Construction and Development

Short-Term Rental Legislation & Litigation On the Way!

Posted on September 3, 2019 by Patrick J. Paul

The advent of the shared economy in the real estate context has provided homeowners and investors alike with expanded opportunities to generate revenue from the use of their real estate. Airbnb and VRBO are two of the most popular companies facilitating short-term rental availability. The rapid growth in this shared real estate economy has served as a disruptor of sorts to the traditional hotel and hospitality industry, causing that industry to revisit its own models in order to better compete.

The popularity of short-term rental use, however, has created a whole new set of problems about which property owners, state and local governments, renters, and those impacted by the explosion of short-term rentals should be aware.… Read More »

Author: Patrick J. Paul | Leave a comment Tagged #2672, #partyhouse, #scottsdale, #shorttermrental

CCP 998 Does Not Confer an Independent Right to Attorneys’ Fees

Posted on June 7, 2019 by acarucci

By: Tony Carucci

A so-called “offer to compromise” under California Code of Civil Procedure section 998 can reverse the parties’ entitlement to costs after the date of the offer, depending on the outcome of the litigation. Cal. Code Civ. Proc. § 998. When making a 998 offer, parties may designate the plaintiff as the prevailing party and provide that the plaintiff may seek attorneys’ fees allowed by law, or expressly include the plaintiff’s attorneys’ fees within the amount of the offer. But does an offer that simply provides that the plaintiff may seek attorneys’ fees “allowed by law” provide the plaintiff with an independent right to attorneys’ fees?… Read More »

Author: acarucci | Leave a comment Tagged commercial real estate, construction, contractor, real estate, real estate litigation, Snell & Wilmer

Colorado Court of Appeals clarifies that a finding of irreparable harm is not required to enter a permanent injunction to enforce an easement

Posted on May 7, 2019 by Luke Mecklenburg

On March 21, 2019, the Colorado Court of Appeals issued its opinion in Rinker v. Colina-Lee, holding for the first time that the “irreparable harm” element typically required to grant a permanent injunction is not needed for injunctions issued to enforce easements. 2019 COA 45. While the facts underlying the case are long and somewhat convoluted, for the purposes of the court’s “irreparable harm” holding, the case involves two real property owners along a private road governed by an association agreement. Id., ¶¶ 12-14. Uphill property alterations by the association and other members caused debris to accumulate on Mr.… Read More »

Author: Luke Mecklenburg | Leave a comment Tagged colorado real property, commercial real estate, developer, easements, injunction, irreparable harm, real estate, real estate litigation, real property, Snell & Wilmer

What If Your CCP 998 Offer is Silent on Costs?

Posted on January 17, 2019 by acarucci

By: Tony Carucci

In California, the “prevailing party” in litigation is generally entitled to recover its costs as a matter of law. See Cal. Code Civ. Proc. § 1032. But under California Code of Civil Procedure section 998, a party may make a so-called “offer to compromise,” which can reverse the parties’ entitlement to costs after the date of the offer, depending on the outcome of the litigation. Cal. Code Civ. Proc. § 998. The potential payoff of a 998 offer is that “If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendant’s costs from the time of the offer.” Cal.… Read More »

Author: acarucci | Leave a comment Tagged commercial real estate, construction, contractor, developer, foreclosure, Guarantor, guaranty, real estate, real estate litigation

Ten Years After Colorado’s Adverse Possession Amendment: a brief look backwards and forwards

Posted on September 10, 2018 by Luke Mecklenburg

In response to national outrage over an infamous adverse possession case in Boulder, Colorado, in which a lawyer and a judge intentionally took their neighbors’ undeveloped land through adverse possession, the Colorado legislature amended the state’s adverse possession statute (C.R.S. § 38-41-101) to make the claim significantly harder to prove. It did this because it believed “there were insufficient ‘obstacles’ to establishing a claim for adverse possession under the existing law.”[1] Effective July 1, 2008, the amendment created a heightened burden of proof, additional element requirements, and the possibility of a losing defendant recovering money from successful plaintiffs for the value of the land they took and the taxes the defendant had paid on that land.… Read More »

Author: Luke Mecklenburg | Leave a comment Tagged adverse possession, colorado real property, CRS 38-41-101, real estate, real estate litigation, real property, residential, Snell & Wilmer

Wait, You Want An HOA?! Restricting Implied Common-Interest Communities

Posted on August 31, 2018 by nmcconomy

By: Neal McConomy

While the butt of many jokes and a thorn in the side of some property owners, homeowners associations (“HOAs”) serve the vital function of collecting and disbursing funds to care for and maintain common areas of residential developments. Without HOAs, neighborhood open spaces, parks, and other amenities risk falling into disrepair through a type of tragedy of the commons, wherein residents use such amenities but refuse to subsidize care and maintenance for these common areas believing someone else will pony-up the funds. HOAs, when properly organized and managed, avoid this problem by ensuring everyone pays their fair shares for the common areas.… Read More »

Author: nmcconomy | Leave a comment Tagged CCIOA, common-interest communities, HOA, homeowner, homeowners association, homeowners' associations, real estate, real estate litigation, real property, residential, residential construction, residential real estate development

Cybersecurity on Your Project: Why Not Follow National Security Strategy?

Posted on August 20, 2018 by Rick Erickson

By Rick Erickson

In its recent Cybersecurity Strategy, the U.S. Department of Homeland Security (DHS) defined “cyberspace” as “the independent network of information technology infrastructure, including the Internet, telecommunications networks, computers, information and communications systems, and embedded processors and controllers.” To DHS, protecting cyberspace includes threats against “federal and nonfederal information systems.” In other words, both private and public interests are at risk. In his 2018 National Defense Strategy, U.S. Department of Defense Secretary, Jim Mattis, essentially concurred in declaring cyberspace a “warfighting domain” and promising to “invest in cyber defense, resilience, and the continued integration of cyber capabilities into the full spectrum of military operations.”

The construction industry is a key player in cybersecurity because contractors, designers and owners are responsible for building and delivering projects providing critical public services like national defense, health care, law enforcement, transportation, and utilities.… Read More »

Author: Rick Erickson | Leave a comment Tagged breach of contract, builder, chief information officer, construction, construction law, construction management, contractor, cyber, cyber threat, cybersecurity, design team, DHS, electronically stored information, ESI, general contractor, homeland security, information systems, liability insurance, national security, national security strategy, network security, project manager, real estate, real estate development, risk management, subcontractor

California Supreme Court Clarifies Deadline to File Anti-SLAPP Motions in Light of Amended Pleadings

Posted on June 14, 2018 by acarucci

By: Tony Carucci

California’s “anti-SLAPP” (“SLAPP” is an acronym for strategic lawsuit against public participation) statute—codified at California Code of Civil Procedure section 425.16 et seq.—is the primary vehicle for defending against any action involving petitioning or free speech. The statute was designed to provide an early and fast summary judgment-like procedure to allow defendants and cross-defendants to file a motion to dismiss either an entire complaint, specific causes of action, or even just portions of a cause of action, and to require the plaintiff to respond before conducting discovery. By facilitating an early challenge to a plaintiff or cross-complainant’s claims, the anti-SLAPP statute allows the responding party to avoid the costs and delay that chill the exercise of constitutionally protected rights.… Read More »

Author: acarucci | Leave a comment Tagged commercial real estate, construction, developer, eminent domain, real estate litigation, real property

Developers Celebrate Arizona’s Opportunity Zones

Posted on April 27, 2018 by Patrick J. Paul

By: Patrick J. Paul

President Trump’s Tax Cuts and Jobs Act passed by Congress in December included a new community development program designed to promote investment in low income urban and rural communities. These “Opportunity Zones” provide that every Governor may nominate up to 25% of qualifying low-income Census tracts for consideration in the program which provides substantial reductions on capital gains taxes with the greatest benefits to those holding their investments for a period of at least 10 years.

States were required by March 21st to submit nominations or request a 30 day extension to subsequently submit. The Treasury Department in turn has 30 days from the date of submission to designate the nominated zones. … Read More »

Author: Patrick J. Paul | Leave a comment Tagged Arizona Commerce Authority, IRS, Opportunity Zones, Tax Cuts and Jobs Act, Treasury Department

Under Colorado House Bill 17-1279, HOA Boards Now Must Get Members’ Informed Consent Before Bringing A Construction Defect Action

Posted on April 6, 2018 by Luke Mecklenburg

By: Luke Mecklenburg

Last year, I wrote a post calling attention to stalled efforts in the Colorado legislature to pass meaningful construction defect reform. Shortly thereafter, the legislature got it done in the form of House Bill 17-1279. This bill creates an important pre-litigation notice-and-approval process whenever an HOA initiates a construction defect action in its own name or on behalf of two or more of its members.

Before May 2017, the pre-litigation requirements that an HOA had to fulfill before bringing a construction defect claim under the Colorado Construction Defect Action Reform Act (“CDARA”) were generally minor. For example, while many declarations required majority approval from the community prior to initiation of claims, in practice, what the industry was seeing is that some HOAs were making it so that only a majority of the HOA Board had to approve bringing the claim, rather than the majority of interested unit owners. … Read More »

Author: Luke Mecklenburg | Leave a comment Tagged C.R.S. § 38-33.3-303.5, CCIOA, CDARA, construction defect, HB 17-1279

California’s Right To Repair Act Is The Sole Remedy For Damages For Construction Defects In New Residential Construction

Posted on March 6, 2018 by Mark Johnson

By: Mark Johnson

The California Supreme Court ruled in McMillin Albany LLC et al. v. The Superior Court of Kern County, (1/18/2018) 4 cal. 5^th 241, that California’s Right to Repair Act, California Civil Code sections 895 et seq. (“Act”) is the sole remedy for construction defect claims for economic loss and property damages regarding new residential construction. The Act establishes a pre-litigation dispute resolution process that must be followed before filing a construction defect action for new residential construction purchased after January 1, 2003. The Act provides a builder with the right to attempt to repair construction defects before litigation is filed.… Read More »

Author: Mark Johnson | Leave a comment Tagged construction, construction defect claims, new residential construction, property damage, residential

When Does a Contractor Legally Abandon a Construction Project?

Posted on January 15, 2018 by Rick Erickson

By Rick Erickson

Lately, we’ve been spending more time as litigators pursuing and defending claims of abandonment against contractors. It has become apparent that abandonment is often misinterpreted in its legal meaning and effect. Here are some thoughts on abandonment to consider.

On its face, the concept of abandonment is simple enough. For any number of reasons, a contractor abandons a project when the contractor stops showing up. Abandonment is major concern for all players on the project because it causes critical path delays and significant costs to replace the contractor with another contractor, many times at a much higher cost than the original contractors’ bid.… Read More »

Author: Rick Erickson | Leave a comment Tagged abandon, abandonment, breach, breach of contract, claims, construction, construction litigation, contract, contractor, developer, legal excuse, licensing, owner, Registrar of Contractors, subcontractor

Withdrawal of an Admission in California May Shift Costs—Including Attorneys’ Fees—Incurred in Connection with the Withdrawal

Posted on January 11, 2018 by acarucci

By: Tony Carucci

Under California Code of Civil Procedure section 2033.300, a court may permit a party to withdraw an admission made in response to a request for admission upon noticed motion. The court may only do so, however, “if it determines that the admission was the result of mistake, inadvertence, or excusable neglect, and that the party who obtained the admission will not be substantially prejudiced in maintaining that party’s action or defense on the merits.” Cal. Code Civ. Proc. § 2033.300(b). The court may also “impose conditions on the granting of the motion that are just, including, but not limited to .… Read More »

Author: acarucci | Leave a comment Tagged real estate litigation

Is the Issuance of a City Use Permit Referable? Not When It Is an Administrative Act

Posted on December 22, 2017 by Adam Lang

By: Adam E. Lang

Arizona’s Constitution gives electors in cities, towns, and counties the ability to refer legislation that was enacted by their local elected officials to the ballot for popular vote. Ariz. Const. art. IV, Pt. 1 § 1(8). But only legislative acts are referable; administrative acts are not. In general, a legislative act makes new law and creates policy, is permanent in nature, and is generally applied. On the other hand, an administrative act is one that executes and implements a law already in place. Wennerstrom v. City of Mesa, 169 Ariz. 485, 489-90, 821 P.2d 146, 150-51 (1991).… Read More »

Author: Adam Lang | Leave a comment Tagged administrative act, electors, initiative, legislative act, petition, referable, referendum, rezoning, use permit, zoning

Arizona Supreme Court Clarifies Area Variance Standard; Property Owners May Obtain an Area Variance When Special Circumstances Existed at Purchase

Posted on October 10, 2017 by Ben Reeves

By: Nick Wood, Adam Lang, Noel Griemsmann, and Brianna Long

In Pawn 1st v. City of Phoenix, the Arizona Supreme Court rejected a Court of Appeals rule that would have unduly restrained alienation of property in Arizona. The Court of Appeals found that the City of Phoenix Board of Adjustment acted beyond its authority when it granted an area variance to a pawn shop where the special circumstances causing a need for the variance existed before the pawn shop purchased the property. Under Arizona law, boards of adjustment cannot grant an area variance where the special circumstances requiring the variance are self-imposed.… Read More »

Author: Ben Reeves | Leave a comment Tagged LLC v. Phoenix, Pawn 1st, real estate litigation, variance, zoning

Arizona Supreme Court Confirms a Prevailing Homeowner Can Recover Fees on Implied Warranty Claims

Posted on August 24, 2017 by Rick Erickson

By Rick Erickson

On August 9th, in Sirrah Enterprises, L.L.C. v. Wunderlich, the Arizona Supreme Court settled the question about recovery of attorneys’ fees after prevailing on implied warranty claims against a residential contractor. The simple answer is, yes, a homeowner who prevails on the merits can recover the fees they spent to prove that shoddy construction breached the implied warranty of workmanship and habitability. Why? Because, as Justice Timmer articulated, “[t]he implied warranty is a contract term.” Although implied, the warranty is legally part of the written agreement in which “a residential builder warrants that its work is performed in a workmanlike manner and that the structure is habitable.”

In other words, a claim based on the implied warranty not only arises out of the contract, the claim is actually based on a contract term.… Read More »

Author: Rick Erickson | Leave a comment Tagged attorneys fees, breach of contract, construction law, contractor, homebuilder, homeowner, implied warranty, implied warranty of workmanship and habitability, insurance coverage, liability insurance, residential construction

California Supreme Court Hands Victory to Private Property Owners Over Public Use

Posted on June 16, 2017 by Sean M. Sherlock

By: Sean M. Sherlock

In 1970 the California Supreme Court held that, under certain circumstances, private property owners impliedly dedicate their property to the public if they permit the public to use it. Gion v. City of Santa Cruz (1970) 2 Cal.3d 29. This holding was controversial, and the next year the California Legislature enacted Civil Code section 1009 limiting the public’s ability to permanently use private property through an implied dedication.

In the 40-plus years since then, the lower courts have wrestled with the issue of whether the statute limiting implied dedication applies only to recreational uses by the public, or also to nonrecreational uses.… Read More »

Author: Sean M. Sherlock | Leave a comment Tagged implied dedication, private property, public use

Appeals of Rulings by The Registrar of Contractors Must Be Timely Filed in Superior Court.

Posted on June 12, 2017 by Rick Erickson

By Rick Erickson

Recently in Johnson v. Arizona Registrar of Contractors, the Arizona Court of Appeals affirmed dismissal of a homeowner’s late appeal of an adverse decision by the Registrar of Contractors (“Registrar”). After successfully pursuing a complaint to suspend a roofing contractor’s license, the homeowner tried but failed to get her roofing repair costs from the Registrar’s Recovery Fund. The homeowner sent her appeal to the Registrar. However, the governing Arizona statute, A.R.S. § 12-904(A), clearly required the homeowner’s appeal to be filed in Superior Court, not with the Registrar. Once the homeowner realized her mistake, her appeal to Superior Court was a day late. … Read More »

Author: Rick Erickson | Leave a comment Tagged appeals, contractor complaints, homeowners, judicial review, jurisdiction, recovery fund, Registrar of Contractors, residential construction

Does Your 998 Offer to Compromise Include Attorneys’ Fees and Costs?

Posted on June 8, 2017 by acarucci

By: Anthony J. Carucci

If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendant’s costs from the time of the offer.

Author: acarucci | Leave a comment Tagged commercial real estate, real estate litigation

Colorado House Bill 1279 stalls over 120-day unit owner election period

Posted on April 14, 2017 by Luke Mecklenburg

With the session more than halfway through, the Colorado Legislature’s 2017 attempts at meaningful construction defect reform may fail again. This year, the Legislature did not attempt a single-bill construction defect overhaul like those that have failed over the last half-decade. Rather, it has sought to enact reforms on a piecemeal basis, with several smaller bills addressing specific issues that have been affecting condominium construction along Colorado’s booming Front Range.

This new approach appears to be headed towards much the same outcome as the failed efforts of the past. House Bill 1169 would have given developers a statutory right to repair before being sued by homeowners, and Senate Bill 156 would mandate arbitration or mediation. … Read More »

Author: Luke Mecklenburg | Leave a comment

Sierra Pacific v. Bradbury goes unchallenged: Colorado’s six-year statute of repose begins when a subcontractor’s scope of work ends

Posted on October 25, 2016 by Luke Mecklenburg

It’s official: the October 20, 2016 deadline to petition for certiorari to the Colorado Court of Appeals on its decision in Sierra Pacific Industries, Inc. v. Bradbury has passed, so it appears that decision will stand.

In Sierra Pacific, the Court of Appeals held as a matter of first impression that the statute of repose for a general contractor to sue a subcontractor begins to run when a subcontractor’s scope of work is substantially complete, regardless of the status of the overall project. Sierra Pac. Indus., Inc. v. Bradbury, 2016 COA 132, ¶ 28, ___ P.3d ___. The Court of Appeals interpreted the statute of repose in C.R.S.… Read More »

Author: Luke Mecklenburg | Leave a comment

Avoiding Lender Liability for Credit-Related Actions in California

Posted on October 21, 2016 by acarucci

By: Anthony J. Carucci

Aside from general statutory prohibitions on lender discrimination, there are certain circumstances under California law in which lenders may be held liable for credit-related actions, such as negotiating or denying credit. See generally 11 Cal. Real Est. § 35:3 (explaining that the business of lending money is subject to the Unruh Civil Rights Act, Cal. Civ. Code § 51 et seq., the Fair Employment and Housing Act, Cal. Gov. Code § 12900 et seq., the Federal Fair Housing Act, 42 U.S.C. § 3601 et seq., and the Equal Credit Opportunity Act, 15 U.S.C. § 1691, et seq.… Read More »

Author: acarucci | Leave a comment Tagged commercial real estate, foreclosure, foreclosures, real estate, real estate litigation, real property

Developer Awarded Cost of Preparing Administrative Record in CEQA Lawsuit

Posted on September 22, 2016 by Sean M. Sherlock

Lawsuits under the California Environmental Quality Act (“CEQA”) typically proceed as petitions for administrative mandamus. This means the petitioner is asking the court to review an agency’s decision and ultimately issue a mandate directing the agency to set aside its decision. In this respect the court acts like an appellate court, reviewing the agency’s decision. There are no witnesses or trial exhibits or jurors or opening statements. The court reads the parties’ briefs, hears their arguments, and makes its decision based on the evidence in the administrative record of proceedings.

The administrative record is often voluminous. It includes not only the environmental reports, but also all project application materials, staff reports and related documents, public notices, written comments and responses, all evidence or correspondence submitted to or relied upon by the agency, hearing transcripts, written findings, and more. … Read More »

Author: Sean M. Sherlock | Leave a comment Tagged administrative record, CEQA, costs of suit

“Rip and Tear” Damage Remains Covered Under CGL Policy as “Accident”—for Now.

Posted on August 4, 2016 by mlindsay

By: Michael Lindsay and Luke Mecklenburg

The Colorado Supreme Court has approved a settlement between the parties to an appeal of the 2012 Colorado Pool Systems v. Scottsdale Insurance Company Court of Appeals case, leaving that ruling intact. The ruling parses a fine line between uncovered costs of repairing defective work and covered costs of damage caused to nondefective work while repairing defective work. This nuanced opinion, which is now established Colorado law, is worth a second look.

In Colorado Pool Systems, Inc. v. Scottsdale Insurance Company, the Colorado Court of Appeals determined that so-called “rip and tear” damage caused by a construction professional to nondefective work while correcting defective work is covered as an “accident” under standard Commercial General Liability insurance language. … Read More »

Author: mlindsay | Leave a comment

Common Law Indemnity Claim Affirmed on Justifiable Beliefs

Posted on June 22, 2016 by Rick Erickson

By Rick Erickson https://www.swlaw.com/people/rick_erickson

Yesterday, the Arizona Court of Appeals issued an interesting opinion in Hatch Development v. Solomon. Hatch illustrated two key points in real estate and construction litigation: (1) a contractor’s indemnity does not always require an expressly written obligation; and (2) when facts are undisputed that a contractor is solely at fault for a construction defect, a property owner can be indemnified after paying a neighboring property owner for damages caused by the contractor’s defective work.

Hatch was a homeowner who hired Solomon to install sewer lines. After installation, heavy rain led to muddy water in the sewer lines, suggesting a defect in the installation. … Read More »

Author: Rick Erickson | Leave a comment Tagged Arizona real estate, common law indemnity, construction, construction defect litigation, implied indemnity, indemnity, real estate, residential construction, restatement of restitution, sewer installation, statute of limitation

Governor Ducey Vetoes Water and Development Bills

Posted on June 2, 2016 by Patrick J. Paul

By Patrick J. Paul

With the second regular legislative session of Governor Doug Ducey’s tenure complete, the Governor exercised his veto pen rejecting several laws impacting water and land development.

On May 9th, Governor Ducey vetoed two measures that could have allowed developers to manipulate the requirements of Arizona’s Groundwater Management Act of 1980: Senate bills 1268 (adequate water supply requirements) and 1400 (county water supply). The bills’ sponsor, Senator Gail Griffin, had expressed concerns that the federal government was exercising too much control of the water supply in Cochise County in its efforts to ensure the continued flow of water in the San Pedro River.… Read More »

Author: Patrick J. Paul | Leave a comment

Examining Denver’s new construction defect reform ordinance

Posted on March 18, 2016 by mlindsay

Construction defect reform is a hot-button issue in Colorado. This is especially true along the booming Front Range, where rapidly increasing population has driven the prices of renting and buying property a mile high. Developers maintain that building condominiums is just too risky given their exposure to lawsuits from dissatisfied owners under current state law, while homeowners’ rights groups insist that the current system is necessary to protect homeowners from shoddy construction in what amounts to the biggest investment of many peoples’ lives.

In the face of such a polarizing issue, the Colorado legislature has tried but failed to pass any meaningful reform.… Read More »

Author: mlindsay | Leave a comment

Tips on Pursuing and Defending Complaints against Contractors

Posted on January 18, 2016 by Rick Erickson

By Rick Erickson firm bio

The often staggering cost of litigation has prompted an equally staggering amount of regulatory complaints against contractors in recent years. Why? Because filing a complaint against a contractor may not cost a complainant anything but time. And any litigation expenses are mostly borne by the contractor/respondent, who is anxious to defend and protect their license and reputation (i.e. their livelihood).

Here are some tips for pursuing or responding to a complaint and getting the best out of your state’s contractor regulatory agency (in Arizona, the Registrar of Contractors):

(1) Respect the Registrar. Your regulatory agency is probably understaffed and overworked.… Read More »

Author: Rick Erickson | Leave a comment Tagged building code, construction, construction bonds, construction litigation, contractor administration, Registrar of Contractors, regulation of contractors, regulatory complaints, surety liability, workmanship

Property Taxes: A Shopping Center May Not Always be a Shopping Center

Posted on November 2, 2015 by Richard Herold

By: Rick Herold, Craig McPike & Ben Reeves

In the world of real property taxes, Valuation + Classification = Assessed Valuation. Sounds simple, right? The County Assessor determines the first factor, valuation (subject to certain guidelines under applicable Arizona law). The Arizona State Legislature determines the second factor, the property’s legal classification and corresponding assessment ratio (i.e., tax rate). Given the wide disparity in assessment ratios, classification can be a major issue for taxpayers.

Recently, the Court of Appeals confirmed that a shopping center for valuation purposes may not be a shopping center for classification purposes. Scottsdale/101 Associates LLC v.… Read More »

Author: Richard Herold | Leave a comment Tagged movie theater, real estate, shopping center, tax appeal, valuation, zoning

Homebuilders Welcome Recent Court Decisions

Posted on September 2, 2015 by Patrick J. Paul

By: Patrick Paul

Arizona homebuilders will welcome with open arms two recent legal rulings of substantial impact to their industry. In the first decision, on July 28, 2015, in Sullivan v. Pulte Home Corp., No. 1 CA-CV 14-0199, the Arizona Court of Appeals held that homebuilders do not owe a duty of care to subsequent (non-original homeowners) for economic losses arising from latent construction defects unaccompanied by physical injury to persons or other property.

The fairly simple fact scenario follows. In 2000, Pulte Home Corporation sold the home at issue to the original homeowners, who, in 2003, sold the property to the Sullivan Plaintiffs. … Read More »

Author: Patrick J. Paul | Leave a comment Tagged Clean Water Act, economic loss rule, homebuilder, Water of the United States

Upheld: Injured Subcontractor’s Lent Employee Has No Claim Against Landowner or General Contractor After Choosing Workers’ Compensation and Failing to Prove Landowner Controlled the Work

Posted on May 25, 2015 by Rick Erickson

By Rick Erickson (http://www.swlaw.com/attorneys/rick_erickson)

On this Memorial Day 2015, I write in honor of my U.S. Marine Corps colleague, Megan McClung, who was killed in Iraq nine years ago this December. Major McClung and I served together in Anbar Province in 2006. She was the first female Marine Corps officer to be killed in Iraq and the first female graduate of the U.S. Naval Academy to be killed in action. She is buried at Arlington National Cemetery.

In Lee v. M and H Enterprises, Inc., — P.3d —- (decided Apr. 21, 2015), the Arizona Court of Appeals recently clarified why, in most cases, landowners and general contractors are not liable when subcontractor employees are injured or killed on construction projects.… Read More »

Author: Rick Erickson | Leave a comment

Federal Courts to Apply More Protective State Law when Analyzing Validity of Pre-dispute Jury Trial Waivers in Diversity Jurisdiction Cases

Posted on April 22, 2015 by Sean M. Sherlock

By Anthony J. Carucci

The Ninth Circuit Court of Appeals recently held that federal courts sitting in diversity jurisdiction must apply the underlying state law to determine the validity of pre-dispute jury trial waivers where the state law is more protective than the federal law. In re Cnty. of Orange, No. 14-72343, 2015 WL 1727240, at *4–5 (9th Cir. Apr. 16, 2015).

Facts/Procedural History

In 2007, plaintiff County of Orange (the “County”) hired defendant Tata America International Corporation (“Tata”) to develop a property tax management system. Id. at *5. In 2008, the parties entered into a contract for that purpose, which included an unambiguous jury trial waiver.… Read More »

Author: Sean M. Sherlock | Leave a comment Tagged jury, waiver

A Purchaser Who Doesn’t Inquire May Be Teeing Up For Failure

Posted on April 2, 2015 by Erica Stutman

By: Erica Stutman

Picture this: While on the hunt for new development opportunities, you stumble across a golf course in the middle of a high-end community, and you think this would be the perfect spot for more houses, or a retail center, or a movie theater, or …oh, the possibilities are endless! Better yet, you learn you can buy it for a bargain. Before closing the deal, you review the property’s recorded chain of title and find nothing requiring the property to be used as a golf course. You sign the closing papers and start planning your perfect new development.… Read More »

Author: Erica Stutman | Leave a comment Tagged equitable easement, equitable servitude, golf course, implied easement, implied servitude, real estate development, real property, restrictive covenant

Transfer of Property Title to a Holding Company Did Not Divest Landowner of Owner-Occupant Status Under A.R.S. § 33-1002(B)

Posted on January 20, 2015 by Rick Erickson

By: Richard G. Erickson

Recently, in Marco Crane & Rigging Co. v. Masaryk, 703 Ariz. Adv. Rep. 29 (Dec. 30, 2014), the Arizona Court of Appeals established that a subcontractor on a residential project has no lien rights against an owner-occupant, even though the homeowner transferred the property’s title to a holding company (an Arizona limited liability company) after the subcontractor commenced work.

In other words, the lien protections afforded to owner-occupants are determined, at the latest, when a contractor records its lien. After the contractor commences work and records its lien, the homeowner’s actions in negating owner-occupant status do not divest the homeowner of statutory protections against lienholders. … Read More »

Author: Rick Erickson | Leave a comment Tagged A.R.S. § 33-1002, construction, contractor, foreclosure, general contractor, holding company, homebuilder, homebuilding, homeowner, landowner, lien, lien law, Limited Liability Company, Marco Crane & Rigging Co. v. Masaryk, mechanic's lien, owner-occupant, residential construction, subcontractor

Guarantor Waivers Narrowed

Posted on December 18, 2014 by Sean M. Sherlock

By: Lyndsey A. Torp and Sean M. Sherlock

A general waiver by a guarantor of “all defenses” does not actually waive “all defenses.” California Bank & Trust v. Del Ponti, — Cal.Rptr.3d —, 2014 WL 6908141 (Cal.App. 4 Dist.). That was the holding in a recent opinion wherein the California Court of Appeal affirmed judgment against a lender, holding that the bank could not recover on its loan guaranties because it had breached the underlying loan agreement.

In California Bank & Trust v. Del Ponti, borrower obtained a construction loan from Vineyard Bank (which was later assigned to California Bank & Trust) to develop a townhome project, with guaranties from two principals of the borrower. … Read More »

Author: Sean M. Sherlock | Leave a comment Tagged defense, Guarantor, guaranty, waiver

California Case Requires Arbitration Despite Lack of Actual Controversy

Posted on December 9, 2014 by Sean M. Sherlock

By: Lyndsey A. Torp and Sean M. Sherlock

For parties to litigate a contract dispute in a court of law, the parties’ disagreement must have ripened into an actual controversy presenting more than a mere academic difference of opinion. But under a recent California Court of Appeal opinion, no actual controversy is required to compel arbitration over a disagreement. Bunker Hill Park Limited v. U.S. Bank National Association, — Cal.Rptr.3d —, 2014 WL 6684796 (Cal.App. 2 Dist.). To avoid being compelled to arbitrate purely academic disagreements, parties should draft their arbitration clauses to limit arbitrable disputes to those that have ripened into actual controversies.… Read More »

Author: Sean M. Sherlock | Leave a comment Tagged arbitration, justiciability, ripeness

General Contractor’s Prospective Waiver Of Its Lien Rights Is Enforceable In California

Posted on November 12, 2014 by Lyndsey Torp

By: Lyndsey Torp

http://www.swlaw.com/attorneys/lyndsey_torp

In another decision favoring lenders (See http://www.swlaw.com/blog/real-estate-litigation/2014/08/29/arizona-supreme-court-to-contractor-sorry-but-equitable-subrogation-of-a-banks-later-deed-of-trust-trumps-earlier-mechanics-lien-rights/), the California Court of Appeal, in an opinion published in September 2014, entitled Moorefield Construction, Inc. v. Intervest Mortgage Investment Company, et al., D065464, held an original contractor can contractually waive or impair its own lien rights, even before it gets paid or performs work, as long as it does not waive or impair the lien rights of its subcontractors. In Moorefield, the court of appeal reversed a trial court’s decision awarding a general contractor $2.2 million on its mechanic’s lien. In doing so, the court of appeal upheld a subordination agreement that the general contractor, Moorefield Construction, Inc., signed with the lender, Intervest Mortgage, “subordinating” the general contractor’s mechanic’s lien claim to the lender’s deed of trust, which was security for the construction loan.… Read More »

Author: Lyndsey Torp | Leave a comment Tagged contractor, deed, foreclosure, lien, loan, mechanics, owner, subordination, waiver

Vendees’ Liens—Construction Lenders Beware!

Posted on October 31, 2014 by Ben Reeves

By: David A. Sprentall

A recent Arizona Court of Appeals decision highlights a lien priority risk for secured construction lenders when the financed project fails. The problem—known as a “vendee lien”—is most likely to arise when up-front deposits are paid by buyers of units in condominiums or similar projects.

The case, Rigoli v. 44 Monroe Marketing, LLC, involved a construction loan made by Corus Bank in 2006 for the development of the 44 West Monroe condominium tower in downtown Phoenix. As a condition to the loan, the developer was required to have presales of at least 100 units and earnest money deposits of approximately $4.5 million.… Read More »

Author: Ben Reeves | Leave a comment Tagged 44 Monroe, construction lending, quiet title, vendee lien

Easements Made Easier: Building Pipelines with the Power of Eminent Domain Under the Natural Gas Act

Posted on September 29, 2014 by Richard Herold

By: Richard H. Herold

Any person or entity seeking to construct a natural gas pipeline and successful in obtaining a certificate of convenience and necessity from the Federal Energy Regulatory Commission may exercise the power of eminent domain to obtain easements across private property when those easements are necessary and cannot be obtained consensually (by contract) from the landowners. Columbia Gas Transmission, L.L.C. v. 76 Acres More or Less, 2014 WL 2960836 (D. Md. June 27, 2014). the Columbia Gas Court recently held that (1) the property’s legal description need not be attached to sufficiently identify the property to be condemned, and (2) even in the absence of a federal condemnation statute authorizing immediate possession of the property, the condemning plaintiff may obtain an order to take immediate possession of the property since it would be wasteful and inefficient to skip over one or more parcels in the construction process – only if the condemning plaintiff is capable of satisfying the requirements for preliminary injunctive relief under Fed.R.Civ.P.… Read More »

Author: Richard Herold | Leave a comment Tagged condemnation, easements, eminent domain, natural gas act, pipelines

Nevada Supreme Court Clarifies Mechanic and Materialman Lien Issues

Posted on August 22, 2014 by Nathan Kanute

By: Nathan Kanute and Bob Olson

On August 7, 2014, the Nevada Supreme Court issued two opinions dealing with the priority of mechanics’ liens and the proof required for a materialman to establish a lien. These cases provide valuable guidance to lenders, materialmen, contractors, and subcontractors operating in Nevada.

In Byrd Underground, LLC v. Angaur, LLC, 130 Nev. Adv. Op. 62, the United States Bankruptcy Court for the District of Nevada certified three questions to the Nevada Supreme Court. The questions focused on whether placement of fill materials and grading constituted “construction of a work of improvement” for purposes of a lien priority determination under NRS 108.225. … Read More »

Author: Nathan Kanute | Leave a comment Tagged lien priority, materialman's lien, mechanic's lien

A Subsequent Developer has no Ability to Force a Public Body to Call an Abandoning Developer’s Performance Bonds for Infrastructure Improvements.

Posted on August 19, 2014 by Ben Reeves

The Arizona Court of Appeals decided on July 22, 2014 that a developer cannot compel a public entity to call its performance bonds to complete infrastructure improvements on a construction project that a prior developer abandoned due to bankruptcy. Ponderosa Fire Dist. et al. v. Coconino County et al., 1 CA-CV 13-0545.

– See more on this case from our blogger Rick Erickson at: http://www.swlaw.com/blog/construction-ally/2014/07/23/a-subsequent-developer-has-no-ability-to-force-a-public-body-to-call-an-abandoning-developers-performance-bonds-for-infrastructure-improvements/#sthash.3iBSqIC1.dpuf… Read More »

Author: Ben Reeves | Leave a comment Tagged developer, performace bonds, Ponderosa Fire v. Coconino County, real estate litigation

Governmental Power and Property Lines

Posted on July 21, 2014 by nmcconomy

By: Neal McConomy

On May 27, 2014, the Colorado Supreme Court issued its opinion in Town of Dillon v. Yacht Club Condos. Home Owners Ass’n, 2014 CO 37. Overturning the rulings of both the trial court and the Colorado Court of Appeals, the Colorado Supreme Court reaffirmed the long-standing deference Colorado law shows to state legislative bodies exerting their police powers. This opinion reminds Colorado property owners that property rights and interests end at the property line and no one should rely on the ability to use public land around their property in the future.

Between 1965 and 1967, a developer constructed the Yacht Club Condominiums in Dillon, Colorado, consisting of three buildings and fifty condominium units. … Read More »

Author: nmcconomy | Leave a comment Tagged health, litigation, municipal, ordinance, parking, police power, rational basis, rational relationship, real estate, real property, safety, welfare

Amendments to Arizona’s Anti-deficiency Statute Exclude Homebuilders from Anti-Deficiency Protection

Posted on April 28, 2014 by Ben Reeves

By: Ben Reeves

Last Tuesday, April 20, 2014, Arizona’s Governor, Jan Brewer, signed HB 2018 into law. This bill closes a long-standing loophole that allowed commercial homebuilders to take advantage of Arizona’s anti-deficiency statute, even though the statute was originally enacted to protect only homeowners. In sum, for loans secured by residences that are originated after December 31, 2014, commercial homebuilders will no longer be able to avoid liability based on Arizona’s anti-deficiency statute, A.R.S. § 33-814(G).

A.R.S. § 33-814(G) provides that after a trustee’s sale, a lender cannot sue to recover the difference between the value of a “dwelling” and the amount owed on the loan (i.e., the “deficiency”). … Read More »

Author: Ben Reeves | Leave a comment Tagged A.R.S. 33-814, anti-deficiency, HB 2018, MidKansas v. Dynamic

Arizona Supreme Court Holds That Property Owner Who Quarreled With Light Rail Construction Should Be Compensated For Lost Access

Posted on April 22, 2014 by Eric Spencer

By Eric H. Spencer

Late last week, the Arizona Supreme Court handed down a decision that clarified the rights of property owners who lose access to an abutting road and, in the process, reinforced the principle that both elimination and substantial impairment of access is compensable under the Arizona Constitution. But perhaps more significant, the Supreme Court in City of Phoenix v. Garretson held that a property owner should be compensated even if it retains relatively convenient access to that road through other means.

In so holding, the Supreme Court no doubt sent initial shockwaves through public works departments across Arizona who may be wondering whether they are hamstrung in making even basic traffic improvements. … Read More »

Author: Eric Spencer | Leave a comment Tagged eminent domain, just compensation, right of access

The Registrar is Changing the Game for Complaints Against Arizona Contractors

Posted on April 8, 2014 by Rick Erickson

By Rick Erickson http://www.swlaw.com/attorneys/rick_erickson

Sweeping changes at the Registrar of Contractors have the construction and real estate industries concerned and curious. The Registrar recently received some poor performance reports by the Auditor General and State Ombudsmen. As a result, the Registrar overhauled its procedures for handling complaints and adjudicating contested cases against Arizona contractors. You should be following these changes before the Registrar rolls out its new approach this summer.

The Registrar regulates contractor licensing and enforcement of workmanship standards against thousands of licensees throughout Arizona. In doing so, the Registrar dictates administrative remedies available to property owners on residential and commercial projects. … Read More »

Author: Rick Erickson | Leave a comment Tagged administrative remedies, contractor complaints, contractor licensing, enforcement, Registrar of Contractors, regulation of contractors

Beyond Real Estate: Publicly Traded Homebuilders (And Other Public Companies) Must be Aware of Cybersecurity and Data Breach Disclosure Requirements Applicable to SEC Filings

Posted on March 14, 2014 by Richard Herold

By: Richard H. Herold

Generally speaking, publicly traded homebuilders and other public companies must disclose material information in their SEC filings. “Information is considered material if there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision or if the information would significantly alter the total mix of information available.” Basic v. Levinson, 485 U.S. 224 (1988)

As the agenda of hackers and other criminals advances, so has the issue of cybersecurity, focusing on what risks exist in the company’s cybersecurity defenses and, if there has already been a data breach incident, whether the scope of the breach and the resulting adverse consequences (which may include regulatory investigations, SEC or FTC enforcement actions, securities class actions, and/or derivative lawsuits) is material and must be reported in SEC filings.… Read More »

Author: Richard Herold | 1 Comment Tagged SEC, securities, Securities Litigation

Mortgage Lenders Can’t Jump Ahead of Mechanic’s Liens

Posted on February 11, 2014 by Ben Reeves

By: Ben Reeves

In Weitz Co., LLC v. Heth, 223 Ariz. 442, 314 P.3d 569 (Ct. App. Nov. 26 2013), the Arizona Court of Appeals held that the plain language of Arizona’s mechanic lien statute, A.R.S. § 33-992(A), does not allow a lender to jump ahead of a mechanic’s lien under the doctrine of “equitable subrogation.”

In Weitz, First National Bank of Arizona lent a developer $44,000,000 to build a 165-unit, mixed-use commercial/residential project in downtown Phoenix. The bank secured repayment of the construction loan by recording a deed of trust against the project.

The developer hired The Weitz Company as its general contractor. … Read More »

Author: Ben Reeves | Leave a comment Tagged equitable subrogation, mechanic's lien, real estate litigation, Weitz v. Heth

Arizona Court of Appeals Holds That Certain Residential Developers Are Not Protected By The Anti-Deficiency Statute After Foreclosure Of A Deed Of Trust On Vacant Land

Posted on January 24, 2014 by Adam Lang

By Eric Spencer and Adam Lang

Nearly three years ago, in M&I Marshall & Isley Bank v. Mueller, the Arizona Court of Appeals held that the Arizona anti-deficiency statute protects a borrower who started, but never completed, construction of a single-family dwelling before defaulting on its loan. This week, the same appellate court limited those anti-deficiency protections by holding in BMO Harris Bank v. Wildwood that a developer of vacant land – land on which no construction has begun – cannot invoke the anti-deficiency statute as a matter of law, regardless of whether the borrower intends to eventually reside on that land.… Read More »

Author: Adam Lang | Leave a comment Tagged 33-814, anti-deficiency, borrower, deficiency, dwelling, homebuilders, Lang, lenders, Mueller, Spencer, vacant lot, Wildwood

Developers and Homebuilders: The Ramifications of Yanni v. Tucker Plumbing, Inc.

Posted on December 6, 2013 by Bob Henry

By Bob Henry

On November 20, 2013, Division Two of the Arizona Court of Appeals issued its opinion in Yanni v. Tucker Plumbing, Inc., 2013 Ariz. App. LEXIS 235. While the opinion was a victory of sorts for the real estate and construction industry generally in Arizona, the opinion could have long-term ramifications to developers and home builders. In short, the opinion could encourage more direct suits by homeowners against developers and homebuilders – including potential class actions, as was the situation in Yanni – for defects in the construction of homes arising out of defective and substandard work by subcontractors.… Read More »

Author: Bob Henry | Leave a comment Tagged construction defect litigation, implied warranty of workmanship and habitability, real estate litigation, Yanni

The U.S. Supreme Court’s Latest Attempt to Differentiate a Fair Quid Pro Quo in the Developer’s Permitting Process From an Unconstitutional Taking

Posted on July 18, 2013 by Richard Herold

By: Rick Herold

Introduction

The U.S. Supreme Court has issued an important decision in an attempt to add clarity and help government land use planners understand the difference between reasonable requests and unreasonable demands rising to the level of unconstitutional takings in the permitting process. Koontz v. St. Johns River Water Management District, 2013 WL 3184628 (June 25, 2013).

When does a fair quid pro quo, a legitimate exercise of police power in the permitting process, go too far and lapse into an unconstitutional taking without just compensation through the government’s unconstitutional conditions in the permitting process? In Koontz, the Supreme Court ruled that the seminal cases of Nollan v.… Read More »

Author: Richard Herold | Leave a comment Tagged condemnation, eminent domain, essential nexus, just compensation, land use, real estate litigation, rough proportionality, unconstitutional conditions, unconstitutional taking

Green construction sounds great, but…

Posted on May 28, 2013 by Ben Reeves

It isn’t always easy being green. Snell & Wilmer partner Marc Erpenbeck talks about emerging litigation issues generated by the proliferation of green construction projects in this informative article entitled “Understanding LEEDigation, The fast-growing trend of GREEN building spurs new issues for the commercial real estate industry” published in the May/June issue of AZRE Magazine. Click on the link to check it out.… Read More »

Author: Ben Reeves | Leave a comment Tagged AZRE Magazine, Green Construction, LEEDigation, real estate litigation

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