Massachusetts Builders Blog

Litigation-I Win, You Lose vs. Mediation-Win/Win

2023-08-23T12:45:00.000-04:00

Litigation is a zero-sum game. It destroys relationships and fosters enmity between the parties. Parties rarely walk away happy. Even if they win, the expense of litigation is enormous, and collecting on judgments is difficult. Disputes ultimately resolve, but the focus on winning at any cost can lead to prolonged legal battles. Living with a lawsuit causes ongoing stress, which can distract you from your business and even have an effect on your health.

In a courtroom, the final decision lies with a judge or jury who may not fully grasp the complexities of the case. Parties relinquish control over the outcome, potentially leaving them dissatisfied with the final judgment.

Mediation has the opposite effect. Rather than polarizing people, it enables the parties to attack the issues and not each other. The process promotes open communication, collaboration and problem-solving, which enables parties to actively participate in crafting mutually beneficial solutions. It results in an efficient, effective resolution to disputes. It has also been demonstrated that parties are more likely to comply with mediated settlements.

While litigation has its place, its zero-sum game mindset stifles resolution. The escalating costs, limited control, strained relationships, and prolonged conflict associated with litigation can leave parties dissatisfied and emotionally drained. Embracing alternative dispute resolution methods that prioritize cooperation and collaboration can lead to outcomes that benefit all parties involved. By shifting focus from winning to finding common ground, we can foster a more harmonious and equitable approach to resolving disputes.

Arbitration v. Litigation-Which one is more efficient?

2023-05-30T15:52:00.003-04:00

Last week I arbitrated a case over Zoom. The hearing lasted one hour. The Claimant, a construction company, was owed high five figures. They did not have an attorney’s fee clause in their contract.

The Respondent never answered the arbitration demand and did not appear.

The Claimant presented his damages and told me the history of the project. I awarded him the full value of his claim plus interest and costs because they were provided for in his contract.

What if this had gone to litigation?

He would have filed a lawsuit and paid for service on the defendant.

He would have had to wait twenty days for him to file an answer.

He would have to file a request for default.

He would have to file a motion for default judgment.

Even if the claim were for a “sum certain,” the court would probably require a hearing on damages.

He will have to appear at the hearing and testify as to his damages. If the court is busy that day, he may have to wait around for hours.

He will have to wait for a judgment.

He will have to ask for an execution.

To be fair, the Claimant will have to ask the court to confirm the arbitration award in order to obtain a judgment, but that is usually decided on the papers.

If you were owed money, what would you choose?

Parties should include arbitration clauses in their construction contracts because it allows them to have more control over the dispute resolution process. When disputes arise, they should carefully consider the qualifications of potential arbitrators making their choice. Choosing an arbitrator with specialized knowledge in the construction industry can help ensure that the dispute resolution process is efficient, effective, and fair.

Contact me to arbitrate or mediate your residential construction dispute. Andrea Goldman agoldman@goldmanlg.com or 617-953-3760.

How to Calculate Construction Defect Damages

2023-04-04T13:37:00.000-04:00

How to Calculate Construction Defect Damages

As an arbitrator, mediator and advocate, I am often surprised by claimant’s calculation of their damages in construction matters. They come to hearings seeking wildly inflated damages or simply do not calculate their damages properly. I cannot tell you how many times I have heard plaintiffs ask for all their money back, request lost wages or feel they are entitled to pain and suffering for the inconvenience they have experienced when a project does not go well. This leads to inflated damage claims, which can hinder settlement and benefit only the lawyers. To avoid such outcomes, it is crucial to understand how to calculate damages correctly.

Image courtesy of sscreations at FreeDigitalPhotos.net

In most cases, Owner’s claims or for defective work. To support their claim, Owners must either hire an expert to evaluate the job or obtain subsequent quotes from at least two sources for repairs and completion. Both methods can serve as an assessment of the cost of repair and completion.

The preferred method for assessing damages is through an expert evaluation. Experts are objective and do not benefit from inflating costs, making their reports less biased and more credible in the eyes of judges and arbitrators. They also specialize in evaluating construction projects and are experienced in presenting testimony, making their reports clear and comprehensible.

Subsequent contractors, on the other hand, may inflate damages to win the job or overlook the original scope of work, making it challenging to make a realistic comparison of repair costs. However, subsequent quotes may present a more realistic market price for repairs, especially when expert costs are not justifiable.

The driving force when getting quotes to repair defective work is usually cost. Experts are not cheap and the amount of your damages may not merit the expense. In addition, it is still necessary to find someone to complete the work of the prior contractor, so finding an expert involves an additional step in preparing your claim. Expert costs can also escalate. A verbal assessment costs less than a written report. Testimony from an expert usually costs more.

If an owner decides to self-perform the work, they must justify the damages claimed. The only time I have seen an owner fully compensated for their sweat equity was when a client had actually worked for a contractor and knew his hourly rate. The judge found his damages credible because he kept track of his time, documented the work performed and put a realistic dollar figure on each task.

Therefore, the first step in any construction defect claim is to have the work assessed. The choice of the evaluator will depend on the value of the claim and the availability of experts. The quotes obtained should be for the original scope of work plus change orders, and the amounts claimed should be realistic.

An objective assessment of your damages will do a great deal to persuade a judge or arbitrator to find in your favor.

Why You Should Arbitrate Your Construction Dispute

2023-03-13T15:33:00.000-04:00

Many of my colleagues are dissatisfied with arbitration due to its virtually unappealable nature in Massachusetts. The bases for appeal are extremely limited and include only bias on the part of the arbitrator, fraud, and other difficult-to-prove allegations. Moreover, there is no concept of "manifest disregard of the law," which means that the arbitrator can fail to apply the law correctly. Despite this, the reality is that most cases settle, and of those that go to trial, only a small percentage are appealed. For example, in Massachusetts last year, out of 52,299 civil matters filed, there were only 435 appeals, representing less than 1% of the total civil matters filed.

Construction law is a specialized area, and it is crucial for a judge or arbitrator to have experience in the subject matter of a dispute. The course of conduct in construction projects is often relevant, making experience in the field important. Therefore, the lack of a right of appeal should not discourage parties from pursuing arbitration. The parties can choose their arbitrator, resolve disputes more efficiently and, hopefully, fairly. They can also avoid negative publicity and maintain confidentiality.

I include arbitration clauses in all of my contracts and allow for mediation as an option only if both parties agree to pursue it. That way, parties do not waste time and expense on mediation if they cannot enter the process in good faith.

If you need assistance with your construction dispute, please visit my website at www.goldmanlg.com to learn more about my experience. To schedule an arbitration or mediation, please contact me directly at 617-953-3760 or agoldman@goldmanlg.com.

TEN NEW YEAR’S RESOLUTIONS FOR CONTRACTORS-2023

2023-03-02T16:47:00.001-05:00

TEN NEW YEAR’S RESOLUTIONS FOR CONTRACTORS-2023

As I think about developments in construction in the last year, I would say that construction seems to have become more stressful. Rising prices due to fallout from COVID-19 and inflation make money a more difficult subject. Consumers are monitoring expenditures closely and contractors are having to account for price increases. Trust between the parties is more important than ever. Communication is paramount and transparency is key. At the end of the day, running your business in a professional fashion is more important than ever. My New Year’s Resolutions for 2023:

1. Be An Educator

Many people have never done home improvement projects before. You have to teach them what to expect. For example, I have seen many situations where homeowners want to bring in their own subcontractors or buy their own supplies. You need to explain to them that you have your own subcontractors who you work with regularly who are trustworthy and dependable. Your suppliers are also beholden to you. They will make sure that materials arrive on time and in new condition. Homeowners need to know that they are hiring you for your expertise, your team and your suppliers. You don’t want them second-guessing your procedures or trying to do things on their own.

2. Talk About Money

No one likes to talk about money, but if you are a business owner, you have to be prepared to discuss prices. If prices are going up, homeowners need to be warned that their choices may become more expensive. Both sides need to be flexible as price increases may require changes in scope. Be open and honest about material and labor costs. It’s better to be upfront about rising costs than to blindside your customers with a huge bill. That never turns out well.

3. Set An Expiration Date For Your Proposals

Prices are fluctuating like crazy. You do not want homeowners to sit on your proposal and then try to make you perform the work for the same price if a lot of time has gone by. Say that proposals are good for thirty days and that prices are subject to change.

4. Include Non-Disparagement Clause

I wish this were my idea, but I saw it in another contract. Disgruntled customers who blast companies online can cause a lot of harm. I always insist on confidentiality and non-disparagement clauses in negotiated settlement agreements once there has been a dispute, but many homeowners are very resistant to not being able to share their experiences. Why not get them to agree to keep your relationship private as part of the initial contract?

5. Do Not Use a Home Improvement Contract If The Job Doesn’t Fall Under M.G.L. c. 142A

Not all renovation projects fall under the auspices of the Home Improvement Contractor Statute. Given that the law imposes so many requirements on contractors, it is better to avoid using a contract that includes the 142A language if that law does not apply to your job. For example, the law only applies to 1–4-unit owner-occupied buildings. If you are working at a condominium building with more units, it would not apply. If you a performing a remodel for an investor, the HIC law does not apply. There are numerous exceptions, so get to know them, or if in doubt, ask your lawyer.

6. Record A Lien

If you are owed money and are concerned about being paid, record a lien. As a general contractor you do not even have to inform the Owner that the lien has been recorded. If you miss the deadline for recording, you lose your chance to lien the property. You can dissolve a lien at any time, so it’s better to err on the side of recording.

7. Get Ready For The Stretch Energy Code

The 10^th edition of the Building Code is in the works. From what I understand, there will be even stricter energy requirements than we have now. Keep in mind that these changes are going to increase the price of your projects. Be prepared and include these additional costs in your estimating.

8. Enforce Payment Schedules

There are reasons you need to have a payment schedule in your contract. Most importantly, it is required under the Home Improvement Contractor Statute. In addition, you do not want the work to get ahead of the money. If there is a breakdown in the relationship, you want to be whole if you have to terminate the project. For that reason, you should “front-end load” your profit in your payment schedule as well. That said, a payment schedule does not do you any good if it is not enforced. Bill regularly and stick to the deadlines in your contract.

9. Make Your Bills Easy To Pay

My contractor sends me bills from QuickBooks Online. I know it costs him extra money for me to pay by credit card, but I pay his bills immediately when I receive them by email. Getting paid sooner will make your life easier. Make it super easy for your customers to pay you.

Include Arbitration and/or Mediation Clauses in Your Contracts

Contractors who perform residential renovation work should always have a separately signed arbitration clause in their contracts that allows them to go to the state Home Improvement Contractor Arbitration Program. The program is an inexpensive way to get disputes resolved. It is fully appealable with a new trial in the courts if you are not happy with the result, but the arbitrator’s decision becomes a part of the case. If you are incorporated, you can represent yourself in the state program, whereas you cannot represent yourself in court. With the separately signed clause in your contract, you can force the other side to go through the program instead of having to deal with a lawsuit.

As 2023 begins, most of you are as busy as ever. It is hard to stay on top of your business practices, but you will benefit greatly if you review your systems and implement them. I wish you all a happy and healthy new year!

* Please contact me if you are looking for an arbitrator or mediator for your construction dispute. You should also email me your contracts and I will review them for free! I will then quote you a price for updating them or drafting new ones. I look forward to hearing from you. 617-953-3760 or agoldman@goldmanlg.com

To Arbitrate or Not? That is the Question.

2022-11-03T18:21:00.002-04:00

There are lawyers who will not include arbitration clauses in their contracts and they avoid arbitration at all costs. I have spent the last 33 years litigating disputes and it is my opinion that arbitration is preferable in most cases; especially in construction disputes.

In arbitration, the parties submit their dispute to a third-party neutral who serves as a private judge who then rules on the case. The arbitrator holds a hearing that is similar to a court proceeding, but the rules of evidence do not apply and the proceeding is private. The arbitrator’s award is usually binding and non-appealable.

The advantages of arbitration are numerous:

1. The parties choose the arbitrator. Construction is an area where subject matter knowledge is important. You want an arbitrator who understands the course of conduct in construction projects. Many judges in the courts are not familiar with the nuances of mechanic’s liens, local construction laws, delay and construction defect claims.

2. Arbitration is usually more expedient and less expensive. When you file a lawsuit, courts control the schedule. There are frequently delays; especially when motions are filed. Discovery (the exchange of information) can drag disputes out because there are requests for production of documents, interrogatories (written questions) to be answered and often, depositions (testimony under oath). In arbitration, the parties usually exchange the documents they intend to use and there are no interrogatories and more limited depositions. Parties spend less money on contending with procedural issues and the process focuses more on the issues at hand.

3. Arbitration is private. Lawsuits are public record. The outside world never has to know that the parties have arbitrated a dispute.

4. The rules of evidence do not apply.

Arbitration is final. This is both a blessing and a curse. In Massachusetts, an arbitration decision will almost never be overturned on appeal, even if the arbitrator does not properly follow the law. Arbitrations can only be set aside if the arbitrator committed fraud, was biased or if the arbitrator exceeds his authority.

For that reason, it is extremely important to be careful when choosing an arbitrator. I don’t believe it is possible to “game” an arbitration, but it is helpful to choose someone who understands the issues and has experience in both sides of a dispute. Construction arbitrators or mediators have typically been working in the field for years, usually as attorneys, and understand the nuances of construction disputes.

I am happy to serve as a neutral and help you resolve your disputes without resorting to litigation. Given the availability of Zoom and other virtual portals, I can arbitrate anywhere. You can contact me at agoldman@goldmanlg.com or 617-953-3760. Please contact Goldman Law Group today!

Is Your Construction Arbitrator Biased?

2022-04-10T15:44:00.003-04:00

The first thing clients ask me when we start choosing an arbitrator is: “What is the arbitrator’s reputation? What is the arbitrator’s background?” In other words, “Is the arbitrator biased?”

Honestly, in my thirty-four years of experience, I can’t say that I have ever encountered an arbitrator who was biased in favor of builders, owners, subcontractors or suppliers. Most try to be fair and apply the law. However, we still try to “game” the system by considering the arbitrator’s background and whether it may unconsciously cause him/her to lean in a specific direction. Even if that’s the case, it is the arbitrator’s ethical duty to draft an award that is based on the facts and the law.

One’s background does influence perception. We try to remain neutral, but if an arbitrator’s experience is mainly in representing developers, it may be difficult to understand the general contractor’s point of view. Can your arbitrator set aside past experience and judge the matter fairly?

As with Supreme Court justices, some arbitrators are “strict constructionists” and will not consider any deviations from a contract. Others give more weight to the course of conduct of the parties and the equities of the situation. Decide the type of arbitrator you want before making a choice.

So, how do you pick a construction arbitrator? Start with someone who has diverse and extensive experience in the field. Then consider their approach to the law. Do they understand the subject matter of the dispute? Do they apply the law to their decisions? Do they consider the equities of the situation?

Arbitration is not appealable in Massachusetts. I think it is only fair for parties to be able to ask the arbitrator about his/her philosophy and approach to arbitration before making a choice. Arbitrators should be willing to explain their approach to the arbitration, how they handle the process and decide their awards. The choice of an arbitrator is an irrevocable decision that should be made wisely.

I am happy to serve as a neutral and help you resolve your disputes without resorting to litigation. Given the availability of Zoom and other virtual portals, I can arbitrate anywhere in the country. You can contact me at agoldman@goldmanlg.com or 617-953-3760. Please contact Goldman Law Group today!

TEN NEW YEAR’S RESOLUTIONS FOR CONTRACTORS-2022

2022-01-18T00:43:00.000-05:00

TEN NEW YEAR’S RESOLUTIONS FOR CONTRACTORS-2022

Can you say COVID fatigue? As I sit here to write this year’s resolutions, I can’t believe that coronavirus is still very much with us. In fact, you can just read my newsletter from last year, and all of them are still relevant. The difference this year is how divided we have become. Some are living life as it is more or less normal, and others are still playing it safe. One thing is certain. The virus has disrupted construction and the way you do business. On the positive front, I keep hearing that business has never been better. On the negative side, there are still issues with increases in the cost of materials, shipping delays and unavailability of subcontractors. Last year I wrote a number of blog posts with clauses to add to your contracts and refined them as new developments occurred. See, http://buildingconfidence-llc.blogspot.com/2020/04/coronavirus-and-construction-clauses.html Those clauses still hold. That said, here are the takeaways and goals for 2022:

1. Include the Right to Delay or Cancel Jobs in Your Contracts Before They Start.

Your contract should allow you to delay or cancel jobs before they start depending upon unforeseen circumstances. Construction jobs are taking longer than expected and new projects may be delayed. Owners need to be flexible about start dates right now. You don’t want to have to lose a large job if you’ve run out of time to complete a smaller one. So, you need a provision in your contracts to protect you if any of those events occur.

2. Include the Right to Delay or Cancel Jobs in Your Contracts Once They Are Under Way.

Workers might be exposed or become ill with coronavirus. The same can happen with owners. All sides should have the right to cancel or delay jobs at any time. Although many contracts have had “force majeure” or “acts of God” clauses, these may not be enough to protect you if you have to press pause on a project. Review the language in your contracts and add more if necessary.

3. Allow for Increased Material Costs.

The supply chain has been disrupted. As a result, the costs of materials have been increasing. Insert a clause in your contract that allows for a change order if costs increase by more than x%. You should educate owners in advance about this possibility and discuss options for substitutions so there are no surprises. In addition, if the cost of the job increases too much, you might want to allow for a reduction in scope.

4. Termination for Convenience.

Traditionally residential contracts have not included terminations for convenience, but if you decide that both sides have the right to exercise this option, you will want to put in how much notice you require (seven days?). Add the remaining payment that would be due, such as payment for all work completed to date plus the cost of demobilization and any work required to protect and preserve the site.

5. Form Strong Relationships with Your Subcontractors.

I have received numerous reports this year about subcontractors delaying or abandoning jobs. You need to develop strong, consistent relationships with your subs so they are loyal to you. Pay them fairly and set reasonable expectations. In subcontractor contracts you can include bonuses for early completion or penalties for delay. I prefer the former. It is an excellent selling point with customers to be able to state that you have a reliable pool of subcontractors. Treat them well.

6. Make Sure You Have Current, Complete Insurance Coverage

I have seen a few nightmare scenarios this year where clients have gotten sued and they either haven’t had liability insurance or their policy didn’t cover the claim. One of the most important parts of being insured is that your insurance company will provide you with a defense (pay for your lawyer) if you are sued. They may do so with a “reservation of rights,” which means they may not ultimately cover your claim, but attorney’s fees are incredibly expensive and having them covered is much less stressful than paying out of pocket. You also need to check your policies with your agent. A client was sued and discovered his policy didn’t cover construction work on condominiums. That exclusion made no sense for his business!

7. Review Payment Schedules

Every year I remind people to review their payment schedules. Given the volatility of the world these days, it seems as though I have recorded more mechanic’s liens than usual. Cash flow is incredibly important. In residential home improvement work you have the right to ask for a deposit as long as it is no more than one-third of the contract price or the cost of special-order materials, whichever is greater. Since you can’t expect final payment until the owner is satisfied with the work, make the final payment really small!

8. Don’t Miss the Window to Record a Mechanic’s Lien

Mechanic’s liens are an incredible tool for getting paid. They give the contractor or subcontractor leverage in negotiating with owners or GC’s. People hate having liens on their property and they interfere with the ability to sell, refinance, disburse or secure loans. If you are a GC, you have no more than 90 days from the last day you worked at the property to record a lien. If you are a subcontractor, the deadline is usually longer-90 days from the last day anyone working through the GC at the project could record a lien. Don’t wait. Liens are very inexpensive (I do them for a flat fee) and if you miss the deadline, you lose the opportunity to record.

9. Consider a “Hold a Spot” Deposit

Contractors have customers lined up to secure their services. If you are going to set aside a date for an owner, consider asking for a deposit to hold that spot for them. You have the right to make some or all of it non-refundable; especially if you are providing design or pre-construction services. People place value on services they pay for. A deposit is a way of showing that they are serious about proceeding with their project.

10. Include Arbitration and/or Mediation Clauses in Your Contracts

The courts just suspended jury trials until the end of the month. Litigation is still delayed and lawyers have no control over court schedules. Lawsuits should always be avoided, but now, more than ever, it’s time to seek out alternative forms of dispute resolution. As someone who has been doing this for over thirty years, I can tell you that most cases eventually settle rather than going through trial (which is ridiculously expensive), so why waste so much time and money on going through the court system? Mediation is a voluntary process where the parties work with a third-party neutral to try to resolve their dispute. It can be very effective in resolving disputes and gives you a say in the outcome. Arbitration is a private process where an arbitrator acts as the judge and rules on your dispute. It is usually a binding process and the arbitration decision or award is enforceable by the courts. The downside of arbitration is that it is almost never appealable. That said, most parties do not appeal court decisions because the cost of appeals is quite high.

We are all hoping that 2022 will allow us to go back to our lives. That said, we all need to continue to adjust to the new normal and adapt our businesses as the work environment changes. I wish you all a happy and healthy new year!

* Andrea Goldman has launched Beyond Dispute Arbitration and Mediation Services. Contact Andrea if you are looking for an arbitrator or mediator for your construction dispute. Email me your contracts and I will review them for free! I will then quote you a price for updating them or drafting new ones. agoldman@goldmanlg.com

TEN NEW YEAR’S RESOLUTIONS FOR CONTRACTORS-2021

2021-01-12T18:59:00.001-05:00

As I sit down to write my annual list of resolutions for contractors, I am amazed at how much things changed in 2020. Construction was going well and then, in March 2020, COVID-19 hit. At first, we thought it was going to be a disaster for the construction industry. States, cities and towns shut down projects and many applied for PPP loans. Then, something amazing happened. Construction was considered an essential service and everyone was back to work.

That said, the work world changed: companies were donating their PPE to frontline workers, COVID-19 protocols had to be followed and paperwork had to be filed. Everyone was scrambling to figure out how to comply and keep their businesses going. So, you may or may not ask, what was I, as a construction lawyer doing? I spent March and April thinking about the new risks contractors/construction companies were facing and developing contract clauses to protect the industry. I wrote a number of blog posts with clauses to add to your contracts and refined them as new developments occurred. See, Massachusetts Builders Blog. Here are the takeaways and goals for 2021:

1. Prepare for Unforeseen Events.

We are working in unpredictable times. Your contract should allow you to delay or cancel jobs depending on unforeseen occurrences. Workers might be exposed or become ill with coronavirus. The same can happen with owners. All sides should have the right to cancel or delay jobs at any time. Although many contracts have had “force majeure” or “acts of God” clauses, these may not be comprehensive enough to protect you if you have to press pause on a project. Review the language in your contracts and add more if necessary.

2. Allow for Increased Job Costs.

The supply chain has been disrupted. As a result, costs of materials may increase. Insert a clause in your contract that allows for a change order if costs increase by more than x%.

3. Require Compliance from Subcontractors.

As with OSHA regulations, your subcontracts have to comply with COVID-19 protocols. I am assuming that regulatory agencies will hold you responsible if your subcontractors are in violation. You also need to protect your workers when subcontractors are on site.

4. Review Your Insurance Policies

It is currently unclear whether business interruption insurance will cover coronavirus-related issues, but it would be worth looking into a business interruption policy. Worker’s compensation claims may also go up, and coverage may not be in place for COVID-19. It’s time to have a conversation with your insurance agent.

5. Work on Your Payment Schedules

It is really important to make sure that the money is even with, or stays ahead of the work. The economy is volatile right now and people are losing their jobs. This is not the time to have a customer suddenly unable to pay and cancel a project. You can include a clause in your contract that says that if you are insecure, you can require your client to escrow the payments for your project. It is time to include that clause in your contract.

6. Waive the Right to Sue and be Sued for Contracting COVID-19

Let’s face it. People are going to try suing each other for transmitting the virus. I don’t think these lawsuits will prevail, because it is virtually impossible to prove how and from whom you got sick. That said, I would just have everyone waive the right to sue each other in their contracts for transmission of coronavirus. It’s one less thing to worry about.

7. Run from Red Flag Customers

We’ve all experienced those red flags when meeting with potential clients. Now, more than ever, everyone is on edge. This virus has brought out the worst in some people. If something seems off, run! Better clients will come along. Good communication is key and it’s hard to communicate with customers when the relationship is strained.

8. Include Arbitration and/or Mediation Clauses in Your Contracts

Litigation is pretty much at a standstill in MA. Even when trials begin again, criminal cases will have priority. Litigation is a distraction from your business and can be extremely costly. Lawsuits should always be avoided, but now, more than ever, it’s time to seek out alternative forms of dispute resolution. Arbitration is a private process where an arbitrator acts as the judge and rules on your dispute. It is usually a binding process and the arbitration decision or award is enforceable by the courts. Mediation is a voluntary process in which parties work with a third-party neutral to try to resolve their dispute. It can be very effective in resolving conflicts.

9. Avoid Disputes at All Costs

It is always better to try to resolve disputes with owners rather than ending up in litigation. Although I have said this before, now, with the virus, lawsuits are more difficult than ever. Stress levels are heightened. There are always going to be problems that arise in construction. The important thing is how you deal with them. So, try to resolve disputes immediately. Email allows people to say things they would not say directly, so schedule an in-person meeting (socially distanced with masks) to address any issues.

10. Check Out the New PPP Loans

A new round of loans is coming. So far, I know that if you have a quarter where you earned 25% less than last year, you are eligible. Look into it!

My bonus resolution:

11. Take a Vacation!

I can’t remember my last vacation. Can you? With WFH (work from home) being the norm, it can be difficult to separate work and leisure, let alone take a break altogether. For many, vacation means going somewhere else and the planning that goes along with it. So, it has been very easy to forget that we all need a break from work; even if we can’t go anywhere. Once we have the vaccine, I assume we can all start planning trips (my firsts will be to see my kids in LA, Charleston and NYC!), but before then, take some time off! You will be rested, refreshed and more productive as a result.

We are all hoping that 2021 will be better than 2020. That said, we all need to continue to adjust to the new normal and adapt our businesses as the work environment changes. I wish you all a happy and healthy new year!

*Andrea Goldman has launched Beyond Dispute Arbitration and Mediation Services. Contact Andrea if you are looking for an arbitrator or mediator for your construction dispute. To see my Alternative Dispute Resolution resume, click here. Send me your contracts and I will review them for free! I will then quote you a price for updating or drafting your contracts. agoldman@goldmanlg.com 617-953-3760.

When You Shouldn’t Mediate Your Construction Dispute

2020-11-12T18:44:00.010-05:00

Photo by Cytonn Photography on Unsplash

Mediation is a wonderful form of dispute resolution. It allows the parties to craft their own resolution to a conflict. It frequently repairs relationships. Parties tend to comply more with mediated settlements. That said, there are definitely times when you should not mediate.

As a refresher, mediation is an alternative form of dispute resolution where the parties attempt to negotiate a settlement of their dispute with the aid of a third-party, neutral mediator. It is a confidential process. If the parties come to an agreement, that agreement becomes an enforceable contract. Since parties have control over whether they come to an agreement, they are much more likely to comply with a mediated settlement than a judgment.

So, when not to mediate?

When the other side refuses.

Mediation is supposed to be a voluntary process. The parties are supposed to attend a mediation session in good faith. There is no point in wasting everyone’s time by attending a mediation session and refusing any sort of compromise or not being willing to listen. If the other side won’t play, don’t bother.

If the law and the facts are on your side.

As a lawyer I can tell you that I have rarely been involved in a dispute where the situation was absolutely black and white, but it can happen. If you are absolutely going to win, why mediate?

If there is a power imbalance.

Parties really can’t mediate if one side has most of the power. If you don’t have any leverage in a situation, there may be no point in mediating. It may be cheaper to just try to settle or have your lawyer negotiate for you.

If the relationship has been abusive.

This is really a variation of a power imbalance, but worse. If there has been abuse by one party against another, then it would not only be inadvisable to mediate, it could be dangerous. The abused individual may make decisions that are against his or her best interest. If the person is not represented by counsel, it would be dangerous to even be in the same room as the abuser.

When it isn’t cost effective.

Most disputes come down to money. I cynically tell my litigation clients that it is their job to persuade the mediator to advocate for their position. As a preliminary matter, mediators need to determine who is writing a check to whom; then, it’s a matter of how much. If you believe money should be coming your way, but you don’t think a mediator would see it that way, then don’t bother. Mediation typically saves money because the parties come to an agreement and litigation ends. That said, spending eight hours mediating and not coming to an agreement just costs the parties money. During the mediation you may find out some valuable information, but at the end of the day, it has to be worth it.

The timing isn’t right.

Sometimes parties rush into mediation before they have exchanged any information or have evaluated the strengths and weaknesses of their position. At times, the parties’ contract requires mediation, but no one is really ready. In that scenario, it is better to waive mediation and pursue it at a later date when the process has more of a chance of being successful.

Although I firmly believe that mediation is a wonderful thing, that doesn’t mean it is suitable for every dispute. For a mediation to be successful, it has to be done when the time is right, when the parties are read to participate in good faith and when everyone is motivated to do the work to discuss the issues and possible solutions. If you are ready to mediate your dispute, give me a call at 617-953-3760, or email me at agoldman@goldmanlg.com.

What if the Debate Were Moderated by a Trained Arbitrator/Mediator?

2020-09-30T12:30:00.004-04:00

I am guessing like the rest of you, I am still reeling from last night’s presidential debate. I was so tense during the whole thing that I felt as if I had been through a horrifying experience.

How could that have happened? Trump came in like a bulldozer and just kept stepping on the gas. Sadly, Biden did not seem to know how to deal with this attack. As Dana Bash on CNN stated, “It was a shit show!”

I couldn’t help imagining how I, with my arbitration/mediation skills, could have moderated the debate, which may have resulted in a very different outcome.

State the Rules and Control the Process.

In every mediation and arbitration, I remind the parties that it is my job to control the process. They provide the evidence and information, but when it comes to procedure, I am the boss.

So, knowing Trump’s track record, I would have sternly reminded the parties of their prior agreement to the debate format.

“You will each have two uninterrupted minutes to respond to the questions.” That was said but the participants were not forewarned about the consequences of violating the rules.

So, here is my imaginary introduction to presidential debate:

As part of the ground rules, you need to know what will happen if you do not abide by the debate agreement. First, I will remind you to not to interrupt. We have agreed in advance that there will be no personal attacks, and each of you will respond to the question as presented.

If you deviate from responding to the question, I will remind you of what the question is. If you still persist in raising irrelevant issues, I will award your remaining time to the other party and turn off your microphone.

Once Chris Wallace realized what was happening, Andrea, the fantasy moderator would have said, “Time Out!” You agreed to a set of rules. You are not abiding by those rules. We have ten topics to get through tonight. Your behavior is not helping the American people choose a president. I am going to now proceed with each question. I want to hear your response to that question.

Trump still persists in his bullying and name calling.

Name That Behavior.

President Trump. You are acting like a bully. You are being rude and insulting Vice-President Biden. That behavior is not acceptable and I will not allow it. If you cannot control your behavior, I am turning off your microphone. If that doesn’t work, then I will end the debate early and you can answer these questions in a written format.

Remind the Parties of Their Goals.

If I am forced to turn off your microphone or end the debate early, that will not serve either one of you. The goal here is for the American voters to learn your positions on the issue of importance in our society. Your actions are depriving your audience of the opportunity to do that.

Get the Parties to Buy into the Process.

You both agreed to the format of this debate. You both agreed to debate in the first place because that is part of the election process. You both agreed that you are here for the voters.

Now can we proceed?

I am happy to serve as a neutral and help you resolve your disputes without resorting to litigation. Given the availability of Zoom and other virtual portals, I can arbitrate anywhere in the country. You can contact me at agoldman@goldmanlg.com or 617-953-3760. Please contact Goldman Law Group today!

Why You Should Mediate and/or Arbitrate Your Construction Case

2020-09-02T16:27:00.002-04:00

As a result of the pandemic, the courts have a terrible backlog of cases, and parties who are trying to resolve disputes will wait months, if not years to see a resolution of their cases. The courts in Massachusetts have been doing a fantastic job of handling the issues raised by Covid-19, but there has been an unpreventable delay in processing cases.

Mediation and arbitration have always been effective ways of resolving conflicts. Now, more than ever, parties should consider avoiding lawsuits and hiring an independent mediator or arbitrator to bring finality to their disputes.

What is the difference between mediation and arbitration?

Mediation is a voluntary process whereby the parties try to negotiate their dispute with the aid of a third-party neutral. The mediator has received training in trying to facilitate a resolution. The advantages of mediation are numerous. It is a voluntary process and the proceedings are confidential. If the parties arrive at a resolution of their dispute, it is memorialized in a settlement agreement that has the force of a contract. A good mediator will draft the agreement with consequences if the parties do not comply with its provisions. Since the parties craft the agreement themselves, they are more likely to comply with its terms.

In arbitration, the parties submit their dispute to a third-party neutral who serves as a private judge or arbitrator who rules on the case. The arbitrator holds a hearing that is similar to a court proceeding, but the rules of evidence do not apply, and the proceeding is private. The arbitrator’s award is usually binding and generally non-appealable.

In Massachusetts, an arbitration decision will generally not be overturned on appeal, even if the arbitrator does not properly follow the law. For that reason, it is extremely important to be careful when choosing an arbitrator. I don’t believe it is possible to “game” an arbitration, but it is helpful to choose someone who understands the issues and has experience in both sides of a dispute. It is not an accident that there are professionals who become known as construction arbitrators or mediators. They have generally been working in the field for years, usually as attorneys, and understand all of the aspects of a dispute.

Most of my cases are currently being taken out of the court system and proceeding to alternative dispute resolution. Although parties have opted to turn to private dispute resolution in the past, it has gained in popularity since the coronavirus pandemic. Online portals such as Zoom make it easy to conduct a proceeding without the stress of in-person exposure. Zoom has tools that make meetings in private breakout rooms an easily accessible option. Zoom allows for meetings that do not require masks and Plexiglas. It is easier to assess someone’s demeanor over Zoom rather than while social distancing.

I have been a construction lawyer for over thirty years and have represented all sides of construction disputes; builders, contractors, developers, owners, homeowners, subcontractors and suppliers. I trained as a mediator in 1996 and have had many hours of training since. I started arbitrating in 2003 and am currently on numerous arbitration panels including AAA Construction and Commercial as well as the FINRA panel.

I am happy to serve as a neutral and help you resolve your disputes without resorting to litigation. Given the availability of Zoom and other virtual portals, I can arbitrate anywhere in the country. You can contact me at agoldman@goldmanlg.com or 617-953-3760. Please contact Goldman Law Group today!

Coronavirus and Construction-Clauses for Your Contracts

2020-04-27T11:37:00.006-04:00

Photo by Ben Garratt on Unsplash

On Friday, April 17, the City published a draft COVID-19 Safety Policy for Construction. These are new requirements designed to make job sites safer for workers and communities that are expected to be implemented by Monday, April 27.

The requirements offer guidelines for performing construction work for the “new” normal. Essential work in Boston includes “small residential construction projects in dwellings of 3 units or less (for example, kitchen or bathroom remodeling)” which means that you may be returning to work.

In addition to following the protocols, how can you, as a company, protect yourself legally as new COVID-related issues arise? One way is by including an addendum to current contracts and adding clauses in new contracts that anticipate possible scenarios and how they should be addressed.

State the following: This is an Addendum to the existing Construction Agreement dated XX/XX/XXXX. It is incorporated herein. Then I would have everyone initial it.

To work or not to work? Since this crisis began, contractors have had to face the question of whether to continue working. Some wanted to shut down to protect their workers, and others wanted to keep working to keep business on track. In either scenario, there are liability concerns.

Force Majeure

Does your contract contain a provision that would allow you to stop working in the event of a pandemic? It might.

Some of you have one already, but it can be expanded. If you have ever wondered what “force majeure” means, it refers to natural disasters or Acts of God. I would add the following:

Contractor reserves the right to suspend or cancel projects in the event of a pandemic, natural disaster, government orders or other force majeure events in order to protect the health and safety of its workers and customers. Contractor will make every effort to resume its projects once, in Contractor’s discretion, it has been deemed safe to undertake its regular business operations.

If you prefer, you can also give your customers the same right to suspend or cancel.

Delay

Many of you have “no damages for delay” in your contracts. If you don’t, you should. In addition, we can now spell out that a pandemic is one of the circumstances that would prevent damages for delay:

In no event will Builder be liable to Owners or any other party for any special, incidental, delay, emotional distress or consequential damages arising from this Contract. Builder shall not be liable to Owners for any damages resulting from coronavirus or other force majeure policies enacted by Builder that cause delays in current projects or in the commencement of new projects.

Social Distancing

What if you want to keep working? If you are in an unoccupied building, the Owner should not be allowed to come on site without notifying the contractor so appropriate social distancing measures can be taken.

Owner agrees that he will not enter the Work Area while the work is being performed without the permission of Contractor. Owner shall not enter the designated work area without express authorization from, or without being escorted by, Contractor or Contractor’s representative. If Owner encroaches upon the worksite, he will sign an acknowledgment that he entered the work area without Contractor consent. It is the responsibility of the Owner to prevent household members, other workers, children, visitors, pets, and others from entering the work containment area, especially after hours when Contractor is not present at job site.

Indemnification

If you are working in an occupied structure, liability issues are even more concerning. What if the Owner accuses you of exposing him to the virus? Alternatively, what if one of your workers gets sick from exposure to the Owners or their family?

I have been told that home insurance policies do not provide coverage for pandemics. So, you may agree to sign reciprocal “hold harmless” provisions that state that no one is liable for transmission of the virus:

To the fullest extent permitted by law, the Owner shall indemnify and hold harmless the Builder, its agents, subcontractors and employees, from and against any and all claims, damages, losses and expenses including but not limited to attorneys’ fees, by Owner, Owner’s household members or Owner’s representatives, arising out of or resulting from exposure to COVID-19 or any other communicable illness. This indemnification obligation shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Owner under any insurance policies held by Owner.

To the fullest extent permitted by law, the Builder shall indemnify and hold harmless the Owner, Owners’ representative, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, from and against any and all claims, damages, losses and expenses, including but not limited to attorneys’ fees, by the Builder, its agents, subcontractors and employees, arising out of or resulting from exposure to COVID-19 or any other communicable illness. This indemnification obligation shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Builder under workers’ compensation acts, disability benefit acts or other employee benefit acts.

Or, more simply, each party can waive his/her right to sue the other: "The parties waive all claims for transmission of COVID-19 against each other."

Check with your worker’s compensation insurance about coverage if a worker or subcontractor claims the disease is contracted during work. Also check your liability coverage for pandemic-related issues. Find out if business interruption insurance will cover coronavirus interference with projects.

Subcontractor Contracts

Builders will want reciprocal indemnification clauses with their subcontractors as well. No one wants to be held liable for transmission of the disease.

Indemnification

To the fullest extent permitted by law, the Subcontractor shall indemnify and hold harmless the Builder, its agents, subcontractors and employees, from and against any and all claims, damages, losses and expenses including but not limited to attorneys’ fees, by Subcontractor, Subcontractor’s representatives or employees, arising out of or resulting from exposure to COVID-19 or any other communicable illness. This indemnification obligation shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Subcontractor under any insurance policies held by Subcontractor.

To the fullest extent permitted by law, the Builder shall indemnify and hold harmless the Subcontractor, Subcontractors’ representatives, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, from and against any and all claims, damages, losses and expenses, including but not limited to attorneys’ fees, by the Builder, its agents and employees, arising out of or resulting from exposure to COVID-19 or any other communicable illness. This indemnification obligation shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Builder under any insurance policies held by Builder.

What about new safety policies required due to COVID-19?

Safety

Subcontractor agrees to be responsible for maintaining all COVID-19 related safety practices on the jobsite and, specifically, for his/her trade in compliance with any applicable building code or other regulations. Subcontractor warrants and represents that he is familiar with and will comply with all state and city COVID-19 regulations.

Please let me know if you have any additional ideas, questions or concerns.

Sincerely,

Andrea

Coronavirus and Construction-Guidance as of March 25, 2020

2020-03-28T10:51:00.000-04:00

Yesterday the Governor wrote a letter providing further guidance for construction projects in Massachusetts. It provides additional information and clarity regarding the March 23, 2020 Order

"Assuring Continued Operation of Essential Services in the Commonwealth, Closing Certain

Workplaces, and Prohibiting Gatherings of More than 10 People."

Photo by Alex Iby on Unsplash

I am writing this newsletter in order to (hopefully) provide more guidance for those of you in the residential construction arena.

The first issue to keep in mind is that the Governors’ order supersedes any rules issued by municipalities: “This Order supersedes and makes inoperative any order or rule issued by a municipality that will or might in any way impede or interfere with the achievement of the objectives of this Order.”

This is directly from the order:

Exhibit A of the Order contains two entries that designate construction projects as COVID-19 Essential Services and identify workers engaged in construction projects as included within the Order's COVID-19 Essential Workforce:

• Guidance: Workers -including contracted vendors-involved in the construction of

critical or strategic infrastructure including public works construction, airport operations,

water, sewer, gas, electrical, nuclear, oil refining and other critical energy services, roads

and highways, public transportation, solid waste collection and removal, and internet, and

telecommunications systems (including the provision of essential global, national, and

local infrastructure for computing services)

• Guidance: Construction Workers who support the construction, operation, inspection,

and maintenance of construction sites and construction projects (including housing ·

construction)

The following is from Mayor Walsh for work in Boston:

Essential work includes: ● Emergency utility, road or building work, such as gas leaks, water leaks and sinkholes; ● New utility connections to occupied buildings; ● Mandated building or utility work; ● Work at public health facilities, healthcare facilities, shelters, including temporary shelters and other facilities that support vulnerable populations; ● Work that ensures the reliability of the transportation network; ● Small residential construction projects in dwellings of 3 units or less (e.g. kitchen or bathroom remodeling); and ● Other work necessary to render occupied residential buildings fully habitable.

However, the Order also requires that the projects are to "continue operations during the state of emergency, but to do so with allowance for social distancing protocols consistent with guidance provided by the Department of Public Health."

This is the issue. The Public Health regulations are extensive. Here is a link for the COVID-19 GUIDELINES AND PROCEDURES FOR ALL CONSTRUCTION SITES AND WORKERS AT ALL PUBLIC WORK https://www.architects.org/uploads/3.25.2020.SIGNED-Construction-Letter-with-Guidance.pdf

Here are some highlights from the Public Health Guidelines. Please keep in mind that these guidelines are for PUBLIC work.

Employers must have a Safety Stand Down day to disseminate the Guidelines to all employees and workers.
There is a zero-tolerance policy for sick workers.
Workers have to self-certify that they don’t have a fever or symptoms prior to coming to work.
They haven’t been exposed to anyone who has tested positive for COVID-18
They haven’t been told to self-isolate.
Workers have to maintain 6’ of social distancing.
Jobsites must develop cleaning and decontamination procedures.
All meetings must be conducted by conference calls.
100% glove policy. Eye protection is recommended.
PPE is recommended if social distancing isn’t possible.
Employees must drive to work alone.
Surfaces are to be cleaned and sanitized frequently.
A site-specific COVID-19 Officer (who may also be the Health and Safety Officer) shall be designated for every site.

What does this mean for residential new construction and renovation? For most companies, it will be impossible to follow these guidelines. So, it is important to consider what is essential. There is a balance between protecting you, your employees and your customers. Here are some scenarios to consider:

If a homeowner is about to start a bathroom renovation, I would say that it is non-essential and could expose others.
If you are in the middle of new construction and the owners are living in a hotel or with others, it could be essential for them to be able to move to their home ASAP. In that case, as long as your workers can maintain social distancing, it would make sense to complete the home.
If you are in the middle of a renovation and things cannot be buttoned up to protect the work from the elements, you need to keep going.
If a family is greatly impacted by your construction work and are living in great discomfort, you should keep working, as long as your workers are protected.

Please call with questions. Remember, these are guidelines only. Each company needs to do what works for them, their employees and subcontractors. Even though the economic impact has been very difficult, the most important thing right now is to slow the spread of the virus.

Coronavirus and Construction-Slow the Spread!

2020-03-14T15:10:00.002-04:00

Yesterday I received my first call from a client with a corona-virus related legal question: If their company suspended projects for two weeks, would they get sued? Would they be facing legal liability?

So, I would like to provide some reassurance and advice for those of you in the construction industry.

First, the disclaimers. I am not a medical professional. We have not formed an attorney-client relationship (unless we have one already). I am not advising you on your unique situation.

Photo by CDC on Unsplash

1. Can I put projects on hold without facing liability?

Yes. At the end of the day, this is a national emergency. You have the right to protect yourself, your employees, subcontractors and your customers.

2. Are there clauses I can put in my projects that will protect me?

Yes. Some of you have one already, but it can be expanded. If you have ever wondered what “force majeure” means, it refers to natural disasters or Acts of God. Many of you have “no damages for delay” in your contracts. If you don’t, you should. In addition, we can now spell out that a pandemic is one of the circumstances that would prevent damages for delay. I would add the following:

Contractor reserves the right to suspend or cancel projects in the event of a pandemic, natural disaster or other force majeure events in order to protect the health and safety of its workers and customers. Contractor will make every effort to resume its projects once, in Contractor’s discretion, it has been deemed safe to undertake its regular business operations.

If you prefer, you can also give your customers the same right to suspend or cancel.

Here’s another clause:

3. Should I suspend operations?

It depends. This is clearly a decision that is unique to each company. If you are performing new construction or an addition, it may be easy for you to continue working, as long as your workers maintain social distancing. If you are in the remodeling industry, the situation is different. If your workers can block off an area of a house or building and keep the owners from entering the area, they may be able to continue working. If so, it’s time to rent that Port-a-Potty and tell your workers not to use the Owner’s bathroom. They should wear their masks to prevent transmitting illness to customers. They should not interact with their animals or children. They should sanitize or wash their hands as frequently as possible. If workers are even slightly ill, they should not come to work.

4. Can I get sued for suspending or canceling a job?

Yes. Anybody can sue anyone at any time for any reason. That said, a lawsuit based on delay or breach of contract related to coronavirus will probably not survive a motion to dismiss (this is just my opinion). What court or jury would award someone damages for protecting public safety?

5. Create a policy for your workers and enforce it.

I found out I was exposed to coronavirus on a Saturday. I had an arbitration that Monday. I had no way to contact the parties in advance and needed to decide how to proceed. I did reach the other arbitrators, and we agreed I would participate by telephone as long as the parties agreed. It would have been much easier if there was a procedure in place in advance. Here are some ideas:

a. Create a private company Facebook page where employees can post.

b. Utilize an interactive software program so you can keep customers aware of what is happening with their projects.

c. Agree to respond to texts (limit to emergencies if you prefer).

d. Remind your workers to check these forms of communication every day so they are up-to-date on the latest issues.

I will send out another newsletter if I receive more questions from clients or think of more challenges that the industry may be facing. I implore everyone to use common sense and work to slow the spread of the virus.

Please feel free to call or email me with your questions.

Sincerely,

Andrea

Goldman Law Group
60 Austin Street, Suite 210
Newton, MA 02460

T: 617-953-3760

agoldman@goldmanlg.com

www.GoldmanLG.com

“Massachusetts Builders Blog” www.buildingconfidence-llc.blogspot.com

"Home Contractor vs. Homeowner Blog" www.andreagoldmanlaw.blogspot.com

Why You Should Find a Mentor in Construction

2019-11-10T20:17:00.001-05:00

I represent many, many contractors and construction companies. Some have never been sued or seen the inside of a courtroom over the life of their business. Others have had more than one dispute and seem to be fending off attacks on a regular basis. Owning a construction business is about more than being a skilled contractor. It's also about running a business.

In law, a coach once told me there were three aspects to running a law firm: finding, minding and grinding. In other words, you have to find the clients. That involves marketing, networking, word of mouth, advertising, you name it. Minding is running the business. There's the accounting, employee management and interaction with clients. Finally, there's doing the work.

The reality is, no one can be an expert in every aspect of a business. So, do an honest self-assessment, or have a "retreat" with your team. What are your goals? Where are you succeeding? What can you delegate? Are there areas that need improvement?

I have a number of clients who are involved in more than one lawsuit. They are probably great at building, but in my experience, their communication skills are lacking. They could use some guidance in how to interact better with customers and avoid unresolved disputes.

That's where mentors come in. The most successful contractors I know talk to other people in the business. They belong to construction groups where more experienced builders mentor those who are starting out. These mentors help them address the weaknesses in their business.

It is hard to recognize that we have skills that could use improvement, but admitting that we need help is the first step in making your construction business more successful. Contact a builder you admire and take them out for coffee. Most people will be flattered and happy to help. Your business will benefit as a res
ult.

TEN NEW YEAR’S RESOLUTIONS FOR CONTRACTORS-2018

2018-01-19T15:46:00.003-05:00

At the end of the year I think about the disputes I’ve handled, and how they might have been prevented. I also consider better practices for contractors and how they can improve their businesses. Here are some old and new resolutions for 2018!

1. All change orders must be in writing and signed by the parties!

They must state the change in the contract price and how the date of substantial completion will be affected by the change. This sounds so simple, but I bet I could prevent 90% of all disputes if contractors and homeowner would follow this simple rule. Document everything. E-mails or texts are fine. Just make sure you confirm that they have been read.

2. Learn how to properly estimate a job.

This may be the biggest mistake I have seen contractors make in their business. They have cut their margins and not allowed for increases in pricing of materials or labor in bidding jobs. As a result, they are not allowing enough latitude for the inevitable issues that arise during a construction project. This is the way you make a living. Learn how to properly bid a job and protect yourself.

3. Make sure you have a good written contract.

Good contracts establish the expectations of the parties while the relationship is good. In law, a contract is a "meeting of the minds." It spells out the payments, scope of the work, date of substantial completion, warranties, basis for termination, dispute resolution alternatives, etc. Most importantly, it should enable you to recover attorney’s fees if you have to go after a customer for payment. A good contract will help resolve any dispute. It protects everyone. Many states also require a written contract under the law. In addition, have an attorney review your contract! This is well-worth the money, and will protect your business. It's a worthwhile investment and will help you sleep at night. Seriously. I even charge flat fees so clients can call me when they have a question.

4. Make payments contingent upon milestones reached.

Don't let your work get ahead of your payments, and don't let the payments get ahead of the work. This keeps both sides honest. Require payments at the beginning of each milestone so you have cash flow for the next phase of the project. If the payment gets ahead of the work, the owner may lose trust that you will finish the job. If you do your work ahead of the payments, the owner may start delaying when you ask for a check. Numerous disputes develop because the payments are not in balance.

5. Insert a Right to Repair Clause in Your Contracts

If you are going to run a contracting business, you are going eventually run across owners who refuse to pay for work because it is (allegedly) defective. Or, the client may pay another contractor to “fix” your work and try to collect that money from you. One way to discourage this practice is by inserting a “right to repair” clause in your contract. Before an owner can go hire someone else to “repair” your work, they are required under the contract to give you the opportunity to review any supposedly defective work and repair it. This greatly reduces your exposure to defect claims.

6. Include a Right to Stop the Work for Nonpayment

A contractor does not automatically have the right to stop working if a customer fails to pay. There are always going to be clients who try to come up with excuses for not paying. If payment isn’t made within a certain amount of time, you should include wording in your contract that allows you to stop work after written notice to the owner.

7. Have Agreements with Subcontractors

You may have been working with your subcontractors for years, but you need to have a written agreement with them. This should include terms of payment, clearly delineated scopes of work and indemnification clauses. An indemnification clause states that if you are liable for your sub’s work, the sub must pay for your legal fees and pay you back for any damages assessed. You should also be able to back-charge a sub for incomplete or defective construction work.

8. Pay Employees as Employees and not as Independent Contractors

Massachusetts is very clear. If someone is working for you and doing the same work that you do, they are your employees. If you control the means and methods of their work, they are your employees. If you pay employees as independent contractors, you could be liable for triple damages, attorney’s fees, interest and costs. It is not worth it.

9. Know When NOT to Take a Client

We’ve all experienced those red flags when meeting with potential clients. Listen to them! Life is too short to be spending time with someone you don’t like who micromanages your work. If your gut is telling you to reject a client, move on.

10. Resolve Disputes and Focus on Your Reputation

It is always better to try to resolve disputes with owners rather than ending up in litigation. I have had numerous clients receive bad reviews online, and this is more harmful to their businesses than losing money on a job. Protect your reputation. There are always going to be problems that arise in construction. The important thing is how you deal with them. There is huge value in a good referral once a project is complete. Focus on the long term and make your clients happy.

If you follow these resolutions, I guarantee you that you will end 2018 on a much better note than when it started.

*Email me your contracts and I will review them for free! I will then quote you a price for updating or drafting your contracts. agoldman@goldmanlg.com

TEN NEW YEAR’S RESOLUTIONS FOR CONTRACTORS IN 2017

2017-01-12T10:24:00.003-05:00

1. Insert a Right to Repair Clause in Your Contracts

If you are going to run a contracting business, you are eventually going to run across owners who refuse to pay for work because it is (allegedly) defective. Or, the client may pay another contractor to “fix” your work and try to collect that money from you. One way to discourage this practice is by inserting a “right to repair” clause in your contract. Before an owner can go hire someone else to “repair” your work, they are required under the contract to give you the opportunity to review any supposedly defective work and repair it. This greatly reduces your exposure to defect claims.

2. Include a Right to Stop the Work for Nonpayment

3. Consider a “Termination for Convenience” clause

Sometimes the project just isn’t a good fit. Perhaps a better opportunity comes along. For whatever reason, a failsafe for getting out of a contract can be a good idea. Make sure it includes the right to get paid for all work done to date, including reasonable profit and overhead.

4. Have Agreements with Subcontractors

5. Pay Employees as Employees and not as Independent Contractors

6. Know When NOT to Take a Client

7. Respect Your Clients’ Home

For you, the builder, this is just one of many projects. For the homeowner, this may be the dream of a lifetime. You need to be sensitive to the fact that homeowners are emotional about their projects. Husbands and wives may not be on the same page. Your job is to educate them about the process and be aware that the project means much, much more to them.

8. Make Sure You Have The Right To Recoup Attorney’s Fees If You Have To Go After Clients For Nonpayment

As a contractor, if you don’t have the right to attorney’s fees in your contract, you are not entitled to recover them. Frequently it is not worth it to pursue payment from a client if you have to pay an attorney as well.

9. Draft Separate Design and New Construction Contracts

Renovation contracts are subject to the Home Improvement Contractor Statute which can entitle a consumer to double or triple damages, attorney’s fees, interest and costs if the law is violated. Design and new construction contracts do not fall under this law. For that reason alone, you need separate contracts. Clients also ascribe value to what they pay for. Design provides value, and builders need to get paid for it.

10. Document, Document, Document

All change orders should be in writing, signed by the parties and reflect any change in the contract price and date of substantial completion. Take pictures of your work in progress. Keep good records of signoffs on inspections and customer approvals. I’m not suggesting that every job should be treated as though it’s going to end in a dispute, but unfortunately, in this day and age, you do need to protect yourself, be able to back up decisions that have been made and the quality of your work.

If you follow these resolutions, I guarantee you that you will end 2017 on a much better note than when it started.

*Email me your contracts and I will review them for free! I will then quote you a price for updating or drafting your contracts. agoldman@goldmanlg.com

The Importance of a Good Beginning and End to a Construction Project

2015-08-14T11:34:00.001-04:00

“Light At The End Of The Tunnel” by Sura Nualpradid from freedigitalphotos.net

My husband, who is a very smart guy, made a very wise observation last week. He said, "It seems to me that most of the problems with construction projects occur when a job is first starting, or at the end."

I thought about it and realized that he is absolutely right. A project can go along smoothly, but then problems occur at the end that leave everyone with a negative impression of the experience.

I think about my most recent client, who spent over one million dollars renovating his house. He and the contractor are in a dispute about the last $6000.00. I have not made a mistake with the zeros.
So, for contractors and construction companies, I offer the following advice:

1. Tell your clients at the beginning if you are finishing up another job. Let them know that you will be starting at a slower pace in order to do justice to the previous project. Promise them that you will afford them the same courtesy.

2. Reduce anxiety by letting your clients know how often you will be on site. If it's two days per week, show up two days/week.

3. At the end of a job, tell the owner that you will be tapering off in order to start the next job, but that you will complete the punch list by a certain date. Again reduce anxiety by committing to a certain amount of time on site and following through on that commitment. In addition, if the completion date needs to be extended, fess up and admit it rather than cutting corners and rushing through the finishing touches.

4. Make the client happy! It totally amazes me how short-sighted some builders can be. Your clients are your best source of referrals. You want them to be thrilled with the work you've done. Buy them a bottle of champagne when the project is finished. That's the last thing they will remember about you, and it will more than pay for itself in new work.

Explaining Allowances in Contracts

2015-07-29T15:51:00.000-04:00

To contractors, allowances in contracts may be self-explanatory, but owners often find them confusing. A typical section on allowances may look like this:

Cabinets $10,000

Kitchen appliances $25,000

Bathroom fixtures $20,000

What contracts often don’t explain is, what happens when the full value isn’t used? If I only spend $8,000 on the cabinets, do I then get to allocate the $2000.00 to another category? If not, why not?

Who is responsible for buying the materials? Will the checks be made out to the General Contractor?

Is the General Contractor charging a mark-up on materials? Will this include change order items?

Contractors often find that owners will claim that they can find materials and supplies more cheaply on the internet. It is the contractors’ job to explain to the owner that he has a relationship with his suppliers that ensures timely delivery and good quality.

How will overages be charged? Will the contractor issue a written change order, or will the owner pay for the materials directly?

What will be the level of quality for materials? I once handled a dispute over the definition of “builders-grade” toilets. It is better to include brands and specific choices in the scope of work to prevent misunderstandings.

Include a disclaimer in your contract for owner-supplied materials. Require the option to provide a substitution if an item is not available for an extended period.

Make it clear that manufacturers’ warranties will be passed on to the owners. Delineate responsibility for registering products or obtaining rebates.

Don’t assume that an owner will know how allowances work just because they are included in your contract. Provide the additional information listed above in order to avoid disputes!

THE DESIGN/BUILD CONTRACT

2015-06-30T14:52:00.001-04:00

Design/Build contractors are really running two businesses at once: there is the design portion of a project, and then there is the actual construction. Design/Build contractors should therefore have two different contracts for these phases of the job for the following reasons:

Design does not fall under the Massachusetts Home Improvement Contractor Statute, M.G.L. c.142A which governs home renovation projects in Massachusetts. There are strict requirements for which clauses have to be included in these contracts and any violation is a per se, automatic violation of the Consumer Protection Statute, M.G.L. c.93A, which can give consumers up to double or triple damages, attorney’s fees, interest and costs. For that reason, contractors do not want the design portion of these projects to be subject to these laws.
The contractor must make clear to the homeowner that there is a separate fee for the design, and that the fee is nonrefundable. I have seen too many cases where a homeowner decides to proceed with another contractor and then asks for all of his money back.
It must be made clear to the homeowner that the design is for the contractor’s use only. One of the advantages of design/build is that the design does not require the degree of specificity that would allow for it to be used by an outside contractor. The contractor can make modifications as the project progresses. This provides the homeowner with savings by bundling the design and build services. However, if the design/build process is not made clear, there is a higher risk that the homeowner will attempt to take the design/build contractor’s design to other contractors.
The contractor should decide who owns the design once it is paid for. If the homeowner is given the design then the homeowner should have to sign an indemnification clause that would protect, defend and pay back the contractor if he is sued for the use of the design by someone else.
The contractor may decide to include mediation and/or arbitration clauses in the design contract that would result in a settlement of any dispute regarding the design phase. This would be binding, and would not fall under the state Home Improvement Contractor Arbitration Program.
The contractor may also want to include a clause that allows him to end the work at the design phase “for convenience” if the relationship is not going well.

It is the contractor’s job to educate the consumer about the advantages unique qualities of design/build. The customer should know who is doing the design and the type of qualifications being offered. They should understand that it is the intent of the parties to engage in every phase of the construction together.

Most consumers are not familiar with design/build. It is important to have comprehensive contracts to protect you if unexpected issues occur.

Why Contractors Should Strive for Excellence

2015-06-23T17:00:00.000-04:00

I have many clients who tell me that they've never been sued. If a problem develops, they work with their clients and try to resolve it. Working as a contractor who does new construction or remodeling has never been harder. Clients turn to the internet and believe they know how to do it faster, better and less expensively. They are savvy consumers who monitor time spent on the job and costs of materials. Sometimes they work at home and keep close tabs on the work. The pressure on contractors is enormous, and in some cases, can make them discouraged and less motivated to do their best. Despite working in a stressful profession, contractors should always strive to do their best; even if the owner is very, very difficult.

The reason for this is simple. A contractor or construction company's reputation can make or break his business. I have had clients receive bad reviews on known websites and seen them severely damage their financial condition. Unfair as it may seem, once a bad review is posted, it is extremely difficult, if not impossible to remove. We all seem to remember the bad reviews even if there are numerous good ones.

Marketing literature says getting a new client is hard. It is much easier to get new business from an old client, so it is important to keep the relationship on good terms. In addition, most established businesses get their work through word-of-mouth. In that respect, you are only as good as your last job. References are everything.

On that note, the other day I heard a story that amazed me. As part of my practice, I coach my clients on how to deal with difficult clients. Some have had the door slammed in their faces, the locks changed, received nasty emails or been wrongfully terminated. One client was having repeated issues with a job, but he handled every insult with class and respect. He never challenged the owner head on, followed through with his promises and asked for payment nicely. Meanwhile, he never knew what was coming next.

Imagine his surprise when he overheard the owner telling a friend what a great job his company had done! After all his trouble, this same client was giving him an excellent review and the opportunity for future referrals. So, the next time you want to throw up your arms and walk off the job, keep this in mind. It is really worth it to always strive for excellence.

The Pros and Cons of Design/Build

2015-06-13T14:13:00.001-04:00

It seems as though more and more contractors are branding themselves as design/build these days. The process is attractive for both homeowners and contractors. Rather than seeking the services of an architect, the homeowner only needs to engage one professional for the design and execution of a renovation project. The contractor has a great marketing tool. He can advertise as a “one-stop” shop that provides both the design and construction as part of a seamless, efficient process that will result in a less expensive, successful project.

What I have found in practice is that design/build has both advantages and traps for the unwary contractor and consumer. The pros for the contractor are many:

Earning a fee for both the design and the construction aspects of home improvement projects.
Working with a design that has the necessary components for the construction phase. No unclear specifications that handicap the builder.
Dealing with known in-house or independent contractors who have a preexisting relationship with the contractor. Fewer conflicts with unfamiliar design professionals.
Longer-term projects and the ability to provide a greater variety of services to the customer.
The ability to provide a lower bid for a job, since the specifications will not require as much detail as modifications can be made onsite.
An additional creative outlet for the contractor
More “bang for the buck” on one’s website since photos will reflect both design and construction ability.

That said, numerous clients have run into issues with design/build that can be prevented. The most common problem is when client(s) wants to terminate the relationship before the construction phase, take the design and have it executed by someone else or want to stop the project altogether. In addition, clients frequently don’t understand the process and request numerous revisions or designs beyond their budget. Finally, I have seen numerous instances where clients do not understand the pricing and payment schedule associated with the project.

All of these issues can be prevented with a proper design/build contract. This will be the topic for my next blog post.

How to Get Paid When You’re a General Contractor

2014-11-01T18:36:00.000-04:00

Image courtesy of satit_srihin at FreeDigitalPhotos.net

The #1 complaint that I hear from contractors is that they have trouble getting paid. They provide a service to an owner, do additional work when asked, and then when an owner is presented with a bill, the owner ignores it, pays less than asked or refuses to pay at all. What is a contractor to do?

Here are the rules for getting paid:

Start with a good payment schedule. The payments should be linked to milestones so the work does not get ahead of the payments or vice-versa. Ask for payment at the start of a milestone to ensure reasonable cash flow. For example: 10% at the start of plumbing.
Ask for a reasonable deposit. Make it enough money to ensure payment for custom materials and make it non-refundable. If you are a home improvement contractor in Massachusetts, the deposit cannot be more than one-third, and you have to include language in your contract stating that fact.
Include a provision in your contract that allows you to stop work or suspend the job if a payment is not made when due. For that reason, make sure that the payment schedule is broken down into more frequent payments. That way, if one is missed, it will only constitute a small percentage of the job.
Charge finance charges. As long as your state allows you to do so, charge finance charges for late payments. You can also include a discount for immediate payment if you would like.
Include a provision in your contract that entitles you to attorney’s fees and all costs of collection. In Massachusetts, you can’t get your attorney’s fees back if you don’t include a clause in your contract saying that you have a right to them if you have to pursue a customer for payment.
Consider having a “pay when paid” clause with your contractors. Unless you are working on a commercial job in MA that is >$3,000.000.00, you have a right to wait to pay your subcontractors until you are paid. This may not be great for your relationship with your subs, but it will put pressure on the owner to pay you.
Insist that all change orders are in writing and reflect the change in contract price. In addition, indicate in your contract when payments are due for change orders. Then, do not make any additions to projects without written change orders!
State in your contract who will have the authority to sign change orders. If the owner asks others for change orders, make sure the owner understands that he will have to pay for all unauthorized change orders.
Invoice on a regular basis and keep proper accounting of your job. Guess how many owners are willing to pay for change orders that a general contractor discovers after final payment has been made.
Finally, if all else fails, make sure you are in compliance with the timing of your state’s law for filing mechanic’s liens. Mechanic’s liens are an excellent tool for getting paid, but the rules for filing them are usually very specific, so consider hiring an attorney so they are done properly.

Next up: How Subcontractors Can Make Sure They Get Paid.

What to Do When Subcontractors and Suppliers Ask the Owner for Payment

2013-09-15T16:04:00.001-04:00

When owners discover that their contractor has not paid subcontractors and suppliers, anxiety immediately sets in. Contractors who are not adept at running their businesses end up with cash flow problems and operate on credit. The situation then catches up with them and they stop making payments. Suddenly the owner finds himself being contacted by subcontractors and suppliers who are demanding payment.

The law in Massachusetts is clear; a subcontractor or supplier can only collect against an owner if it records a properly perfected mechanic’s lien. Then he can only expect payment to the extent that money is owed to the contractor at the time the lien is filed. That said, the owner has the right to finish the job. If there are no funds left, the subcontractor or supplier can only go after the general contractor for payment.

Mechanic’s liens are complicated. They consist of two documents: a Notice of Contract and Statement of Account. After filing these documents, the sub or supplier must file suit within 90 days, or the lien is no longer valid. Contractors and construction companies frequently fail to properly perfect or record their liens. If this occurs, they may be dismissed.

Generally, in MA, liens must be filed within 90 days of when the general contractor or someone working through him was last at the job. If an owner pays subs during the period that others can still record liens, he “pays them at his peril.” For that reason, the owner should record a Notice of Termination with the Registry of Deeds. That starts the clock running and all liens must be filed within 90 days of the recording.

At that point, the owner has a decision to make. Should he file a motion to dismiss the lien because no money is owed to the general contractor, or negotiate with the sub or supplier and pay them something to dissolve the lien? Unfortunately, the answer is, it depends.

In order to have a lien dissolved, your lawyer has to file an application to dissolve the lien with the court, and schedule a hearing. The whole process may take ten hours or more of your attorney’s time. As with any matter before a judge, there is no guarantee that the decision will go your way, even if the facts are on your side.

If the sub or supplier will agree to a smaller amount to pay the general contractor’s debt, it may be worth it to pay and have him sign a release. This may be a preferable and perhaps the only option if the subcontractor still has work to do, or if additional supplies are needed from the same supplier. It is generally more expensive to hire someone new to come in and complete work that has been started by someone else.

On the other hand, the amount owed may be so large that it is more economical to fight it out in court. If money is still owed to the general contractor, then that amount will be distributed pro rata to the subs who have filed properly perfected liens. Unless one can get all of the subcontractors to agree, it is better to obtain a court order decreeing the amount owed and how it should be distributed.

It is extremely stressful for an owner when subcontractors and suppliers start knocking on his door. Given the complexity of the situation, it is advisable for an owner to contact a construction attorney to determine how to best resolve the matter.