Common Disputes in Residential and Commercial Construction

On behalf of Kaplin Stewart Meloff Reiter & Stein, P.C. posted in Real Estate on Feb 23, 2017.

As soon as initial plans have been drawn up — and well before construction begins — it’s important for all involved parties to pay close attention to potential “cracks” and “fault lines” in the ongoing negotiations that could lead to a significant dispute later on.  Of course, not all disputes can be predicted.  There is an basic level of uncertainty that accompanies all residential and commercial construction projects.

Whatever your position relative to the construction project (contractor, developer, purchaser, etc.), it’s absolutely critical that you work with a skilled Delaware County real estate lawyer who will provide expert guidance and draft specific agreements to limit the potential of a lawsuit, even in the event that a dispute arises.

Well in advance of construction, try to be mindful of disputes that commonly arise in both residential and commercial construction projects.  By understanding the potential for dispute, you may be able to clarify issues beforehand and avoid costly litigation down the road.

The following is a non-exhaustive list of common disputes that arise in both residential and commercial construction projects.

Excessive Delay

If your construction contract includes explicit deadlines for the completion of various project milestones (and makes clear that such deadlines are materially relevant to the satisfactory completion of the contract), then a significant delay that threatens the contractual bargain is very likely to lead to a legal dispute.  Even without an explicit deadline, if a delay is particularly excessive, it may be linked to abandonment of the construction project altogether.

Do bear in mind, however, that most construction contracts include an “Act of God” provision that protects contractors from being held responsible for delays that occur due to circumstances outside of their control (for example, if an earthquake were to damage some of the existing construction, then it would likely force a delay on the project for which the contractor could not be held responsible).

Alternative Material Usage

A construction contract should include explicit information detailing the type of materials that will be used for the project at-issue, and what — if any — alternatives may be used.  Disputes often arise in construction projects where the materials have not been adequately specified.  For example, a contractor may choose a cheaper, more readily available material to save on costs, which might conflict with the expectations of the other party.  Material substitution disputes are difficult to resolve after-the-fact.  As such, it’s good policy to discuss specific materials (and alternatives) in advance of construction.

Poor Construction

If the contractor is perceived to have done a poor job with the construction project, then there may be a dispute.  The quality of construction work must be objectively judged against the terms of the contract, as well as the reasonable standard of quality found in the industry.

For example, suppose that a construction contract requires that a shed be built with certain, explicitly laid-out tolerances.  If the contractor fails to meet this requirement, it could be considered a failure to adhere to the standards demanded by the contract.  On the other hand, suppose that the construction contract did not detail specific tolerances.  If the shed fails to meet the minimum standard found in the industry, then it could also be considered a poor effort.

Cost Shifting

On most major projects, the expected costs for completion will almost certainly shift over time.  Disputes may arise if the parties do not agree (in advance of construction) on how shifting costs will be negotiated and who will be responsible for such costs.

Missed Payments

Missed and late payments are certain to lead to disputes — especially in situations where the nonpayment concerns a particularly substantial amount.

In Pennsylvania, if a contractor/subcontractor who furnishes labor or materials on a construction project is not paid for their work, they have 6 months (from the date of completion of the work) to file a mechanics’ lien against the property.  They then have 2 years from the date of filing to enforce the lien against the property.

Scope Modifications

In many construction contracts, both residential and commercial, the client may alter the scope of the project as construction progresses.  Minor scope modifications can accumulate and present real difficulties for contractors, too.  Requests for additional rooms, changes in natural lighting, window alterations, etc. may seem minor at first, but may require substantial and costly modifications to the original plans.

To prevent dispute, it’s critical that the parties agree upon what constitutes a material scope modification, and — assuming that some amount of scope modification is allowed — by what process a particular scope modification request will be assessed for implementation.

Whether you have yet to actually begin construction, or find yourself currently embroiled in a dispute with other parties, call (610) 260-6000 to setup a free consultation with a real estate lawyer here at Kaplin Stewart.  We look forward to speaking with you.