CONSTRUCTION & REAL ESTATE BLOG

The common law doctrine of nullum tempus occurrit regi roughly translates to “no time run against the king.” In the past, that doctrine was enforced when courts determined whether government agencies were barred by the same statutes of limitations as private citizens when bringing claims for undisclosed defects in a real estate sale. However, this principle has since been limited by the statute of limitations for governmental bodies to bring claims.

N.J.S.A. 2A: 14-1.1 (“the statute”) was enacted in the 1960s to limit the potential liability to which architects and building contractors, among others, were increasingly subject. Rosenberg v. North Bergen, 61 N.J. 190, 194 (1972). Its purpose was to define substantive rights for these professionals, such as the right not to have to have to defend ancient claims or obligations. Cyktor v. Aspen Manor Condominium Ass’n¸359 N.J. Super. 459 (App. Div. 2003). The statute was designed so as to provide “repose” for such professionals from all claims arising out of construction or design defects of a hazardous nature ten years after the work was completed.

In 1995, the court found that the nullum tepus doctrine did not apply to the state or its agencies. State v. Cruz Constr. Co, 279 N.J. Super. 241 (App. Div. 1995). Cruz, as well as other similar decisions, prompted the state legislature to amend the statute in order to clarify that it was meant to apply to claims by both private citizens as well as government agencies.

The statute reads: “No action, whether in contract, tort, or otherwise, to recover damages for any deficiency…shall be brought against any person performing or furnishing the design…to real property, more than 10 years after the performance or furnishing of such services and construction. This limitation shall serve as a bar to all such actions, both governmental and private, but shall not apply to actions against any person in actual possession and control as owner, tenant, or otherwise, of the improvement at the time the defective and unsafe condition of such improvement constitutes the proximate cause of the injury or damage for which the action is brought.” N.J.S.A. 2A: 14-1.1

The amendment also enumerates four governmental actions that the statute does not bar. Id. at 14-1.1(b). The statute does not bar an action by a governmental unit:

1) on a written warranty, guaranty or other contract that expressly provides for a longer effective period;

2) based on willful misconduct, gross negligence or fraudulent concealment in connection with performing or furnishing the design, planning, supervision or construction of an improvement to real property;

3) under any environmental remediation law or pursuant to any contract entered into by a governmental unit in carrying out its responsibilities under any environmental remediation law; or

4) pursuant to any contract for application, enclosure, removal or encapsulation of asbestos.

Id. at 14-1.1(b).

The statute defines “governmental” as “the state, its political subdivisions, any office, department, division, bureau, board, commission or public authority or public agency of the state or one of its political subdivisions, including but not limited to, a county or a municipality and any board, commission, committee, authority or agency which is not a State board, commission, committee, authority or agency.” Id. at 14-1.1(c).

Comments/Questions: gdn@gdnlaw.com

© 2012 Nissenbaum Law Group, LLC

May contractors limit their responsibility for paying another party’s legal fees in situations where that other party’s fault precipitates the cause of action? Recent court decisions suggest that, if the contractor has a narrow indemnification clause in his contract, courts might be less likely to find him liable in situations where the contractor was not at fault.

In a recent case considered by the Appellate Division of the Second Department of the Supreme Court of New York, a plaintiff was allegedly injured when his motorcycle struck a pothole in a Brooklyn street. Sand v. City of New York, 2011 NY Slip Op 3226, 2 (N.Y. App. Div. 2d Dep’t 2011). The plaintiff brought suit against the City of New York. The City had issued a permit to Verizon New York Inc. (“Verizon”) to open the roadway at that location. Accordingly, it commenced a third-party action for indemnification against Verizon. That company then commenced a fourth-party action for contractual indemnification against S. DiFazio and Sons Construction, Inc. (“DiFazio”), the construction company that had performed the work for Verizon under the permit.     

DiFazio claimed that it was not required to pay Verizon’s legal fees or any other costs of defending the action because it was not at fault. However, the Court determined that the agreement did not include any writing that would make DiFazio’s obligation contingent on fault. The Court held that “[p]ursuant to the contract between DiFazio and Verizon, DiFazio agreed to defend and indemnify Verizon for all claims arising out of DiFazio’s ‘actual or alleged acts or omissions.’ The plain and unambiguous terms of the contract do not condition DiFazio’s obligation for attorneys’ fees and costs on a finding of fault.” Id. at 2.    

The Sand Court might have decided differently if the indemnification provision were limited to a more specific and narrow variety of claims. For example, in a recent Second Department case, the Court held the contractor was not liable because the indemnification clause was narrowly tailored. Farrell v. City of New York¸ 2011 NY Slip Op 2839, 1 (N.Y. App. Div. 2d Dep’t 2011). That case stemmed from a 2002 incident on the Gowanus Expressway where a piece of road debris allegedly went through a windshield and struck the plaintiff driver in the face, rendering her unconscious. At the time, defendants Grace Industries, Inc. and Grace Industries Inc./El Sol Contracting & Construction Inc., J.V. (the “defendants”) were performing re-decking and structural steel replacement work on the expressway pursuant to a contract with the State of New York. The plaintiff sought to recover damages for personal injuries. Importantly, the indemnification clause was a narrow one. As the Court observed, “[T]heir contract with the State was limited and did not entirely displace the State’s duty to maintain the roadway.” Id.

The defendants submitted a motion for summary judgment, which was granted by the lower court and affirmed by the Appellate Division.      

The Farrell Court held that a party who enters into a contract to render services may be said to have assumed a duty of care (and thus be potentially liable in tort to third persons) only where:

1) the contracting party, in failing to exercise reasonable care in the performance of its duties, launches a force or instrument of harm,

2) the plaintiff detrimentally relies on the continued performance of the contracting party’s duties, or

3) the contracting party has entirely displaced the other party’s duty to maintain the premises safely.

Church v. Callanan Indus., 99 N.Y.2d 104 (N.Y. 2002).

However, the Farrell Court determined that, although the contract between the defendants and the State included an indemnity clause, it did not entirely remove the State’s duty to maintain a safe roadway. In other words, it had not “entirely displaced the other party’s duty to maintain the premises safely.” Additionally, the defendants demonstrated that they did not cause the debris to be on the roadway; they did not know how long it had been there; and that they did not have a duty to remove non-construction roadway debris. Hence, they would not have to pay the State’s legal fees and costs of defending the suit.

These two decisions demonstrate the consequences of having a broad versus narrow construction contract indemnification clause. The second decision also indicates the benefits a construction company may enjoy by including a narrow indemnification clause in its contracts because it might enable a company to avoid the obligation of paying for another party’s attorneys’ fees in situations where they are not at fault.

Comments/Questions: gdn@gdnlaw.com

© 2012 Nissenbaum Law Group, LLC

when real property is either remediated to a nonresidential soil remediation standard, or engineering or institutional controls are used in lieu of remediation to an unrestricted standard, the Department of Environmental Protection (DEP) shall, as a condition of the use of the standard or control, require the recording of a notice indicating that contamination exists on the property at a level that may statutorily restrict certain uses of or aces to the property.

N.J.S. 58:10B-13(a)(2).

The notice is recorded in the same manner as a deed and includes:

Comments/Questions: gdn@gdnlaw.com

� 2011 Nissenbaum Law Group, LLC

“It is expressly understood and agreed that the receipt by the Contractor of payment for the Subcontractor’s work shall be a condition precedent to the Contractor’s obligation to pay the Subcontractor. That is, the Contractor shall have no liability or responsibility for any amounts due or claimed to be due the Subcontractor for any reason whatsoever except to the extent that the Contractor has actually received funds from the Owner specifically designated for disbursement to the Subcontractor.”

Comments/Questions: ljm@gdnlaw.com

© 2009 Nissenbaum Law Group, LLC

Home Improvement Regulation: In an effort to strengthen the protections afforded consumers against wrongful acts by home improvement contractors, the Pennsylvania legislature recently enacted the Home Improvement Consumer Protection Act.

The Act, which will become effective as of July 1, 2009, imposes stringent requirements on individuals or entities engaging in any form of home improvement. They are similar to those implemented in other states. Under the Act, “home improvement” is broadly defined and includes any repair, replacement, remodeling, demolition, removal, renovation, installation, alteration, construction or other improvement for which the total contract price exceeds $500. However, the Act does not apply to the construction of a new home or to the sale of goods or materials, where the seller does not perform actual work on the home.

The new law requires that all Pennsylvania home improvement contractors register with its Bureau of Consumer Protection in the Office of the Attorney General. The contractor’s registration number then must be included in every advertisement, estimate, proposal or contract for home improvement. Contractors must also maintain liability insurance in the minimum amount of $50,000. In addition, they must disclose in the registration application if they have ever been convicted of a criminal offense, fraud or theft related to a home improvement transaction crime. Contractors are also required to disclose if they have ever filed for bankruptcy or if they have had a judgment entered against them in connection with a home improvement transaction within the previous 10 years.

In addition, the Act contains strict requirements regarding the form and content of home improvement contracts. Under the Act, all home improvement contracts must be in writing, and also as mentioned above, must contain the contractor’s registration number. The Act mandates certain items be included in the agreement. For instance, though without limitation, the agreement needs to be signed by both the contractor and the customer; it needs to include required statutory notices; the contract must provide a mailing address for the contractor (this cannot be a PO Box); and provide an outline of information relating to any subcontractor that will be used on the project. Moreover, the contract must also include a description of the work to be performed, the materials to be used and a set of specifications that cannot be changed without a written change order signed by the consumer. It must also specify the approximate start and completion dates for the work and the total sales price due under the contract. Moreover, the contract must contain the toll-free number of the Pennsylvania Bureau of Consumer Protection, as well as a provision allowing the consumer to rescind the contract within 3 business days. Moreover, where the contract price exceeds $1000, the contract must not provide for any deposits in excess of 1/3 of the total contract price. Finally, the Act specifies other language that cannot be included in the agreement. If these provisions are nevertheless included in the agreement, it could void it entirely, and prevent a contractor for being able to enforce it (i.e., collect money owed to the contractor for work performed).

Any violation of the Act by a home improvement contractor will also constitute a violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law. As a result, consumers have the potential to recover treble damages (or three times the amount of the consumer’s actual damages) and attorneys’ fees from a contractor found to be in violation of the Act. This means that regardless of the quality of work performed, a contractor could find himself liable for a violation of the Act for failing to have a compliant agreement. Even a technical violation would suffice to make a contractor liable under the Act. For example, an argument could be made that if the contractor’s customer agreement did not include each and every one of the required elements, or did not include verbatim the statutory language set forth for the required notices, the contractor would be liable for violating the Act, even if unintentionally. It could be responsible for treble (triple) damages as a result.

In light of the potential for huge recoveries against them, contractors should be extremely careful in drafting their home improvement contracts. Any individual or entity engaging in any form of home repair or improvement should consult an attorney in order to ensure that they are in compliance with the Act’s detailed requirements.

Comments/Questions: ljm@gdnlaw.com

© 2008 Nissenbaum Law Group, LLC

New York City has promulgated regulations relating to home improvement contractors, the purpose of which are presumably to protect consumers against contractors’ deceptive and fraudulent practices. However, the requirements go beyond such a prohibition and impose a number of precise requirements with which all home improvement contractors must comply. Home improvement is broadly defined under the law as “the construction, repair, replacement, remodeling, alteration, conversion, rehabilitation, renovation, modernization, improvement, or addition to any land or building, or that portion thereof which is used or designed to be used as a residence or dwelling place and shall include but not be limited to the construction, erection, replacement, or improvement of driveways, swimming pools, terraces, patios, landscaping, fences, porches, garages, fallout shelters, basements, and other improvements to structures or upon land which is adjacent to a dwelling house.” Home improvement does include the construction performed with respect to a new home or building.

One such requirement is that all contractors need to be licensed in order to solicit, sell or perform home improvement services. Where a contractor performs home improvement services without a proper license, he may be deemed guilty of a misdemeanor and subject to imprisonment of not more than one year and/or a penalty not to exceed $1,000.00. Furthermore, a contractor who is not licensed to engage in home improvement services may also be precluded from recovering monies due and owing by a homeowner under a contract. In other words, if a homeowner does not pay, you can’t sue for unpaid monies. In New York City, the public policy underlying the license requirement is so strong that some courts have even precluded an unlicensed contractor from recovering under quasi-contract theories such as quantum meruit. In other words, contractors may as demonstrated in Nemard Construction Corp. v. Deafeamkpor not even be able to recover the reasonable value of the services they provided if they fail to comply with the licensing requirement.

In addition, where a violation of the New York City’s administrative regulations is found, the Commissioner of the Division of Consumer affairs may order the contractor to pay the owner treble damages.

Aside from the requirements that all contractors be licensed, the regulations also prohibit home improvement contractors from engaging in certain acts, including without limitation (a) deviating from the plans or specifications or terms of the contract without the written consent of the homeowner; (b) making a substantial misrepresentation or false promise to induce a homeowner to enter into the contract; or (c) making false statements in connection with advertising their services. Moreover, the regulations further require that a contractor provide written notice to the homeowner that he may cancel the contract at any time prior to midnight of the third night after either the contract was executed or such notice was provided, whichever is later. Again, where a contractor engages in any such prohibited acts, he may be deemed guilty of a misdemeanor and subject to imprisonment of not more than one year or a penalty not to exceed $1,000.00.

In addition to the New York City administrative regulations governing home improvement contractors, there are statutes in New York that also govern home improvement contractors. Specifically, the home improvement contractor must be registered in the municipality where the work is performed. As demonstrated in Price v. Close, a contractor is precluded from recovering unpaid monies from an owner because he is unlicensed. The definition of a home improvement is identical to the definition set forth in the New York City regulations.

Furthermore, New York also requires contracts that exceed the cost of $500.00 to be in writing and signed by both parties. In addition, the contract must be legible and in plain language and clearly describe the other documents that are to be incorporated into the contract. The contractor must provide the owner with a copy of the written contract before any of the work is performed. New York also requires that the contract contain certain information including

(i) the name, address, telephone number and license number of the contractor;
(ii) the estimated dates when the work will begin and be substantially completed;
(iii) the contingencies that would materially change the approximate completion date;
(iv) a description of the work to be done, the materials to be provided to the owner and the agreed upon consideration for the work and materials.

In addition, the New York statute governing home improvement contracts also requires that certain notices be provided in clear conspicuous bold face type notifying the owner, among other things, that he has three business days to cancel the contract. The statute sets out the specific language of these notices.

Comments/Questions: ljm@gdnlaw.com

© 2008 Nissenbaum Law Group, LLC