This article is the eighth in a series on new construction.  The contents of this series of articles apply to commercial as well as residential projects.

This blog entry addresses documenting change orders in new construction projects, commercial and residential.  But before we get there, let’s re-visit the fundamentals of new construction contracting.

As is set forth in this prior blog entry:

the starting point is a clear starting point.  At the time of the signing of the contract, it is important to know what the builder has committed to build — and what he has not committed to — and what the buyer has agreed to pay for that product.  Once we have that foundation, we can address the construction changes and price changes from that point.

As a bad foundation of a house will undermine the entire project, a poor starting point for a new construction contract is not a good foundation for the construction process.

Then, once the initial scope, price and timing are clear, as change orders become necessary or appropriate, every single time a change order is agreed upon in a construction project, that change order should be crisply documented.  That documentation should be a written change order signed by both parties to the contract, which includes, in each instance, all of the following:

1) The change to the scope of the project.  The parties should detail what is being eliminated from the construction and what is being added.

2) The change in the price as a result of the change order.

3) The change in the construction schedule as a result of the change order.

Even if one or more of the foregoing are not changing at all, that should be detailed and documented as well.

I tell clients that the point of a contract is twofold: (i) to flesh out the issues between the parties and eliminate confusion as to what is being agreed upon and (ii) to create a document of the commitment of each party to the other that, yes, can be enforced in a court of law.

What happens when one or more of these issues are left unaddressed is that both issues are at play: (i) the parties may have a misunderstanding of the impact of the change order on timing or price, and (ii) it creates a murky situation when it comes time to enforce that contract.

 

My law school alma mater, Salmon P. Chase College of Law, is offering a Master of Legal Studies program folks who want to acquire targeted legal knowledge and skills in a year or so, but who don’t want to practice law or commit 3 or 4 years to law school.  It’s an interesting and new option.

The idea is that professionals in business, real estate, media and publishing, criminal justice and other disciplines can take focused studies in the law aimed at helping them to better understand our legal and governmental systems.

 

The scenario is as follows: A party files a formal appeal of his property’s tax valuation before one of Ohio’s 88 Boards of Revision and then fails to appear to prosecute his case.  It would seem automatic that the case is dismissed, and the complainant would have no right of appeal.

But Ohio is unique in that new evidence can be presented before the Board of tax Appeals following a win or loss at the Board of Revision.  It’s not exactly a trial de novo, but it’s close.

Thus, the question recently before the Ohio Supreme Court was whether a complainant in that circumstance has the right to appear before the Board of Tax Appeals to challenge the Board of Revision dismissal, and still seek a reduction in valuation.

Prior precedent of the Ohio Supreme Court said definitively “no.”  LCL Income Properties v. Rhodes, 1995.  However, as Court News Ohio reports here, the Ohio Supreme Court’s decision on July 2 in Ginter v. Auglaise County Board of Revision changes all that, and now the complainant will have a second bite at the apple at the Board of Tax Appeals.

The Finney Law Firm has a strength in bringing claims under Ohio’s Open Meetings and Public Records laws, and we are used to seeing amazing defenses that public officials raise to their secretive acts in violation of Ohio law.

But even we were surprised at a counterclaim against a Council member brought on the basis that he refused to raise taxes, and refuses to adopt the “company line” on a host of other initiatives.  Maggie Thurber of Ohio’s Watchdog.Org writes, here, about this counterclaim against a Finney Law Firm client.  It’s going to be an interesting one!

A copy of the counterclaim is here.

This article is the first in a series on new construction.  The contents of this series of articles apply to commercial as well as residential projects.

Defining “what” is to be built in a new construction contract can be tricky.

For starters, when buying an existing commercial building or house, you can see, touch, feel and inspect what is there, and based upon those observations decide whether or not to buy.   But in a new construction contract, we must define — using words and drawings — the end product.  And it is an end product with hundreds and thousands of components.  Thus, we must carefully use the contract to describe what the builder will build.

This would include dimensions, construction materials, fixtures, mechanical systems and equipment, appliances, and finish materials, such as millwork (cabinets), countertops, flooring, landscaping, etc.

Some of these items are left out of the contract, and references as “allowances,” which are to be addressed in a later article.  Be cautious with allowances, as they are frequently the basis for price disputes between builders and buyers.

Second is the intangible of “quality.”  The flatness of concrete floors, the waviness of walls, the precision of miter joints, are all exceedingly difficult to describe.  One way to tackle this drafting challenge is to refer to a “model” or “sample” that the builder has held out as the general quality of construction.  For example: “the general quality of construction — to the finishes and selections — will equal or exceed that of the model home shown to buyer by builder located at 1234 Main Street.”  Others try to reference objective standards of quality, but this can be cumbersome to wade through– and be cautious of who drafted these standards as they will invariably be tilted towards the drafter.

So, consider carefully how you define what is to be built, and the quality of the construction.  It can mean the difference between a quality project and a disappointment.

This article is one in a series on the Finney Law Firm blog on new construction.  Read more here:

New construction: The “when” >>

New construction: Change orders, allowances and selections can significantly impact price >>

New construction: On whose land are you building? >>

New construction: Cost-plus versus fixed-price >>

New construction: What form of contract?

New construction: Ohio residential buyers absolutely protected from liens in limited circumstances