Author Archives: Melissa Dewey Brumback

Tues Tip: Two upcoming NC Building Expos

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Two Building Expos are coming to North Carolina.  If you want to increase your knowledge of building issues, consider checking one or both of the expos out!

First up, is GreenNC’s North Carolina Building Industry 6th Annual Tradeshow,  scheduled for September 9, 2010, at the McKimmon Center in Raleigh.  The event is free to attend.  There will also be a keynote luncheon ($35) by Bill Reed, AIA, LEED, Integrative Design Collaborative.

21stlogoGreenNC

Second, the 21st Century Building Expo & Conference will be held September 15-17, 2010 at the Charlotte Convention Center.  Conference passes start at $75 and increase if you want CE credit. The Expo promises over 50 general session seminars, North Carolina Builder Institute courses and NAHB Education classes.

If you plan to attend either or both of these events, let me know and we can try to meet up in real time.  Secondly, I’d love to know your thoughts about these conferences.  What were the valuable things you learned?

 

Tolling the Statutes of Limitation & Repose? (Law note)

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Lowe's Motor Speedway

A blog reader recently raised the question of to how to handle construction defect claims while repair attempts are being made on a defective building.  In part, the answer to this question will depend on how close you are to the statute of limitations or the statue of repose from running.  The closer you are, the more you need to be concerned about this issue.  Just because all parties are working together to solve construction issues does not mean that the statutes are not running.  They can.  [There are, as usual, exceptions for equitable reasons.]  And once statues run, there’s no getting them back.

One prudent approach to dealing with the statutes is to have all parties involved enter into a “Tolling Agreement.”  What a properly drafted tolling agreement can do is to stop the running of the statue of limitations and/or repose while the parties attempt to fix the defects or otherwise settle their issues with one another.  Note that the tolling agreement does not give a party any greater rights than they would have at the time it is signed– that is, if the statute has *already* run, then it would be of no use.  But the tolling agreement can act as a “time out” on the running of the clock.

A good example of a tolling agreements is found in the Court of Appeals opinion in Charlotte Motor Speedway, Inc. v. Tindall Corporation, 195 N.C. App. 296, 672 S.E.2d 691 (2009).  The Speedway case involved the infamous collapse of a pedestrian walkway during the NASCAR Winston Cup.  The walkway which collapsed had been substantially completed by October 1995, and the collapse occurred in May 2000.  Speedway (the project owner) and Tindall (which constructed the walkway) entered into a tolling agreement:

“to toll and suspend any applicable statute of limitations, repose or time, whether created by statute, contract, laches or otherwise, within which any cause, claim action, cause of action, or suit must be made, or commenced by the parties against any one of them concerning the [pedestrian] claims, including any and all claims for indemnification and contribution.”  Id. at 298, 672 S.E.2d at 693.

Tindall attempted to argue that the statute of limitations barred Speedway’s claim for indemnification of monies paid prior to three years before it filed its complaint, but the Court found that the Tolling Agreement, which remained effective “through and including January 1, 2006” tolled the action, and Speedway brought suit on July 17, 2007, less than two years after the Tolling Agreement expired.  Likewise, the Court held that the statute of repose did not bar the action, because the Tolling Agreement was entered into less than six years after substantial completion, and the lawsuit was brought during the pendency of a second funding [tolling] agreement between the parties.

If you are considering a tolling agreement (or think you don’t need one because you “have time”), it is always smart to get a professional opinion on the matter.

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Comments? Let me know.  I welcome the opportunity to discuss how the statute of limitations and repose may be tolled in your specific situation.

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Photo “Trucks” by JMLeedy (Justin Leedy) via Flickr via Creative Commons License.

 

Tues Tip: 8 Best Collection Practices

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crayon tips

COLLECTION “TIPS”

 

 Readers of this blog may not know this, but in addition to construction law I also head our firm’s Collections practice.  What that means is that, once your client is no longer paying your bills or taking your calls, you can hire our Firm to either (1) get the client’s attention or, failing that,  (2) sue the (former) client for unpaid fees or merchandise.         However, if you establish good collection practices up front, before you extend credit to any client, you may be able to avoid having to hire a collection attorney to do the dirty work for you.  Here are my top 8 collection practice management tips:

1.

 Be careful on the front side in who you extend credit to. Get personal guarantee if possible.  Make a copy of the person’s driver’s license. (This helps if you have to sue to collect). Check their credit.

2.

Have a written contract.  Failing that, a signed purchase order agreement, with contract terms on the back, would be good. Just don’t rely on a handshake.  You can include language for interest (up to 18% per annum in North Carolina) and reasonable attorney fees and collection costs.  If you don’t have this in writing, you may not be able to get these items later.

3.

With the first payment by the customer, make a photocopy of the check.  (This is helpful to know where they bank in case they later stop making payments).

4.

Bill regularly- at least monthly.

5.

Charge an interest rate on past due accounts so your money isn’t being used for your client’s “float”.

6.

If you are in the position to file a mechanic’s lien (contractor, subcontractor, etc)– be aware of time deadlines for both (1) filing a lien and (2) perfecting that lien.  These are state-dependent so consult an attorney in your state.

7.

Create a system for large A/R accounts.  For example, when account is X days late, send a polite but firm demand letter.  When account is Y days late, initiate lawsuit/have your attorney send demand letter.

8.

Consider alternative payment arrangements.  If your customer acknowledges the debt, and is willing to sign a note or confession of judgment, you can offer payment terms.  If the payment terms are not met, then you can file the note and judgment.

Bonus tips– Steps for after a judgment, to help your collection efforts:

  • Send a copy of the debtor’s drivers license to the sheriff for execution on your judgment.
  • See if your jurisdiction allows for the seizure of bank funds.  If so, provide the banking information to the sheriff to aid in his seizing assets.
  • If a judgment comes back with “no assets,” consider having your attorney serve supplemental discovery questions if allowed in your jurisdiction.
  • Some states (but NOT North Carolina) allow you garnish wages.  Ask your local attorney if this is an option.

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Comments? Questions? Other good collection practices?  Let me know in the comments section or drop me a line.   And sign up for email updates by putting your address in the box on the top right so you will not miss any posts.

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Photo “Crayon Tips” by laffy4k via Flickr via Creative Commons License.

 

Follow your Change Order Requirements

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 check markIt is extremely important that you follow your written contract requirements.  No where is this more evident than in the change order process.

Most contracts have an explicit provision for the payment for additional work– and they generally require a written, signed change order (or change directive) before the work is performed.  Can you get by with verbal agreements for additional work? Sometimes yes, sometimes no.  Will it be much harder to get paid for additional services without a signed change order? You bet.  So why put yourself through that trouble?

Often times parties begin to “waive” formal requirements for written change orders, and construction projects are often on tight deadlines where stopping work to get a fully executed change order would bog down the schedule.  However, you run the risk of throwing yourself on the mercy of the Court when you don’t play by the contract rules.

A new case out of the Eastern District of Virginia demonstrates this fact very clearly.  In Artistic Stone v. Safeco, 2010 WL 2977894 (E.D.Va July 27, 2010), the Court held that the requirement that change orders be in writing was to be strictly construed and the subcontractor in that case could not recover for verbal change orders that violated the written change order requirement.  The Court held that where there is a method to ensure recovery of additional extra work in the written contract, the subcontractor could not recover additional money when it failed to follow that method.

“Written change order requirements maintain order and predictability in the construction business, and are meant ‘to avoid subsequent disagreement, and prevent just such a controversy as has arisen in this case.  For this reason, ‘where there is a method under the contract by which a party can insure the recovery of the cost of extra work, that party is not entitled to recovery where it fails to follow that method.'” Artistic Stone Crafters at 5.   [Internal citations omitted.]

A North Carolina court would likely concur.

To ensure you can fully recover for extra work, make sure it is authorized.  Follow the contract.  If circumstances make it so you cannot always follow the contract terms, document the situation as best as you can.  A follow-up email, confirming a verbal change order, would at least provide written evidence you can present in Court, should it come to that.  Otherwise, arguments can and will be made that the person who gave the change order wasn’t authorized to do so, and you may be stuck with no recovery for the extra work.

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Photo “white check mark on blue- acrylic on canvas” by kylemac via Flickr via Creative Commons license.

Tues Tip | NC HUB Requirements for state construction projects

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If you bid on state work in North Carolina, or want to, you should be aware of the Office for Historically Underutilized Businesses (HUB).   [You should also be aware that there may be changes coming soon in light of a recent 4th Circuit Decision with regard to who still qualifies as a HUB.]

Historically Underutilized Businesses logo

1.  What does the HUB office do?

The HUB office is set up to:

  • help qualifying companies become listed vendors in their database
  • help contractors find HUB companies to solicit subcontractor bids from
  • answer questions about the HUB process for bidders

2.  Who qualifies as a HUB business?

By statute, a HUB business is one in which at least 51% ownership and control is held by minorities, women, disabled, and/or disadvantaged owners.  If you think you qualify, get certified! It can only give you more opportunities for public work.

3.  If I bid on a state contract, how do I comply with the HUB requirements?

Under the HUB statute, each bidder must do one of the following:

  •  identify on his bid the minority businesses that will be used and for what percentage of the contract;
  • sign an affidavit and provide documentation listing the good faith efforts to comply [see below]; or
  • sign an affidavit that all work will be self-performed

4.  What activities qualify as “good faith efforts” to identify a HUB subcontractor?

The statute provides that good faith efforts include:

(1)        Contacting minority businesses that reasonably could have been expected to submit a quote and that were known to the contractor or available on State or local government maintained lists at least 10 days before the bid or proposal date and notifying them of the nature and scope of the work to be performed.

(2)        Making the construction plans, specifications and requirements available for review by prospective minority businesses, or providing these documents to them at least 10 days before the bid or proposals are due.

(3)        Breaking down or combining elements of work into economically feasible units to facilitate minority participation.

(4)        Working with minority trade, community, or contractor organizations identified by the Office of Historically Underutilized Businesses and included in the bid documents that provide assistance in recruitment of minority businesses.

(5)        Attending any prebid meetings scheduled by the public owner.

(6)        Providing assistance in getting required bonding or insurance or providing alternatives to bonding or insurance for subcontractors.

(7)        Negotiating in good faith with interested minority businesses and not rejecting them as unqualified without sound reasons based on their capabilities. Any rejection of a minority business based on lack of qualification should have the reasons documented in writing.

(8)        Providing assistance to an otherwise qualified minority business in need of equipment, loan capital, lines of credit, or joint pay agreements to secure loans, supplies, or letters of credit, including waiving credit that is ordinarily required. Assisting minority businesses in obtaining the same unit pricing with the bidder’s suppliers in order to help minority businesses in establishing credit.

(9)        Negotiating joint venture and partnership arrangements with minority businesses in order to increase opportunities for minority business participation on a public construction or repair project when possible.

(10)      Providing quick pay agreements and policies to enable minority contractors and suppliers to meet cash‑flow demands.

Depending on which public entity is involved, different weight may be assigned to different parts of this criteria, or additional criteria may be required.

5.  What documentation is necessary to prove good faith efforts?

The short answer is, “it depends”.  The statute requires “all” documentation be provided.  If you are telephoning minority businesses and getting verbal denials, you must find a way to document that.  Better practice would be to send written requests for bids to HUB-certified businesses, so you can maintain a copy for submission with your bid.  The HUB website even has instructions for creating a HUB vendor/contractor Excel spreadsheet to track your efforts.

6.  Is the HUB process related to my local MBE/WBE [Minority-owned/Women-owned  Business Enterprise] certification?

As of last summer, there is now a statewide process to getting certified, the Statewide Uniform Certification (SWUC).  This change was made to streamline and centralize the HUB certification process and HUB database.

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Logo from NCDOA HUB website.