Building Code Enforcement and Contractual Consequences

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My part in a building code seminar sponsored by Lorman Education Services. This presentation focuses on building code enforcement mechanisms in Louisiana, and the effect building code violations can have on contracts, parties to contracts, and third parties. Also, it touches on defenses available to parties when building code violations exist, as well as green building code issues that are now arising with green building projects.

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  • Ancient Babylon has the first building codes, known as the Code of Hammuraby. Only one example of the code survives today, inscribed on a 7 foot, four inch tall basalt stone slab, currenly on display at the Louvre Museum in Paris.\n
  • This is extremely basic, but it’s good to get to the root of things when you start a discussion. This is a good definition of what a building code is. But, for the purposes of our discussion, it’s important to think of some other things that “feel like” building codes, and act like building codes.\n
  • What about this, anyone heard of LEED? Is this a building code?\n
  • Or what about this? While we may think of them as pure standards, they can actually feel like a code...and sometimes, actually take on the form of a code, in that municipalities are now adopting some of these standards as the “code” contractors must comply with when constructing public works...or when trying to qualify for certain tax or grant benefits.\n
  • And these... Construction specifications are simply contract requirements, and not true codes. But, they the more specific a specification becomes, the more code-like it becomes - especially between the parties. And that is one distinguishing feature we will make, is code between the contractor and the government, versus codes and building standards between the owner and the contractor, or other contractual parties. What becomes interesting is how these two intersect when the code and the contract requires two different actions.\n
  • And then this. I do know that the LEED and Entergy Star standards are standards, and not actu\n
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  • In 2007, Louisiana adopted the International Business Code. This is a contrast to the building code scheme in Louisiana before 2007, when every parish had control to create their own codes. Now, there is a uniform construction code across the state of Louisiana...which is NICE.\n
  • While the IBC is very, very successful, it is not unanimously adopted (and if it was, there would be monopoly concerns, anyway). But, this does make an interesting code war that leaves jurisdictions and the trades in the middle of a fight over nuances.\n
  • Let’s start by discussing the true building codes out there - the ones that are enforced by states, municipalities, and the like. Here, we’re really talking about parish enforcement of the codes. Now, there are a few things we need to keep in mind.\n
  • Obviously, the parish code enforcers and permit departments have quite a reputation for corruption, whether its earned or unearned. If there is corruption or the appearance of corruption, it’s likely because of this next slide.\n
  • Directors of permitting departments and code enforcers have just a ton of discretion. A ton! As a result of the heavy discretion, they can read the code in ways that make builders and property owners susceptible to their whims. This, of course, produces a fertile environment for corruption. \n
  • Here are some examples of the Director’s discretion. While this is the New Orleans ordinance, it’s nearly identical across the entire county. You can see that the Director has heavy discretionary control when it comes to applying the code.\n
  • Discretion doesn’t end once a building permit is issued, or when the certificate of completion or occupancy is issue. Technically, I suppose the discretion and authority never ends. They have pretty broad authority to go back in time when they change their mind.\n
  • An example of this “post-permit” action happened just this month in connection with a building being constructed on Magazine Street in New Orleans. It got a lot of news. The permit was issued, and the pilates studio went through all the right channels. They sent a drawing into the city saying they would build this...\n
  • And then they built this. The third floor was the issue that the Director focused on, because they had their hands tied a bit in already issuing the permit. The Director’s office argued that the addition of the third floor rendered their drawing a misrepresentation of the construction. Really, it was public pressure about the size of the building. Nevertheless, it goes to show that the director has broad authority to go in and change its mind. Here, the developer had the proper permits and approval, and had invested a significant amount of money into the project...and then it was stopped. There are delay costs, scheduling problems, and then they had to potentially change the plans.\n
  • So, let’s get into what the city and director can do to enforce the codes that they interpret. This first slide regards the penalties that can be charged when someone starts work without a permit.\n
  • This regards the penalties and injunctions that can be placed during a project.\n
  • So, let’s get into what the city and director can do to enforce the codes that they interpret. \n
  • So, your on a project and the director pulls a permit, or refuses to issue a permit, or refuses to issue a certificate of completion or certificate of substantial completion. Nothing is going to change their mind and you’re fighting with the director about his interpretation. What do you do?\n
  • First, you remember this word, and recognize what you’re up against. \n
  • I have this painting in my office, because it reminds me of how I feel sometimes representing businesses. Notice what’s going on here. There is a cat judge, all of the jury are cats, the lawyers and bailiff are cats, the plaintiff is a cat, and the defendant is a dog. The dog is chasing the cat across the street, where the cat gets hit by a car.\n\nIf you get into a fight with the director, you may feel like this dog.\n\nThe director is the judge (he interprets the rules).\nHe has enough discretion to actually make the rules (legislative function, a bit)\nHe enforces the rules (executive function)\n\n
  • If there is a dispute, you’re not without options. There is a right to appeal. But, like I said, there are challenges to appealing a government’s ruling.\n
  • Here are two cartoons that I thought were cute, that demonstrate some of the frustrations and challenges with an appeal.\n
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  • Administrative board is not a court. It is a lot less formal, which means these things.\n\nAlso, remember that with both the administrative law court and the regular court, the concept that the director has discretion will always be hanging over the proceeding.\n
  • Deadlines in these appeals come and go very, very quickly (sometimes, just 10, 15 or 20 days from a decision). Once the deadline is passed, the director can virtually be as arbitrary as he’d like, and there’s little you can do about it. Make sure you follow these strict deadlines.\n\nAlso, insofar as the court hearing, representation may be required. But in the administrative proceeding, even through the proceeding allows you to appear without representation and the proceeding is “informal,” it’s a good idea to get council. The district court will review the administrative court’s findings, and so you don’t necessarily get to start from scratch in the district court. Having an attorney present will help you build the record, and focus on the important legal issues. Plus, sometimes these administrative panels are unsure of the laws b/c they are not legally trained, and may actually rely on counsel at the hearing to help clarify the issues. The city will likely have a city attorney present.\n
  • If you miss your appeal deadlines, or even if you want to file something contemporaneously with your appeal to get to court quicker, the mandamus proceeding is something to keep in mind. It is frequently used by people to force a permit officer to issue a permit, deny a permit, etc.\n
  • This is the theory as to why the Mandamus proceeding is used.\n
  • This is the theory as to why the Mandamus proceeding is used.\n
  • This says the same thing, but a bit of a twist, because the mandamus proceeding was brought by an adjacent landowner.\n
  • This is the reverse of those other two decisions. Basically, after a property owner won before the administrative board and the admin board found that the permit should issue, the building officer continued to refuse to issue the permit. The appeal period came and went, and the property owner didn’t file an appeal (b/c he didn’t lose). When the owner filed the mandamus action, the building permit officer argued that the mandamus had “prescribed” because the appeal period was closed. But the court found otherwise, distinguishing the appeal process and the mandamus action, and saying that once the admin board ordered the issuance of the building permit, the job was ministerial, and could be commanded through mandamus.\n
  • So on the one hand, a mandamus may be appropriate if the duty of the building officer is ministerial and does not allow a shred of discretion. On the other hand, it is also appropriate if the discretion of the building code officer is abused, the standard of which is set forth in this case.\n
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  • Let’s turn away from building codes and how this causes disputes with governmental entities and officials, and we’ll address how codes and code-like requirements affect the parities and contracts.\n
  • We’re looking at the law, obligations & consequences between the parties. The building codes can affect this, as can these other code-like requirements we discussed earlier.\n
  • Which are these things.\n
  • The Building Code is not irrelevant to the parties, as one party may have a cause of action against another based on a building code violation.\n\nThis is a 2009 case. What is interesting here is that the courts specifically state that building codes are incorporated into every construction contract, regardless of whether it is or is not mentioned. It is common for contracts to say “contractor agrees to build to code.” But here, the court is hinting that a contract doesn’t even need that.\n
  • It’s not a construction project if there isn’t some finger pointing going around. So, when there is a code violation....whose fault is it?\n
  • This is the often pleaded Spearin Doctrine. It holds as it says. Which begs the question, what if the plans or specifications requires the contractor to build in a way that causes a code violation, but the contractor agreed to (or is required to according to Bonvillain Builders) to build to code. Who is responsible for the violation?\n
  • Spearin Doctrine is codified into Louisiana law.\n
  • Recent case I was involved with had a number of allegations, but one of them was regarding the lighting required by an elevator. There was a requirement for a certain number of footcandles, and the area did not have the proper amount b/c there were enough light installations. We argued that the light fixtures were specifically ordered by the owner, and were installed in the places specifically required by the architect. Spearin protection?\n
  • It’s not a construction project if there isn’t some finger pointing going around. So, when there is a code violation....whose fault is it?\n
  • Rather than a code violation, let’s look back to a problem with the building permit. \n\nContracts sometimes stipulate who is responsible for obtaining a building permit. This will likely have a lot to do with who is responsible for problems in obtaining a building permit. And is one reason why general contractors ought be cautious about accepting this responsiblilty, when it lacks certain controls.\n\nIf there is a stop work order, who is at fault?\n\nWhat are the damages?\n
  • Go back to our Magazine Street example. When worked stopped - the general contractor had to stop work, and the subs and suppliers had to pull off the job. Everyone’s schedule is affected, and jobs that folks had lined up after this one must get shifted around.\n\nWho pays for these delays? \nWho pays for the extra work in securing the site while the stop work order is adjudicated?\nIf the city was arbitrary and capricious, can they be sued for damages?\n
  • There are some exceptions, or possible exceptoins\n
  • And of course, if there are no specs\n
  • And this spells out the standard a bit more.\n
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  • It’s not a construction project if there isn’t some finger pointing going around. So, when there is a code violation....whose fault is it?\n
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  • In this case: \n\nA contractor was trying to get a change order approved and an additional $30-40k to perform work on a drainage system. The existing drainage system needed to be brought up to code, but the contractor argued this wasn’t in their scope of work because they didn’t realize the drainage system wasn’t to code.\n\nBut, since the code is the law, and a construction contract obligates a contractor to build according to the legal requirements (the building code), the contractor could not get a change order to do work he was legally required to do.\n
  • In this case: \n\nA contractor was trying to get a change order approved and an additional $30-40k to perform work on a drainage system. The existing drainage system needed to be brought up to code, but the contractor argued this wasn’t in their scope of work because they didn’t realize the drainage system wasn’t to code.\n\nBut, since the code is the law, and a construction contract obligates a contractor to build according to the legal requirements (the building code), the contractor could not get a change order to do work he was legally required to do.\n
  • Another interesting question is whether an owner can claim damages from a defect that he accepted, which was open and obvious at the time of inspection.\n
  • Couldn’t find anything directly on point, but this would seem to suggest that the answer is no.\n
  • Here is an interesting situation, and just something we can talk about or you guys can think about. What if there is disagreement between a property owner and a building code enforcer about whether a code is complied with, and the contractor is being held liable for the disagreement.\n\nExample: Involved in a case where an elevator had passed inspection. The property owner claimed that the elevator did not meet code, but relied on NFPA (not the code actually in force). Owner alleged contractor agreed to build in compliance with “all building codes.” Owner claimed that just because the project passed inspection doesn’t mean the code was actually met.\n\nWe brought inspector out and everything, but owner stuck to their guns. I think this is a bad argument to make, but one that could be made. Whether the code was or was not violated would likely be a question of fact, and the code inspectors judgment would only be considered in court, not conclusive...likely.\n
  • Let’s think about negligence law a little bit. I couldn’t find too much case law on negligence issues in Louisiana, that implicated building codes...but there is plenty outside Louisiana. Here are some key issues.\n
  • Explain what this means.\n
  • While Louisiana is not a subscriber to the true common law economic loss rule, it is worth considering because of the implication building code violations have on these types of claims, and because a lot of neighboring jurisdictions do have an economic loss rule.\n\nThe Economic Loss Rule is simply that a plaintiff cannot recover from a defendant under tort theories if the parties have a contract, to the extent that the damages were caused by a breach of contract.\n\nSome states have begun to carve out exceptions to the Economic Loss Rule for building code violations. \n\nA case decided by the Oregon Court of Appeals, Abraham v. T. Henry Construction Inc., is a good example. 230 Or. App. 564, 217 P.3d 212 (2009).\n\nTypically, the economic loss doctrine will prohibit a tort claim between contracting parties when the claim arises out of a failure to perform contractual obligations. In other words, since negligence is a duty/care claim, one party must breach a standard of care….not simply a contractual obligation.\n\nThe plaintiffs in Abraham argued, however, that the contractors had breached a standard of care because it had violated the Oregon Building Code. The Oregon Court of Appeals agreed that the Oregon Building Code did create a standard of care, and allowed the claim of negligence to proceed.\n\n
  • Introduction\n
  • California has a green building code.\n\nDC has the green building act (talk about performance bond issues. It is required, but no one offers it). DC Green Building Act adopts LEED Standards...\n\n\n
  • These green building cases present unique damages issues. \n
  • These green building cases present unique damages issues. \n
  • These green building cases present unique damages issues. \n
  • These green building cases present unique damages issues. \n
  • Before talking about the specific (green building litigation), it’s important to get a grasp on general construction litigation...and what causes this type of litigation.\n
  • Generally, litigation arises because of unfulfilled expectations.\n
  • Generally, litigation arises because of unfulfilled expectations.\n
  • Generally, litigation arises because of unfulfilled expectations.\n
  • Generally, litigation arises because of unfulfilled expectations.\n
  • Generally, litigation arises because of unfulfilled expectations. The same thing for LEED or other green building projects...its just different expectations.\n
  • Generally, litigation arises because of unfulfilled expectations. The same thing for LEED or other green building projects...its just different expectations.\n
  • Generally, litigation arises because of unfulfilled expectations. The same thing for LEED or other green building projects...its just different expectations.\n
  • Generally, litigation arises because of unfulfilled expectations. The same thing for LEED or other green building projects...its just different expectations.\n
  • Generally, litigation arises because of unfulfilled expectations. The same thing for LEED or other green building projects...its just different expectations.\n
  • Generally, litigation arises because of unfulfilled expectations. The same thing for LEED or other green building projects...its just different expectations.\n
  • Generally, litigation arises because of unfulfilled expectations. The same thing for LEED or other green building projects...its just different expectations.\n
  • These green building cases present unique damages issues. \n
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