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The Lawyer's Guide to Your Honeymoon (with your construction contractor)

Posted by attorney David von Beck

Even the simplest construction project will raise legal issues that deserve your attention. This is true whether you're a homeowner, architect, builder, subcontractor, material supplier, developer, or even just the purchaser of a turn-key home. My goal, in this and subsequent articles, will be to help you prevent legal issues from becoming legal problems.

Legal problems in construction and development usually result from, or are complicated by, a lack of foresight. This lack of foresight is most severe and most frequent on small- to mid-sized construction projects because there is very often a "honeymoon" period, during which the owner, architect and contractor are all excited about the project, getting to know each other and, of course, getting paid.

The owner looking at the portfolios of the architect and contractor sees only finished projects - results - and imagines his own completed project. As a result, he or she may tend to focus on the end product and downplay the many steps between initial idea and completion. This may occur even with owners who have been involved with a previous project - especially if that previous project involved few glitches. The architect, contractor and subs, on the other hand, are selling themselves to the owner or firm that is considering hiring them, or has already retained them. In such a competitive industry, where an economic downturn can put numerous people and whole companies out of work, many tradespersons and firms have difficulty saying "No" to a potential project, even when times are good and they have plenty of work already. As a result, they may play up their abilities and downplay whatever obstacles they may foresee, whether it's the site slope, availability of quality labor, materials or time schedule.

When you multiply this tendency by the number of companies and individuals involved in a given project, you end up with a substantial likelihood that some person or company will be unable to fulfill a commitment to the project. This may be as simple as a slight delay in completion, or as serious as poor workmanship that results in substantial damages. In my experience, this can happen even when a company or individual tradesperson comes highly recommended from the architect or contractor. This occurs when the recommended person or company has simply stretched themselves too thin to give your project or your client the necessary and expected level of time and attention.

The legal problems may be most difficult when it involves a company or person who was highly recommended because 1) the person or company who made the recommendation, and who is also involved in your project, probably has a close relationship with them and is hesitant to admit the work is inadequate or to become involved in the dispute, and 2) the contract, if one exists, with the recommended person may be less than adequate because the owner or contractor was relying on the recommendation as an adequate guarantee. This brings us back to the core issue: foresight, or lack thereof. It can be uncomfortable, in the very early stages of a smaller project, to talk about contract details such as remedies in the event of default. Peoples' eyes glaze over at the mere mention of phrases like bonding, indemnity and mitigation of damages. Yet these are crucial issues that, when addressed at the front end, can save an unknown but often large amount of time, money and stress later on. And the reality is, the honeymoon period is usually the most comfortable period in the various parties' relationship.

Honeymoons are great, but they're quickly forgotten when a relationship sours. Addressing potential conflicts, in writing, at the outset will help your relationships on a project to endure, and will lead to faster, cheaper resolution of conflicts that do arise.

There are many other, detailed legal issues that arise in construction projects, from site selection and environmental issues to renting and resale. Each of these presents its own unique legal issues that may warrant consultation with an attorney.

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