Carolina Construction Law

Can a contractor's promise to repair extend statute of limitation?

There is one case in North Carolina that seems to say that if you agree not to sue a contractor because the contractor agreed to fix the problem with the home, that the promise than extend the statute of limitations and/or repose.  However, most cases hold that once the statute of repose expires, the contractor's liability is over.

What does Builder's Risk insurance really cover?

Maybe not much.  In recent years the builder's risk insurance policy coverage has continued to shrink.  Only a few years ago, subcontractors were insured under such a policy - now it takes an entirely separate endorsement.  Policies do not cover defects in workmanship.  It may, however, in some circumstances, pay for damage caused by a defect.  For example, if a roof leaks, it will not pay to fix the roof - it may pay for the damage to the house that the leak caused.  Also, once a project is completed, many policies try to exclude coverage for "completed operations".  My opinion is that both the general contractor and the owners are being short changed when it comes to the purchase and protection of builder's risk policies.

What is remedy if contract exceeds limitation on license?

Sometimes you will have a situation where the builder undertakes a contract with a license that is limited in some way, but then the cost of the undertaking exceeds his limit.  In that case, North Carolina will permit him to recover up to the amount of his license - but no more.  We are handling a case just like this now.  The fact that the owner knew the license was limited does not help the contractor recover his money.

Unlicensed general contractors

One concern for builders and homeowners alike is the necessity for a general contractor to possess a valid contractor's license.  The laws pertaining to contractors may be found at Laws and Regulations for Contractors.  Any contractor who undertakes a project greater than $30,000 is required to have a license.  There are three types of licenses:  Limited (up to $350,000), Intermediate (up to $750,000) and Unlimited.  The penalties for undertaking a project without a license or in the name of an entity that does not have a license is harsh.  An unlicensed contractor may not collect any money for his labor or material - even if the owner knew the contractor was unlicensed.  Where our contractors have problems is when the contract is not precisely in the name of the entity (or person) that has the license.  If the name on the license does not match the name on the contract, our courts consider the contractor - unlicensed and the penalties apply.  Not only can the unlicensed contractor not recover any money for his work - but technically he has committed a misdemeanor. 

Arbitration

Arbitration is a legal proceeding, outside the courtroom, that is binding on the parties.  It is typically conducted by 1 or 3 arbitrators.  There are only two ways to have arbitration in North Carolina. First, there must be in arbitration clause in the written contract between the parties; or second, the parties must consent to arbitration.  Some contracts require the arbitration to be conducted through the American Arbitration Association (AAA).  However, many people find their administrative fees expensive.  There are alternative arbitration groups such as The Arbitration Group (TAG) that some may find to be a less expensive solution.  There are advantages and disadvantages to arbitration.  A disadvantage is that the decision is not appealable. An advantage is that it is usually quicker, cheaper and less formal that a jury trial. 

What is the time period for filing a lien?

In North Carolina, if a contractor, subcontractor, laborer or materials provider has not been paid, they have the right to file a lien.  A lien is a claim against either someone’s property or against money that someone is owed.  In North Carolina, a person has 120 days from the last day they either worked or provided material to the job site.  Filing a lien places other people on notice that you are not getting paid and protects your rights to recover before other people are paid.  If gives you a priority when money is disbursed on the project. Filing a claim of lien is only one step in the process.  Once a lien is filed, you must “perfect” the lien by filing a lawsuit to enforce the lien.  While you have 120 days to file a lien from the date you were last on the job or provided materials – you have 180 days from those events to file a lawsuit to enforce the lien.  If you fail to file the lawsuit within 180 days, you still have three years from the date you were owed the money to file a lawsuit to collect your money.  However, you will have lost your priority to get paid before everyone else if the lien is not filed or perfected.

Warranties

There are three kinds of warranties in the construction of a new home, condominium or town home.  The first is an express warranty.  This warranty is provided in the contract to build or purchase and the warranty is provided by the builder/seller.  The second type of warranty is a third party warranty. Many times a builder will supply the homeowner with a warranty provided by a third party.  Typically, these are ten year warranties that insure only major structural defects in the home.  The third type of warranty may be the most powerful - yet least known.  Under North Carolina law, the builder/seller of a home automatically gives the first purchaser of a home, a six year implied warranty of habitability.  That means that for six years, the builder is responsible for repairing defects in your home that impact its livability.  Examples of defects covered by the implied warranty are:  foundations, HVAC, plumbing, roofing, electrical retaining walls and water intrusion.  The implied warranty cannot be excluded unless specifically and unambiguously referenced in the contract.  The implied warranty claim must be brought within the applicable statute of limitations and statute of repose.

Statutes of Limitation and Statutes of Repose

Statutes of limtiation and statutes of repose are laws designed to limit the time that a homeowner can file suit - or a builder can be sued.  The statute of repose is a length of time after which no suit can be filed. It begnis to run after the structure is finished.  The statute of limitations is the period of time you have to file suit after discovering a defect.  For example the statute of repose in North Carolina is six years.  The statute of limitations is three years.  Suppose the homeowner discovered leaking windows in their home.  They would have three years from the date they discovered (or should have discovered) the leak to file a lawsuit (statute of limitations) - but in no event could they file a lawsuit more than six years after the house was finished (statute of repose)

Carolina Construction Law

Welcome to the Carolina Construction Law blog.  This blog is hosted by the law firm of DeVore, Acton & Stafford, PA. (www.devact.com) and is intended to educate and discuss various legal aspects of the construction industry.  The blog is for homeowners as well as all aspects of the construction industry.  Since our site is still under "construction" check by frequently for updates.

Fred DeVore (fdevore@devact.com)

Will Wallace (wwallace@devact.com)