Construction Law

Construction Law

I’m glad you are here and you found this page on construction law. This may be one of the most comprehensive single webpages on the subject of construction law on the internet. The intention is to give a brief overview of the most common construction law issues that a construction lawyer encounters on a regular basis.
Use this as a reference point and please reach out if you need more content on a certain subject listed below.
The lawyers at Smiley Law Firm are located in New Orleans, Louisiana. We handle cases from New Orleans to Baton Rouge, Louisiana and we also handle the entire State of Louisiana. We have attorneys licensed in Texas and California as well. We know construction law.

Construction Law is a nuanced area of the law. Construction Law is a subset of business law and contract law because all construction companies are businesses and contracts are what the parties negotiate and live by during the life of a construction project. Louisiana has a unique legal system based on Napoleonic law, so when contractors from other states like Texas and California come to do work in Louisiana cities such as Baton Rouge or New Orleans, there are a number of differences which need to be addressed before work begins on the construction project. Typically, construction law issues center around a particular construction project. There are instances where legal disputes can involve many construction projects, however, the laws typically apply on a project-by-project basis.

Typically, construction law issues center around a particular construction project. There are instances where legal disputes can involve many construction projects, however, the laws typically apply on a project-by-project basis.

Construction contracts – negotiating and drafting

There would be very little construction law without construction contracts, this holds true for Louisiana and all other states. Sure there are many instances where there is no written contract, but nearly every project has some type of legal contractual agreement. Many times lawyers see issues that have turned into a serious matter because of the lack of a solid contract or the parties did not carefully lay out the framework of the agreement. In Louisiana, the construction contract is the law between the parties. I say this all the time and it does not stick for some reason. Sure the Louisiana code has statutes to guide when construction contracts are silent or against public policy, but the majority of all construction law issues can be resolved by looking to the construction contract.

The key to construction contracts here in Louisiana is to either have your own contracts drafted for your company or negotiate a construction contract that is presented to you for signature. All construction contracts can be negotiated and they should be negotiated! If they are not, then the drafting party will always have the advantage. Savvy contractors in big cities like Houston, Dallas, Baton Rouge, San Diego, and New Orleans know to negotiate their construction contracts before signing on to a project.

Construction Law: Private Projects

Basically, there are two ways to classify a project in construction law, either public or private. This is the same whether you are in Louisiana, Texas, or California. Public is either state or federal and will be described in more detail below. The opposite of a Public construction project is a Private construction project.

A privately owned job is one where either an individual person or an entity owns the land where the construction project is being built. The reason for the crucial difference has to do with how the law treats the land the construction project is being built upon. In the eyes of a construction lawyer, we know privately owned land can be sold and public lands cannot be foreclosed.

There is a long legal history of this classification structure, it goes back all the way to the founding of the United States of America. The key to remember is if a contractor is not paid for a private job, then a lien can be filed and as a last resort, the property can be sold to satisfy the lien. You cannot do this for a public job. Public construction projects must be bonded so claims can be made against the bond as security.

Construction Law: Public Projects

Public projects, as described above, are the opposite of a private job. The public entity must provide a bond as security so parties who bid can ensure there will be money to pay for the work performed. This means that a general contractor who signs a construction contract with the State of Louisiana, Texas, California, or any other state government may have to furnish a bond for the work.

Public projects also have many other formalities which are designed for transparency in the public bid process. There is a requirement for sworn pay applications and sworn statements of amount due. These safeguards were enacted by legislatures to make sure that the United States Constitution is upheld. Government action has to be fair and apply the same to all.

The element of a bond on a public project also helps to speed up the payment process by allowing for other pressure to be put on non-paying contractors. Navigating the public construction landscape is essential for getting paid. A good construction lawyer can help greatly.

Substantial Completion

The term substantial completion is a buzz term in the construction law world. The reason for the buzz is due to the fact it is often used in the law or contracts but it is rarely defined with certainty.

Many definitions use terms such as “put to its intended use” or a job is substantially complete when it reaches the punch-list phase. Some contracts will define substantial completion and others will not, in my experience most do not. However, the law requires many deadlines to run from the substantial completion date.

The American Institute of Architects (AIA) has a form document for the owner, architect and general contractor to sign and agree when the project reaches substantial completion. Many times the date is agreed upon, other times it is hotly contested. The substantial completion date can determine when liquidated damages start and can also trigger lien period clocks. Lawyers often debate substantial completion in construction law settings because the actual date of completion can make or break contractors, subcontractors, and suppliers. This article from the blog does a good job explaining substantial completion.

Public Bid Process and Bid Protests

The precursor to any public project is the public bid process. If the public bid process is not followed correctly then there is a process called a “bid protest” whereby a bidder can object to the bid process and if the conditions are correct, the bidder can file to have the entire bid thrown out. The rules for public bid are stringent and need to be followed carefully by the parties issuing the bid. There are many technical issues that can have a bid thrown out. The devil is in the details.

Each state has different construction public bid laws. Louisiana, Texas, and California all have a different set of rules that need to be followed so that the bidders are treated fairly. Construction lawyers often have sent out a public records request, obtain all of the bid documents and compare the bid process for a specific project to make sure it matches up with the public bid process exactly. One wrong move in the bid process and the bid protest may be successful.

Construction Law: Federal Projects

Projects issues and paid for by the United States Federal Government are considered federal projects. The Miller Act, Federal Acquisition Act, Federal Business Opportunities (FedBizOpps), competitive bidding and Department of Labor are just some of the hot topics under construction law for federal projects. Like state construction projects and public bid, any federal construction project over $100,000.00 is required to be set for competitive bidding.

The details on federal construction projects are intense. Having a lawyer well versed in construction law for federal projects is essential if you want to navigate the complex waters of bidding on federal jobs. The SBA has a website dedicated to government bids and numerous resources to help a business owner with the basics of federal contract opportunities. Review this information carefully and then discuss it with your construction law attorney before moving forward on a federal construction project. The rewards can be great when working on federal construction projects, however, the penalties for non-compliance or violating federal laws are just as severe.

Owner Issues

The subject of owner construction law issues typically involves homeowner issues. A home is the most valuable asset that most individuals will own in their lifetime. I believe that “you” are your most valuable asset in life but for tangible assets, many people will not pay more for anything in their lifetime than their home.

People love their homes and they are very protective of this valuable investment. We see many construction law cases where homeowners are upset with their contractor due to delays, cost overruns, change orders, poor workmanship, and many other issues.

In the eyes of a third party construction lawyer, I see both sides of this dispute. Here at Smiley Law Firm, we represent both contractors and homeowners in various instances when that party has been wronged.

We understand that homeowners care deeply about their home. We also understand that contractors are trying to run a construction business and they often juggle many projects at one time. This contradicts with the homeowner who only cares about the one job, his/her house.

Smiley Law Firm also has a number of second home, investment home, and commercial property owner, clients. There are specific construction law needs for each type and a good construction lawyer can navigate the issues with care, helping the owner client reach the goal they are trying to obtain from the legal representation.

As always, getting out in front of any possible issue is the key. Trying to work out a deal before the construction problem becomes a legal disaster increases the likelihood of success. However, many times we do not become involved until later and the adversarial process is the only means for resolution. Just remember dispute resolution, whether its litigation, arbitration or mediation, is not cheap.

Developer Issues

Through the years Smiley Law Firm has had the pleasure of representing a number of construction developers. We like these clients because these are the people who are out getting their hands dirty trying to make our cities like Houston, Baton Rouge, and New Orleans a better place.

Developers take on huge amounts of risk in exchange for a big financial reward. There are a number of legal issues that need to be planned for early on in the development stages of a construction project. Land procurement, leasing, city or municipal permitting, hiring contractors and other vendors to perform the work and finally selling or leasing the construction development to parties to realize the financial gain, are all issues that developers face.

Developers need a number of tools handy to complete the construction project efficiently, on time and under budget. All developers should factor in legal costs into the construction project so that they can have trusted counsel to advise along the way. Here at Smiley Law firm, we help our developer clients reach the construction project finish line.

General Contractors

Construction projects consist of basic elements: owner/developer, general contractor, subcontractors, building suppliers, construction vendors, laborers, and equipment rental companies. General contractors are the cornerstone of this entire landscape. Smiley Law Firm attorneys understand all of the issues and complexities general contractors face on each construction project. General contractors get much of the glory when a project ends successfully, however, they also assume much of the risk when the construction project ends poorly. General contractors must:

  1. manage owner and developer expectations,
  2. manage payment to subcontractors,
  3. ensure that subcontractors are paying vendors and suppliers,
  4. manage payment to the general contractor’s vendors, and suppliers,
  5. secure bonds for the project that are backed up with personal guarantees from the ownership of the general contractor construction company,
  6. manage delays from subcontractors, suppliers, and the weather,
  7. complete the job on time and under budget,
  8. account for and manage the change order process,
  9. maintain contract compliance with both the owner contract and the subcontractor’s contracts,
  10. comply with local permitting and political issues for the project, and
  11. maintain proper insurance and licensing for their company and make sure all of the subcontractors have proper insurance and licensing.

This is not even an exhaustive list! The general contractor on a project has power in that they can control the schedule of the job and they have control of the money being paid by the owner. With this power comes great risk and potential reward. General contractors need to be wary of all obligations of the role so they can make the job progress effectively and efficiently.

Subcontractors, Tradesmen, and Laborers

This is what I call the “boots on the ground” – subcontractors, tradesmen, and laborers are the construction companies and/or individuals who perform the actual work on construction projects. They are often the parties who get pushed around on construction projects as well.

Subcontractors, tradesmen, and laborers often have the most to lose on a job and take on most of the risk. Many times the contracts signed by these parties have one-sided provisions, such as indemnity, subrogation, and liquidated damages provisions.

Further, many subcontractors, tradesmen and laborers sign construction contracts with the general contractors that are one-sided, then they have to sign contracts or purchase orders with the suppliers which can be equally as one-sided.

In many states such as Louisiana, Texas, and California there are laws which protect the rights of these parties, but the need to perform perfectly is still pressing. Here at Smiley Law Firm, we file liens for subcontractors, tradesmen, and laborers all the time so to protect their right to payment when funds dry up at the end of a construction job.

Material Suppliers

Construction supply companies who bring the raw materials to be consumed by the construction project and incorporated into the building or structure tend to need the services of a construction law attorney more than subcontractors, tradesmen, and laborers.

Construction material suppliers include but are not limited to, electrical supply, HVAC supply, roofing supply, lumber supply, concrete supply, plumbing supply, paint supply or just about any type of raw material that is used to construct a building or structure.

The law defines these materials as those which come to the job as separate, movable, personal property of the seller, but then they are consumed into the structure and become a component part such that they become a part of the property. They become apart of the immovable or real property such that they cannot be removed without damage to the structure.

This legal distinction is important. In order for construction suppliers to have lien rights they need the parts they supply to become apart of the property. Then if a construction supplier is not paid, they can enforce the lien against the property in order to obtain payment if a dispute occurs.

Many states, such as Louisiana, Texas, and California, have rigid legal notice requirements for construction material suppliers because most owners and general contractors do not know the supplier even has any rights to secure payment for the construction project.

Having a good construction law attorney to explain all the rights and necessities of a construction material supplier is important. The stakes are even higher when construction material suppliers operate in multiple states where the laws change from one state to the next. Some of the most preventable payment issues come when dealing with suppliers securing rights.

Many times the construction suppliers have power but they do not know how to deploy all of the weapons to ensure timely and full payment. Construction supply companies typically have great claims if they delivered the parts to the job, but they need to secure those rights by sending pre-lien notices and filing timely liens. We help construction company credit managers, controllers and chief financial officers of construction supply companies secure rights and privileges on jobs so that they get paid early and often.

Equipment Lessors / Rental Companies

One other specific party to construction job sites and construction law is the construction equipment lessor or rental company. Often times, general contractors, owners, developers, subcontractors, and laborers cannot afford the expensive equipment needed to construct buildings in today’s modern construction landscape. Excavators, bulldozers, backhoes, forklifts, skid steers, dump trucks, and other massive construction industry equipment are often times rented by the party using the equipment.

Again, the legal distinction here is important. The construction company who owns the equipment but is renting it to the job site professional needs to have privileges in order to secure payment for that job.

Lien law and construction law have to make an exception here and allow the rental companies a mechanism to secure payment. A lien is an answer here. However, in most states the notice requirements are intense. Louisiana is an example of where the notice requirement is nearly impossible for a construction rental company to secure rights on rental equipment.

Savvy construction rental companies stay on top of where the equipment is being used. They have intake and deliver procedures which include inspections and pictures by trained professionals. You think returning a rental car is tough, you should see what contractors have to do when bringing back a huge piece of construction equipment.

Again, knowing the construction law, negotiating the construction contracts, obtaining personal guarantees on the owners of the renting company, sending notices, filing liens, sending demand letters and filing suit to collect on past due amounts are essential to know for a construction rental company.

A rental company with a smart construction law attorney will have all of these policies and procedures laid out for each and every state they deliver equipment. Other Popular Subjects In Construction Law: Design Professionals – Architects and Engineers Surety Claims / Bond Claims – performance and payment bonds Payment issues Liens

Lien Waivers Mediation and Arbitration Clauses Insurance Claims on Construction Projects Construction Defects Construction Delay Claims Construction Injury Claims Construction Litigation

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