Construction Defect Repairs

The law of unintended consequences theorizes that the actions of people – especially government – often have effects that are surprising or unplanned. The idea of unintended consequences is generally traced back to English philosopher John Locke. In 1692, in a letter to Sir John Sommers, a member of England’s Parliament, Locke counseled the defeat of a parliamentary bill designed to regulate interest rates. Locke argued that instead of benefiting borrowers, as the bill intended, it would hurt them because creditors would find ways to circumvent the law, and those related costs would be borne by the borrowers, namely “widows, orphans and all those who have their estates in money.” John Locke, Some Considerations of the Consequences of the Lowering of Interest and the Raising the Value of Money (1691). Oregon House Bill 2661 (“HB 2661”) should be considered with unintended consequences in mind.

HB 2661’s goal is to curtail or reduce the spiraling costs of new residential construction in order to make housing more affordable. While that is an admirable and laudable goal, the key features of this bill remind me of Locke’s letter to Sommers and his concerns about that century’s old bill to regulate interest rates.

HB 2661’s key features include:


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After having successfully recovered, borrowed, or assessed funds for the repair of damaged buildings, an owner, property manager, or homeowners association (I’ll use the term “Owner” in this piece for brevity) must shift gears, and determine how most wisely to spend those funds.  The Owner may not have experience with significant construction projects, and likely must rely on outside expertise for management of reconstruction.

  1. Continuation with Forensic Consultants

If the Owner engaged a forensic analyst to study the damage, continuing a relationship with that analyst through the construction project usually makes sense. The analyst can be hired to continue assistance in a number of capacities: convert its recommended repairs to formal construction drawings, review and administer construction through completion, or provide peer review and comment on the work of others. The Owner should confirm with the analyst up front whether it has that capacity and expertise to perform these functions, and meet with the personnel at the firm who would be assigned such duties.
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Please check out my latest post on the Policyholder Report blog regarding a recent Florida decision  – another win for policyholders.  Here is an excerpt:

Last week, a federal district court in Florida reaffirmed the black-letter law in Florida that claims against a general contractor for damage to the completed project resulting from the defective

The Oregon Court of Appeals recently issued a surprising decision regarding the ultimate timeline to file a construction defect claim involving a “spec home.” (A “spec home” is a house which a builder or developer constructs not for a specific owner but on speculation that the home will sell to the general public upon completion.)  In Shell v The Schollander Companies, Inc. (September 24, 2014), the Court of Appeals decided that ORS 12.115, as opposed to ORS 12.135, supplies the appropriate ten-year statute of repose for an owner seeking a negligent construction claim where the owner does not have a traditional “construction contract” with the builder.  The plaintiff in Shell was the original owner of the home.  She purchased the property midway through construction from the original developer/builder using a real estate sales agreement to complete the transaction.
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Our colleagues at The Policyholder Report  note on a recent decision of whether construction defects present a single or multiple “occurrence” for insurance coverage purposes. In Chartis Specialty Ins. Co. v. Am. Contractors Ins. Co. (Aug. 12, 2014), Judge King of the federal district court in Oregon ruled that allegations of “deficiently managed construction” constituted

Today the Oregon Court of Appeals handed down a lengthy opinion upholding a money judgment awarded in favor of a judgment creditor in its garnishment action against American Family Insurance Company.  Read about it and get the decision on Ball Janik’s Policyholder Report.

Building officials are typically immune from liability for failing to properly inspect construction for code violations. Code compliance generally falls on the shoulder of the developer and contractors.  Our colleagues over at Herrick, Feinstein report on the perfect storm:  “The city building inspector for Norristown, PA forces condominium owners to relocate due to structural defects

UPDATE:

The Supreme Court issued an important decision about statutes of limitations under Oregon law on January 30, 2014.  In Rice v. Rabb, 354 Or 721 (2014) the Court held that there is a discovery rule for conversion claims under ORS 12.080(4) and reversed the Court of Appeals, which held that Rice’s conversion claim

Are you one of the lucky ones who just purchased a new Oregon home or perhaps you’ve just completed a remodel?  Are you looking for that automatic one-year warranty everyone told you about?  Here’s the shocker: it doesn’t exist.  There is no such thing as a legally-required one year warranty in Oregon, despite the ubiquitous popularity of this myth. 

However, as with all great myths, it stems from a nugget of truth.  If you hire a contractor who fails to deliver, you can file a lawsuit anytime up to six years after the completion date (maximum ten years for negligence discovered later).  In that sense, you actually have a much longer warranty.  However, you might have a hard time recovering money from the contractor many years later, especially if he is no longer in business. 
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