Articles Posted in Real Estate Development

Stuart Sobel 2013-thumb-180x270-86799Firm shareholder Stuart Sobel authored a guest column that appeared in the May issue of Construction Executive magazine, one of the leading construction industry trade publications in the country.  His article, which was titled “Dispute Review Boards: An ADR Technique That Works,” focused on the use of DRBs for major projects as an effective means to avoid or resolve disputes that may arise during construction.  Stuart’s article reads:

Disputes are endemic to the collaborative nature of construction. It seems prudent to anticipate the disputes, even where the precise nature of the dispute is unknowable, and create a structure for proactively addressing and resolving them when they do arise. Traditional dispute resolution, whether arbitration or litigation, when invoked at the end of the project, takes place too late to save it or get it back on track. Instead, proactive onsite real-time dispute resolution is warranted to protect working relationships, cash flows and schedule progress.

Arbitration has become the preferred alternative dispute resolution forum for resolving construction disputes because it is private, streamlined and presided over by experienced construction professionals.

However, just as with litigation, arbitration only comes into play after a dispute has ripened. The arbitration process usually extracts a considerable toll on the project participants through damaged relationships and expenses. The parties involved are very unlikely to continue doing business together in the future. In addition, discovery in arbitration proceedings is now wider, longer and more expensive, and its growing resemblance to litigation has become unmistakable. Thus, despite its reputation as a cheaper alternative to litigation, arbitration has become more expensive as the process permits more litigation-like discovery, with attendant administrative costs and arbitrators’ fees.

Instead, consider the scenario where an independent person or board, respected by all project participants, is designated in the operative construction contracts to stay abreast of the design and construction and to attend and observe all pertinent meetings (owner/architect/contractor meetings, change order meetings and even important contractor/subcontractor meetings). Through this process, the dispute resolution neutral or, where there is more than one, the Dispute Resolution/Review Board (DRB), can quickly understand theConstruction-Executive-Logo nature and genesis of disputes that are blossoming — before they slow or stop the construction progress.

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In a recent appellate ruling with significant precedential implications for litigation by contractors against construction lenders in Florida, the court found that Florida’s Construction Lien Law bars common law remedies for contractors to sue lenders for work performed by the contractors and other lienors. The court affirmed the lower court’s summary judgment for a lender over a contractor’s claims stemming from a failed housing development.

The case of Jax Utilities Management, Inc. v. Hancock Bank involved contractor Jax Utilities, developer Plummer Creek, LLC and successor lender Hancock Bank. In 2009, after the developer suffered financial difficulties it failed to pay Jax. As a result of the developer’s financial difficulties, Hancock Bank obtained a final judgment of foreclosure against Plummer Creek and the project in September 2011. Subsequent to that, in December 2011, Jax filed a claim for breach of contract against Plummer Creek as well as claims for unjust enrichment, and it sought to impose an equitable lien against Hancock Bank.

The trial court issued a final judgment for Jax against Plummer Creek for more than $587,000, but it also granted a summary judgment to Hancock Bank finding that the contractor’s equitable lien claim was barred by the one-year statute of limitations which governs actions to enforce equitable liens. It also found that §713.3471 of Florida’s lien law precluded Jax’s common law remedies.

On appeal, Jax and Hancock disagreed as to when the statute of limitations began to run to enforce an equitable lien. Jax took the position that it did not begin to run until the bank had instituted foreclosure proceedings. The First District Court of Appeals disagreed, holding, “By its plain language, section 95.11(5)(b) requires that a claim for equitable lien be brought within one year of the last furnishing of labor, services, or material for the improvement of real property.”

1dca.jpgThe First District Court of Appeal also agreed with Hancock Bank’s arguments that the lien law precluded Jax’s common law claims for equitable lien and unjust enrichment. §713.3471 establishes the proper procedures for lenders to notify contractors if they decide to cease disbursing funds under a construction loan, and it also sets the damages for a bank’s failure to provide notice. The court concluded that:

Section 713.3471(2) expressly immunizes lenders who provide notice, prescribes the damages where notice is not provided, and states that the cause of action cannot become the basis for an equitable lien claim. Moreover, a common law claim would conflict with the statute. If a lender complies with the statute, it has no liability. If the lender fails to comply, a contractor may seek damages as prescribed by the statute.

The court also noted that its holding was reinforced by the lack of a provision preserving common law remedies in the statute.

For contractors such as Jax, which had apparently earned the funds that it was not paid, the court’s holding delivers a clear message that they cannot forgo their rights under the lien law in favor of common law claims against lenders. Even in cases in which a construction lender disregards the requirements under the lien law by not issuing the proper notice to the contractor when it decides to stop disbursing loan proceeds, the lender’s liability is delineated solely by the statute.

Our firm’s other construction law attorneys and I work very closely with contractors, subcontractors and other lienors to enable them to utilize all of their rights to recover the funds that they are owed. We write in this blog on a regular basis about important legal and business matters for the construction industry in Florida, and we encourage industry followers to submit their email address in the subscription box at the top right of the blog in order to automatically receive all of our future articles.

Miami has a level of international appeal and prestige that is uniquely its own. Annual events such as the Miami Open tennis tournament and Art Basel lure jet-setters from across the globe, and it is largely due to these well-heeled visitors that the area’s market for new luxury condominiums has been able to bounce back as strong as it has in the last couple of years. Real estate investors who make their primary residences abroad have become the predominant class of buyers for many of the South Florida area’s new condominium developments.

The boom of international investors has had a tremendous effect on South Florida. Land that had once been untouched by most developers is now seeing a robust amount of activity. Nearly 300 towers are expected to be built within the tri-county area in the near future.

constructionMany of these projects are being built by developers who are new to South Florida. We are now seeing scores of international or out-of-state developers who have never developed properties in Florida entering the market with high-profile new projects. New developers are coming in strong, but they must be wary of the obstacles that come with building condominiums and other large projects in Florida. Laws and business practices are not consistent from country to country or even state to state. Consequently, otherwise experienced developers who are new to Florida will be required to educate themselves with development in South Florida in order to maximize their chances of successfully completing their projects.

With the right team, development and construction of a project can be simplified, and obstacles by-passed. Our firm’s other attorneys who are board certified by The Florida Bar in construction law and I focus our practices solely on construction matters, and we offer developers as well as contractors, engineers, architects, subcontractors, suppliers and other industry members the experienced guidance and representation that can enable them to build successfully in Florida.