In Florida, as well as several other states, there appears to be an emerging trend within the residential construction industry, namely: the use of construction managers on homeowner-builder projects.  Whether motivated by saving construction costs or rather a desire to maintain control over their dream homes, many homeowners are choosing to act as their own general contractors.  There are numerous advantages for a homeowner to utilize the services of a construction manager when the homeowner acts as his/her own builder.[i]  From the industry standpoint, however, there are several issues that the construction professional should consider before agreeing to act as a construction manager on a residential project.    

  First and foremost, anyone who agrees to act as a construction manager for a homeowner-builder must know what a "construction manager" is and what it is not.  Simply handing the hard hat and plans over to the homeowner does not mean that the construction professional is free to perform whatever scope of work is necessary to complete the project.  There are several key elements that define what a construction manager is.  A "construction management" relationship is one whereby the construction manager acts as the homeowner's agent.[ii]  The construction manager provides advice and services to the owner, yet does not directly perform the design work and is not responsible for the actual construction work. Instead, the homeowner contracts with the licensed subcontractors who will be performing their designated scope of work.  The duties of a construction manager vary from job-to-job and his/her services may include helping the homeowner solicit bidding, reviewing the qualifications of the contractors who will perform the actual construction, helping to prepare bid packages, analyzing bids, as well as analyzing proposals for the owner.

  So what's the big deal?  The above definition becomes important for several reasons.  The leading basis that comes to mind is the disciplinary aspect.  Florida maintains strict licensing requirements for contractors.[iii]  Simply calling oneself a "construction manager" will not absolve the construction professional from discipline by the State's Construction Industry Licensing Board if in fact the individual is acting as a "contractor" and is not properly licensed.  The other aspect that comes into play is payment for services.  Florida holds that contracts entered into by unlicensed contractors are unenforceable either in law or in equity.[iv]  What does this mean for the unlicensed professional?  It's simple.  Performing the work does not guarantee an entitlement to fees.

  There is no apparent Florida law discussing the remedies for a construction manager who is owed money by a homeowner.  There is, however, a recent California case, which is on-point and addresses this area of apparent first impression.  In The Fifth Day, LLC v. Bolotin (decided on March 27, 2009)a construction management company brought an action against a project owner seeking compensation due for construction management services.  The Fifth Day, LLC v. Bolotin, 91 Cal. Rptr. 3d 633 (Cal. Ct. App. 2d 2009).  The project's owner maintained that the construction manager was barred from initiating an action against the owner since the construction manager was not a licensed contractor.  The Court analyzed the scope of services under the construction management agreement, and compared the services to California's statutory definition of "contractor."  In the end, the Court ruled that the construction manager was not acting as a "contractor" and thus could maintain its action against the project owner. The same analysis that California exercised can be employed in Florida to reach the same conclusion.

  What should be taken from this article?  First, a construction professional should not engage in contracting services unless he/she is properly licensed.  Calling oneself a "construction manager" will not absolve one from the responsibilities of being a contractor.  There are not only disciplinary ramifications for unlicensed construction activity, unlicensed contracting also affects the wallet.  Second, if truly acting as a construction manager, be certain that scope of services does not inadvertently sneak into the realm of a contractor.  A construction manager needs to carefully review his/her scope of services and make certain that the homeowner-builder knows that the homeowner-builder is the contractor.       

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[i] See § 489.103(7)(a), FLA. STAT. (2008) (discussing the owner-builder exception).  

[ii] See 2 Bruner & O'Connor Construction Law § 6:58. 

[iii] See Chapter 489, FLA. STAT. (2008).

[iv] See § 489.128, FLA. STAT. (2008).

 

By: Eileen A. LaCivita, Esquire

LEED® Accredited Professional

 Terminating any party to a construction contract is a drastic remedy that should be exercised with the utmost caution and care.  To fully appreciate the risk associated with termination one must understand the various types of termination clauses commonly found in construction contracts and subcontracts. 
  A termination for cause provision allows for the termination of a contract as a result of a material breach.  Termination for cause discharges the defaulting party's remaining performance obligations and supports the terminating party's recovery of the cost of completing the contract in conformance with its terms. While on its face the termination for cause provision appears to favor the terminating party, an owner or contractor must carefully consider the "poison" or risks associated with wrongful termination prior to taking action.
  A contracting party who is wrongfully terminated is entitled to damages and possibly other relief.  Therefore, termination for cause should generally be reserved for extreme circumstances, and if a breach is curable, the defaulting party should be given an opportunity to cure.  Allowing a defaulting party to cure non-conforming work is typically mandated in most contracts, but also lends credibility to a terminating party, who ultimately has the burden of proving that the termination was "for cause" in defending a claim for wrongful termination. 
  A termination for convenience clause allows an owner to terminate a general contractor or a general contractor to terminate a subcontractor for any reason whatsoever.  Often times, the terminating party is only obligated to pay for labor and materials provided to the project up until the time of termination. However, this amount may include the cost of demobilization, plus any negotiated profit on the completed work.  Consequently, it is vitally important to consider and negotiate what will be compensated if the contract is terminated for convenience.  The poison for the party using the termination for convenience clause is that the terminating party probably has waived its rights for damages.
  Finally, the less utilized conversion clause allows a party which has terminated "for cause" to convert the basis of the termination to that of "for convenience" in the event the litigation indicates that the terminating party wrongfully terminated the contracting party.  Owners, general contractors, and subcontractors alike should be mindful of this type of clause since the use of a conversion clause has the ability to limit a contracting party's right to recover wrongful termination damages.
  Understanding termination clauses is critical.  Prior to executing a contract, take the time to analyze the potential damages available to you in the event of termination. When a termination for cause provision is used in a contract, make sure it specifically identifies procedures and causes for termination.  Moreover, recognize that while these basic termination clauses exist, causes for termination, termination procedures, and recoverable damages are all negotiable and should be considered before contracting to perform work.

John Maroney has been appointed to the Associated Builders and Contractors ("ABC") Board of Directors.  After serving as Chair of the 2008 Holiday Gala for ABC, John was invited to join ABC's board for the 2009 year.  Regarding John's appointment to the board Greg Hough, 2009 Chairman said, "I am very pleased that John was selected to be an ABC board member and I have full confidence that he will do an outstanding job." Mr. Hough went on to say, "The ABC Board allows you to have a voice in local, state and national government.  There is also an abundance of knowledge available that otherwise we may never hear about plus you have the option to visit Tallahassee and Washington where we have the opportunity to visit with our elected officials.  This is our chance to make a difference."

Eileen LaCivita recently became only the second attorney in Jacksonville to become a LEED Certified Professional.  Arnold D. Tritt, Jr., managing partner of the firm said "Tritt|Henderson recognizes the growth of green building and the impact these initiatives will have on our clients and the construction industry as a whole.   Eileen becoming a LEED AP is a prime example of her passion for construction law and our firm's commitment to being on the forefront of the education process.  Eileen will now be able to support our clients through the certification process and help them understand the ever evolving green building regulatory requirements."

Bryan Rendzio's article -

Invoking "the Rule" During Depositions?

Absolutely "Maybe" -

was published in the November 2008 issue of the Florida Bar Journal; the criteria to have one's article published in The Florida Bar Journal are stringent and the time commitment demanding.  This is a very prestigious honor and a demonstration of Bryan's exceptional legal research and writing skills as well as his commitment to the practice of law.  Bryan's article can be found at: Florida Bar Journal - November 2008

  Thursday, February 5, 2009 was our 4th Annual Tritt|Henderson Groundhog Day Party and, as usual, Punxsutawney Phil provided us with some unusual weather.  Despite temperatures hovering slightly above freezing, over 400 friends from the construction and legal industries were still able to enjoy a great time eating, drinking and huddled around heaters.  We look forward to another fun evening for our 5th Annual Groundhog Day Party on Thursday, February 4, 2010!  Mark your calendars now!