufacturer issues a warranty, or it may be done by the product distributor as a favor to the installer. These inspections usually do not result in changes or repairs, and often the inspector assures everyone that the installation is just fine. If the inspection is done because it is required by a contract, or otherwise, then obviously a duty to act reasonably is implied. Even in the absence of an obligation to perform such inspections, the law will impose a duty to act reasonably, if one who relies upon the work is harmed. Even if you are doing someone a favor, if you represent that the work was done properly, you could be liable if it turns out you were wrong.

New Jersey law holds that one who gratuitously undertakes to render services to another is bound to act in a reasonable manner, and he can be liable for damages, if he fails to do so. Restatement (Second) of Torts § 323; Velasquez v. Jiminez, 172 N.J. 240 (2002). (Doctor who, although under no obligation to do so, assisted another doctor’s patient, was found liable for his negligence in providing that assistance.) See also Dawson v. Bunker Hill Plaza Associates, 289 N.J. Super 309 at 327 (App. Div. 1996). Additionally, the claimant must have reasonably relied upon the information or services provided. See Viducich v. Greater New York Mutual Insurance Co., 80 N.J. Super. 15, at 24 (1963).

So, for example, if a shingle manufacturer’s representative visits a job site where an authorized roofing contractor is installing his product, he may inspect the installation and verify that the installation is correct. There may even be a document memorializing his conclusion, such as a checklist with his signature. If the homeowner or his representative was aware of the representations of quality (perhaps by the issuance of a warranty) and if the inspections were done improperly, there is a negligence claim against the manufacturer. Where a contractor or a vendor performs a service, whether that is an estimate, an inspection, an evaluation or review of plans, if the job is done negligently, it does not matter if there was a contractual obligation to do the work, or if the defendant even got paid for the service, if damages result, then liability may be found.

A component product’s failure to perform as represented by its manufacturer is a frequent claim in a construction defect cases. Often, defendants of such claims attempt to hide behind general disclaimers and limitations of warranty. Addressing the failure of a component product of yachts, the Federal Court for the New Jersey District recently denied a manufacturer’s summary judgment motion, having concluded that a general disclaimer of warranty will not automatically defeat an express warranty created by representations, descriptions and affirmations set forth in a product bulletin. Viking Yacht Co. v. Composites One LLC, ___ F. Supp.2d ___, 2007 WL 2153243 (D.N.J. July 26, 2007).

Defendant’s distributor sold the plaintiffs, two New Jersey yacht manufacturers, the gel coat used as the outermost surface of the yachts. Gel coat provides an attractive finish while protecting the yacht from water and other materials. Prior to their purchase of gel coat, defendant provided the plaintiffs with its literature for the product, touting its improved flexibility and weather resistance, as compared to a prior gel coat that plaintiffs had purchased from defendant. The literature included a descriptions of the gel coat’s characteristics, a product bulletin, and test data supporting defendant’s claims that the new product was an improvement over the old. Defendant also provided a limited warranty that the gel coat met specifications when shipped as well as a general disclaimer and limitation of warranty, stating that a buyer’s exclusive remedy was replacement of the product or refund of the purchase price.

Plaintiffs conceded that they had not purchased the gel coat based on its improved flexibility. Instead, each tried the new product, hoping that it would demonstrate better “buffback qualities” than the earlier product. Unfortunately, both plaintiffs discovered that the new gel coat cracked extensively on boats that were stored or used in cold weather. Plaintiffs sued defendant, alleging that it new of the gel coat’s inherent problems and failed to disclose them. Defendant replied that it had been unaware that the product was subject to cracking, that the cracking could have been attributable to the plaintiff’s errors in using the gel coat, and that, under the limited warranty, it was not liable for plaintiffs’ damages.

The court disagreed with defendant. Governed by the Uniform Commercial Code, express warranties arise whenever a seller states a fact or makes a promise about the goods becomes part of the basis of the bargain or whenever the seller’s description of the product, specification list, expression of a standard, representation of quality, or provision of a sample or exemplar is a basis of the bargain. A disclaimer of such an express warranty may only be effective if it is “clear and conspicuous,” and written so that “a reasonable person against whom it is to operate ought to have noticed it.” And even if the disclaimer is clear and conspicuous, it will not be found effective to the extent that it is inconsistent with express warranties extended by the seller. Here, the properties of the gel coat were trumpeted on the first page of a flyer while the limitation of warranty was buried within it. Accordingly, the court declined to grant summary judgment to defendant based on its disclaimer and limited warranty.

In an unpublished case addressing a peculiar repair, the Appellate Division recently reiterated one of the basics of common interest ownership: When in doubt, read your documents. Waldstein v. Highview at Hawthorne Ass’n, Inc., A-2281-05T1 (June 12, 2007).

Shortly after purchasing their town home as a resale in 2003, Plaintiffs Jay and Kathleen Waldstein discovered a broken sewer pipe was leaking water and sewage below the concrete slab that formed the lowest floor of their town home. Further investigation revealed that the pipe had ruptured when the slab failed as a result of a construction defect: the interior foundation of the home had never been built. Plaintiffs repaired the sewer pipe and rebuilt the floor slab, then requested reimbursement from the Homeowners’ Association.

After the Association declined payment, the plaintiffs brought a declaratory judgment action, asking the court to determine that the Association was responsible for the cost of the repairs and to award them fees and costs. The trial judge declined to do so, finding that, the Declaration of Covenants and Restrictions applicable to the development included no provision making the Association responsible for such a repair. On appeal, the Appellate Division agreed.

Plaintiffs relied on a provision of the Declaration that reads as follow:

Each townhouse Owner, by acceptance of ownership, agrees and covenants that if his townhouse, including any party walls, shall be fully or partially destroyed by fire or otherwise, the Association shall reconstruct said townhouse expeditiously, pursuant to plans approved by the Board of Trustees. Any such reconstruction shall be subject to all other applicable provisions of this Declaration and applicable governmental regulations.

Plaintiffs also pointed out Declaration provisions requiring the Association and the Owners to carry fire and casualty insurance as well as extended coverage.

The appellate judges rejected Plaintiff’s argument, limiting the Association’s responsibility to reconstruct under the cited provision to situations in which a townhouse is fully or partially destroyed by fire or similar casualty. Because Plaintiff’s repairs were necessitated by defective construction, the Association was not required to repair or reconstruct.

The court also rejected Plaintiff’s alternative argument that the Association was required to reimburse them since it maintained a reserve account for repair, replacement and improvement. Analyzing the Declaration as a whole, the judges concluded that the reserves were explicitly intended to fund repair, replacement and improvement of common property and the exteriors of the townhouses. No provision required the Association to fund the repair and reconstruction of an interior structural flaw in a town home, caused by a construction defect.

Finally, the court rejected Plaintiff’s argument that an easement provision granting the Association the right to enter a town home to repair breaks of leakage in the water, sewer or sprinkler systems that threaten damage to common property obligated the Association to reimburse them, finding that no evidence suggested that the leak below Plaintiff’s town home threatened the common property in any way.

The Waldsteins’ futile attempt to pass their repair bills on the Association is another reminder that no one formula sets forth responsibility for repairs and maintenance in common-interest communities. New Jersey law permits sponsors and developers great flexibility in designing the maintenance provisions of their communities, and the many variations in governing documents reflect factors such as marketing decisions, architectural requirements, and site anomalies, among others. Careful reading and analysis of the governing documents, that is, the Declaration or Master Deed, is always the first step in determining responsibilities for performing and paying for repairs.

In New Jersey, a buyer of a newly constructed home generally can’t move in until the municipality (or other governmental entity) has issued a certificate of occupancy, often referred to as a “C.O.” Issuance of a C.O certifies that the construction to which it relates has been completed in compliance with the construction permit and applicable provisions of the Uniform Construction Code. N.J.S.A. 52:27D-121; N.J.S.A. 52:27D-133. Commentator David Frizell has opined that “[i]t is clear that the Legislature . . . intended the C.O. to be conclusive (except in cases of obvious mistake or fraud) evidence of compliance and the right to occupy.” 36 N.J. Prac., Land Use Law §13.8 (3d ed. 2006-07).

Not surprisingly, builders and contractors frequently assert the municipality’s issuance of a C.O. as an iron-clad defense to a property owner’s allegations of negligent construction. The defense is not a sure winner. New Jersey’s courts do not view C.O.’s as the final word on compliance with the Uniform Construction Code (UCC) when code violations are identified after the C.O. has been issued and the property conveyed from the builder to the property owner.

Court holdings rejecting C.O. finality have twice emerged in cases in which governmental bodies sought to enforce UCC provisions. In DKM Residential Properties Corp. v. Montgomery Tp., 182 N.J. 296, 308-09 (2005), the Supreme Court held that the municipal code enforcement entity could issue notices of violations to the builder/developer even after C.O.’s had been issued and the properties conveyed. And, in Cyktor v. Aspen Manor Condo. Ass’n, 359 N.J. Super. 459, 464 (App. Div. 2003), the Appellate Division recognized the propriety of the Department of Community Affairs bringing a post-C.O., post-conveyance enforcement action against a builder/developer so long as the action was initiated within the ten-year period prescribed by the statute of repose.

Long before, the Appellate Division held that issuance of a certificate of compliance for a new septic system did not preclude the property owner’s action against the vendor when usage revealed that the system did not meet code. Andreychak v. Lent, 257 N.J. Super. 69 (App. Div. 1992).

New Jersey has abolished the doctrine of caveat emptor in real estate sales, imposing an implied warranty of habitability and fitness for use. McDonald v. Mianecki, 159 N.J. Super. 1, 14 (App. Div. 1978), aff’d, 79 N.J. 275 (1979). Imbuing the C.O. with finality on questions of compliance would effectively foreclose buyers’ actions against builders and contractors on any construction maters governed by UCC provisions. That result would be contrary to the recourse against negligent builders that the Court gave home buyers when it abolished the doctrine of caveat emptor in McDonald.

Home improvements can cause homeowners as many, and sometimes more, headaches as building a new home. Until recently, home improvement contractors were essentially unregulated, which led to many unskilled and sometimes dishonest contractors preying upon innocent homeowners. In response, the New Jersey Department of Community Affairs ("DCA") required home improvement contractors to register with the State as of December 31, 2005. N.J.A.C. 13:45A-17.1, et seq. The registration includes the registration of the formal name and address of the company, including all trade names, as well as the disclosure of the name and address of the principals of the company and any criminal record of any of those principals.

The DCA also recently created regulations that were specific to home improvement contracts under the New Jersey Consumer Fraud Act. The regulations take into account almost any type of home improvement, from remodeling the kitchen to repairing the driveway to installing wall-to-wall carpeting. Specific actions are prohibited by the regulations including misrepresenting the types of material used in the home improvement, failing to begin or complete work on the date or within the time period specified, failing to give timely written notice to the buyer of reasons beyond the seller's control for any delay in performance, and when the work will begin or be completed and failing to obtain the proper building permits or inspections.

Also, any home improvement contract for a purchase price in excess of $500.00 must be in writing, must be signed by both the buyer and seller and must clearly set forth the terms of the contract. The legal name and business address of the seller, including the legal name and business address of the sales representative or agent who solicited or negotiated the contract for the seller must also be included in the contract. The contract must also include a description of the work to be done and the principal products and materials to be used or installed in performance of the contract, the total price to be paid by the buyer, the dates or time period on or within which the work is to begin and be completed and a statement of any guarantee or warranty to be provided. Violations of these regulations could result in the award of triple damages and reimbursement of counsel fees, if those violations result in damage to the homeowner.

Therefore, in addition to obtaining several bids for the work, asking for and following up with references, it may also be beneficial to homeowners who are thinking about making improvements to their home to obtain the registration information from the DCA and to make sure that the regulations provided by the DCA are followed to protect themselves from future problems.

The front page of Sunday's New York Times Real Estate section headlined the dubious proposition that, if a builder chooses to live in one of his own condominiums, the condo would "most likely work for the buyer" since "the developer's eye is on every detail." (Vivian S. Toy, "If It Seduces the Builder . . ., New York Times, Real Estate, Section 11, p. 1 (October 29, 2006).) Our experience suggests that there are better ways to evaluate the quality of a potential condominium purchase than the builder's decision to buy a unit himself.

Attention to detail has not been apparent in an ocean-front community that we represent, even though approximately one in three initial sales was to a principal of the developer, a subcontractor, or a party with financial connections to the developer. From our point of view, another factor that Toy identified is much more important to a developer's decision to purchase a unit in a condominium he or she has built: the opportunity to "get first choice, sometimes at a substantial discount." Speculating that his unit might sell for $6 million, one developer reflected to Toy that he paid "more than it cost to build and less than market value." Often a developer's purchase price is less than the unit cost to build, with the difference made up by skimping on construction and materials elsewhere in the development.

The advantage of first choice is especially apparent when certain units boast extraordinary advantages, such as ocean frontage or a magnificent view. The developers that Toy profiled selected such units as a "penthouse with sweeping city views" and a Brooklyn waterfront unit with "views of eight different bridges." Non-developer unit owners in one of our client communities were surprised to discover that what had appeared to be common green space above the beach in the plans and models was actually the back yards of the beach front units, which were, for the most part, owned by the developer and his associates. Prospective condo buyers need to look carefully at both the prospectus and what is actually being built to ensure that apparent amenities are not disproportionately allocated to the builder and his cronies, with other unit owners footing the bill through inflated purchase prices or maintenance fees.

Builder's options are enhanced by early choice and limited only by constraints imposed by one's business partners, reported Toy. The profiled developers incorporated into their units additional space and custom features, such lap pools, rooftop party spaces, and casitas for the grandchildren, without the necessity of approval from condo associations that were not yet formed. Toy does not acknowledge that condo associations might reasonably frown on upgrades that have the capacity to increase the association's insurance or maintenance costs, to pose a threat of water leakage, or to overtax the building's structure.

Focusing on the congenial developers interviewed for her story, Toy extolls the advantages of unit owner/developers who can "hurry the contractor[s] along," resolve plumbing and electricity issues as they occur, and make sure "the lobby's going to be clean." The author seems not to have encountered the overextended builders and developers that we construction litigators too often see: cutting corners on construction, rushing closings in hopes of quieting the creditors, and ignoring unanticipated (and unbudgeted) defects and deficiencies because adequate funding simply isn't there. The importance of keeping the lobby clean fades when the builder is desperately trying to pay the dry wall contractor enough to keep him on the job until the last units are finished. As the real estate market cools, more builders and developers will find themselves shortchanging construction quality and customer service in order to satisfy unanticipated carrying charges.

"Having a developer living on site should also assure buyers that the typical problems that come up as any development is being completed will be dealt with quickly," Toy gushes. The unacknowledged assumption underlying Toy's premise is its dependence on the builder/developer's self-interest being concurrent with that of other unit owners. Conflicts of interest between the developer and other unit owners quickly emerge when construction goes bad or the money runs out. In short, the fact that the builder has been "seduced" by his latest project offers no assurance that purchasing a unit will work for an unrelated buyer.

In Construction Defect cases, the best and most persuasive evidence we have is often photographs. The more pictures we have to look at, the more pictures we can show the jury, and the better presentation we can make. Many of the photographs we use come from our experts, but an increasing number of cases feature large numbers of photographs taken by the homeowner. As a homeowner, we recommend that you take pictures of your house as often as possible. If you have a digital camera, it is very inexpensive, and your pictures could help prove a claim later on.

If you are building a new house, you should photograph the construction process as often as possible. Try to get a shot of the subcontractor's trucks, if they identify the name of the subcontractor. (You would be amazed how often there are no records of which subcontractors did what on a house) You never know what mistakes may be made and there may be errors that you don't notice, so you should try to document each step of the process. Once your home is finished, a comprehensive photographic record can help you get proper attention from the builder during the warranty period, and/or provide persuasive evidence of problems that the builder has refused or failed to remedy. If you start having water intrusion problems, you should photograph everything - drips, puddles, buckets, towels, stains. If the house is settling too much, photograph the cracks on a periodic basis, such as once or twice a month to see if they are getting bigger, or there are more and more of them over time. If you see any water stains in your attic, take some pictures.

Should any repairs be necessary to your home after the expiration of the warranty period, you should still give the builder notice of any repair work, since the repairs may destroy evidence that could prove useful in later litigation. If the builder has notice of the repairs before they happen, the cannot argue that they were denied a chance to inspect the home in it's pre-repair state. You should to this in writing to the builder, and of course save a copy of the letter. The builder is also obligated to notify all potentially responsible subcontractors, design professionals, and material suppliers of the pending repairs as well. When and if you have to make repairs to your home due to construction deficiencies, document that process as well, including what you or your contractors find when they peel back the siding, or the roof. Pictures can provide solid compelling evidence, and they can be invaluable for refreshing your recollection about conditions or events that may have occurred years prior. If there is little or no cost to you, and a potentially huge advantage later on, snap away!

If you would like more information you can contact Christopher Geary at 609.895.7261 or cgeary@stark-stark.com.

We get a lot of phone calls from people who are having trouble with their homes. Some of them we can help and some we cannot. There are numerous factors that go into determining if a homeowner has a viable claim against a contractor, and ultimately every claim must be analyzed individually. No one situation is the same as any other, but there are certain things that apply all homeowners: we will summarize a few below:

How old is your home?
New Jersey has a Statute of Repose for Construction Cases. Generally speaking, a homeowner has 10 years from the issuance of a Certificate of Occupancy to make a claim against the builder. After 10 years, you will have an uphill battle to convince a judge that your claim should not be dismissed. Since most builders will offer a warranty of one or two years, we recommend that homeowners pay close attention to any and all issues that may be relevant to their home's long-term performance, specifically that any problems you experience from year 2-8 of the home's life should be carefully examined by a qualified professional, preferably a forensic architect or engineer. If there is any workmanship deficiency, you need to know about it quickly, since you need to file suit before your 10 year time period runs out.

Who built your home?
It is often amazing how few documents are kept by contractors after 6-8 years. Some of the smaller contractors (if they are still in business when problems begin to manifest in the home) often have no records of the subcontractors that they hired to perform the work on your house. A successful litigation strategy means bringing everyone who may have liability into the lawsuit, and to do that, you need to know who to sue. Whether you are building a custom home, a semi-custom tract home, or buying a recently constructed home, ask as many questions as you can about who the subcontractors are. Ask for a list of subcontractors from the builder. Many builders will hand these out to their customers, since they will instruct you to deal with the subcontractors for warranty repairs. Ask for a copy of the contracts, if you can, or take a picture of the pickup trucks with the names painted on the door. If you need to file a lawsuit, you are going to want to know who the various subcontractors were, so you can bring them all in at the beginning of the litigation.

Save everything
Similar to No. 2 above, you should save everything that relates to your home. Save advertising and brochures that led you to the property. Save the back and forth documents when you were negotiating the purchase. Save the paperwork from when you picked out your options. Save the closing documents. Save any documents you received at the closing, including a "homeowner's manual" or "handbook". Save any paperwork relating to warranty repairs. If you have extra tiles, shingles, buckets of EIFS, you should hang on to these as well. Not only will they come in handy for minor repairs, but they can provide valuable information, should you need to go to court to force contractors to stand behind their work.

Be Attentive and Proactive
A new home should not require any substantial maintenance for many years. However, minor maintenance should not be overlooked. You have to act like a reasonable homeowner to safeguard the value of your investment. You cannot treat your new home like an apartment, where someone else owns the property and will suffer the loss if a lack of routine maintenance leads to problems down the road. If you never clean out your gutters, reseal your driveway, re-caulk your windows, or change the air filter on your HVAC. system, you may have a difficult time convincing the jury that your new home's poor performance is related to something the builder did wrong, and not just a lack of normal maintenance. Read manuals and handbooks that the builder gives you, and follow the recommendations. If you are diligent about maintaining your home, and take an active role in upkeep, you will be able to spot issues as they arise, and hopefully before you have massive and expensive damage to repair.

Be Skeptical of Warranty Work
Builders are in business to make money. We all know this. Unfortunately, we often find that this means that builders will skimp on repairs during the warranty period, often doing a "band-aid" repair that will last another 6-12 months, which coincidentally will get them through the end of the warranty period. With any repairs to the building exterior - roofs, siding, doors, windows, you should be skeptical and vigilant. Many times a spot of sealant is an appropriate roof or window repair, but many times in is not. You may want to consider hiring an independent inspector to advise you on appropriate repairs for your problem, and/or to oversee the work of the builder or his contractor, to make sure the repair is appropriate and adequate. We have often seen major issues which arise during the warranty period covered up by builders, and given a "band-aid" repair, simply because the homeowner did not fully consider the issues, or was too trusting of the builder. Don't be afraid to stand out. The builder has hundreds of thousands of dollars of your money. You should have a house that will perform and last for years.

It is common for contractors working on large-scale construction projects to require their subcontractors to provide a “Certificate of Insurance.” These certificates are commonly issued by insurance brokers and are intended to confirm to the prime contractor that the subcontractor maintains insurance.

In Cvetkovic vs. N.J. Water Supply Authority,  a New Jersey Appellate Court has decided, as a matter of first impression in New Jersey, that a certificate of insurance which contains a disclaimer that the certificate was issued “as a matter of information only and confers no rights upon the certificate holder” nor does it “amend, extend or alter the coverage afforded by the policies” does not establish insurance coverage for the contractor receiving the certificate.

The Court confirmed the limited weight these commonly issued certificates should be afforded, due to the expansive disclaimers included on most form certificates.

In practice, a party seeking proof of insurance, in the construction context, or otherwise, should not rely merely upon the certificate of insurance as evidence of insurance coverage. Further, if the contractor seeks coverage under the subcontractor’s policy, the contractor must require an endorsement issued by the insurance carrier showing that the certificate holder has been added to the insurance policy as an additional insured. Without this endorsement, the certificate holder is left largely unprotected, and should not draw comfort from the certificate, which alone can be of little or no value.

Thus, if a party seeks confirmation that its subcontractor has insurance coverage, the party should require an actual copy of the policy with confirmation from the insurance carrier that it is in full force and effect. If the party is seeking liability protection as an additional insured, an endorsement which so provides is required.