Construction Contracting

Construction Contracting

In this scenario, the developer may be held liable for the contractors’ negligent acts or omissions if it can be shown that the developer had the right to control the manner and means of their performance. The design professionals have a statutory duty to exercise due care in their work product, and they may be liable to the developer and/or owner. However, the design professionals were only engaged to provide blueprints and did not supervise any part of the construction project. Accordingly, they are likely not responsible for any of the damages associated with this project. The contractor would be in a stronger position than the subcontractor since he does have a contract with the owner. The subcontractors are also in a tough position because they are not parties to any written agreement with the owner. They may have an implied-in-fact contract with the owner based on their course of conduct, but this would require more facts to determine. It is unlikely that a valid implied-in-fact contract was formed in this case because the owner to the subcontractors made no payment. Generally speaking, though, under Florida law, both contractors and subcontractors can recover damages based on quasi-contract (quantum meruit) theories or unjust enrichment against an owner who knowingly accepts substantial completion of the project.

Liability and Risk Exposures in Construction Contracting

If not licensed and insured, as a contractor, that is a risk of severe monetary fines, penalties, and jail time. Regardless of the reason you may think that licensing and insurance are not important, it will impact your business if you are not properly covered. When working on projects under contract, a party taking on any construction project should understand their risk exposures. The level of exposure varies from project to project, depending on the scope of work contracted. The kind of exposure can range from personal injury to property damage liability. Other exposures could be the potential for violations of laws and regulations or operating without proper licenses and/or insurance coverage. When a general contractor enters into a new contract, his or her first step should be to review the contract documents to determine the scope of work required for the particular project. Suppose there is any discrepancy about what is actually being contracted for, or the contractor has concerns about how the work will proceed. In that case, those should be addressed before starting work on the project. A good rule of thumb is that if there is any question about how to proceed with a particular task, it is best to seek clarification before starting work rather than assuming what should be done. The design professionals would be violating Chapter 471 by failing to submit their designs to Miami Beach Building Officials. The developer would be subject to a fine of up to $5,000 and an additional fine not to exceed $1,000 per day that the design professionals perform the unlicensed activity (Shohet, Igal and Shay, 570).

Some legal and Ethical issues include:

(1) The contractor performing work without a license.

Several issues need to be addressed regarding this situation. The first is, did this construction manager disclose to the contractor and subcontractors that he was not properly licensed in New York? If he did not, he could be subject to sanctions for his failure to disclose this information. In addition, if he did not disclose it, then it is possible that he could be found liable for breach of contract with any party with whom he contracted within New York. The legal and ethical concerns on the part of contractors and subcontractors performing the work are that they must have a Florida contractor’s license to perform any construction activity, including demolition, in Florida. They should not proceed with the work until properly licensed under Chapter 489, Florida Statutes (West, Nicola, Gransberg, and James, 35). Contractors and subcontractors should not be performing work without a permit. In performing work without a permit, they could be subject to fines, litigation or potential suspension of their license by the Department of Business and Professional Regulation to violate Florida Statute 489.103(4). Additionally, if their work is not performed following the building code, the contractor or subcontractor could be subject to possible fines litigation from the owner and/or from an injured party in connection with the performance of this work.

Moreover, there is a specific law relating to unlicensed activity in Florida. Pursuant to Florida Statute 489.127:

(1) A person may not construct or alter any building or structure within this state or cause any building or structure within this state to be constructed or altered:

(a) For which the applicable local government building code requires a permit; and

(b) Unless such person has first obtained a certificate, registration, or license pursuant to this part or unless such person meets one of the following criteria:

1. Is employed by such person as an employee whose duties are confined within the regulatory

(2) The construction manager overseeing work without a license.

The Contractors and subcontractors could be fined under Section 161.094 of the Florida Statutes for not pulling permits for the work performed on the project and for doing so without a license (or without hiring a licensed contractor). Section 161.094 of the Florida Statutes provides that any person who performs contracting without a license is liable to pay to the Board an administrative fine equal to $1,000 per violation plus three times the amount paid or contracted to be paid by any person as compensation for performing such contracting services (Gordon, and Christopher, 100). The contracting services shall include but are not limited to any services in which a certificate of competency is required pursuant to Chapter 489 of the Florida statutes unless specifically exempted by law. In addition to such civil penalties, any unlicensed person who works on a project must also reimburse all reasonable attorney’s fees and costs incurred by all persons who have suffered injuries or damages due to such unlicensed activity.

(3) The design professionals are not submitting their designs to Miami Beach Building Officials.

As design professionals, they must submit their plans to the local building authority for approval prior to construction and obtain the required permits before construction begins. If they fail to do so, they can be subject to penalties under Florida Statute 489.129(1)(a), which states that if a person performs any business or work for which a license is required under this chapter without having a license, he or she commits a misdemeanor of the first degree. Architects also have an ethical obligation under Chapter 61G15-23.001(3), Florida Administrative Code, to ensure that all plans submitted comply with the policy and regulations. First, to address this issue, it is good to understand the requirements for submitting a building permit application pursuant to the Florida Building Code. The Florida Building Code is found in Chapter 553, Florida Statutes. According to section 553.821 of the Florida Statutes, a building permit application cannot be approved unless submitted by the owner, lessee, tenant, or design professional. In this case, we assume that the New York design professionals who designed the hotel’s interior are not licensed in Florida; therefore, they cannot submit a building permit application. However, if they did submit a building permit application without being licensed as a design professional in Florida, they would be subject to criminal charges and fines pursuant to section 553.73(2), Florida Statutes. The construction manager would also be subject to criminal charges pursuant to section 553.73(3), Florida Statutes if he caused any work without first obtaining a valid building permit from Miami Beach Building Officials. This provision requires proof that the contractor or subcontractor relied on the construction manager’s statement that he would handle obtaining the required permits from Miami Beach Building Officials. The design professionals would face criminal charges for violating Florida Statute 489.127 (1) and Florida law. Suppose a design professional submits plans to a municipality, county, or other governmental entity that purportedly show sound construction practices, but which are defective and violate the building codes. In that case, the design professional can be charged with a third-degree felony. This is a very serious crime that could put design professionals in jail for five years.

(4) The structure is a historical building, which could pose additional problems if renovations are made without permits.

A historical building is an asset to the community. It is a mark of the City’s cultural heritage, and as such, it must be preserved by any means. In this case, the building was a historical site renovated by parties who had no right to do so. The fact that the design professionals did not submit their designs to Miami Beach Building Officials would have violated state laws regarding historical buildings. The design professionals should have known that a historical site requires more than just architectural planning. Any alterations to such a building must go through state approval and must not alter the overall architecture of the said building. This would usually include the construction of additional structures on or around the site and any alterations made to the interior or exterior of any buildings on or around the site. The contractors and subcontractors were under no obligation to follow this rule; however, they were not permitted to engage in any unauthorized structure planning or construction. The contractor and subcontractors would also be charged with Unlicensed Activity pursuant to Chapter 489, Florida Statutes (not less than a first-degree misdemeanor) and would also be subject to civil penalties of up to $5,000 per violation (not less than $10,000). Additionally, because the structure is a historic building, it has been determined by local government officials as having historical importance or value in relation to its culture, architecture, or development and should therefore be preserved for future generations. If renovations are made without permits could result in additional charges for failing to comply with historic preservation laws, making the parties involved face criminal charges.

Mitigation of the Situation

An ethical duty to the client is one of the most important duties that a contractor typically has. The ethical issues that arise from this scenario are numerous and varied depending on who you ask. The subcontractors and contractors should be aware that working in a historical building requires special attention to detail and care. They should also be aware of the legal requirements and regulations required to work in a historical building. If the construction manager has informed them that he will handle all of the permits, then it would be reasonable to assume that he will file for all necessary documentation required by law. However, it might be wise to ask him directly about which permits have been filed for so that no one’s legal and ethical duties are compromised. The contractors and subcontractors do not get the necessary permits to perform the work that has been contracted to them. The answer to what should be done about this by the contractors and subcontractors depends on several factors. First, if the structure is a historical building, then other legal and ethical concerns should be brought up. If it is a historical site, some regulations may apply to it regarding permits and approvals from the historical society and possibly even city officials (Bilbo, 45). The contractor’s and subcontractor’s legal and ethical responsibilities would be to obtain any necessary permits from all regulatory agencies that may have jurisdiction over the site. Additionally, if the work being performed would cause structural damage to the building or any damage, then there are further legal issues that need to be addressed. In this case, it would depend on whether or not the contractor or subcontractor knew that they were working on a historical site and if they knew this before beginning work. If they knew this, they should have obtained the necessary permits and approvals before beginning work. If they did not know this before beginning work, they might have only committed a technical violation by not obtaining all of their permits.

Secondly, the subcontractors and contractors should be concerned with their own legal and ethical concerns in this case. Whether or not the construction manager will handle permits is irrelevant to whether or not the contractor or subcontractor performs lawful work. If the construction manager fails to apply for permits or fails to obtain approval from the Miami Beach Building Officials before beginning construction, it does not mean that the contractor or subcontractor can go ahead with their work; doing so would be unlawful. The only way that this concern could be alleviated is if everyone involved were to wait until all necessary permits had been obtained from Miami Beach Building Officials and work then began under those regulations. They should not proceed with any work until they are informed of the licenses of everyone on the project and the permits that have been approved. They must understand that there may be consequences for them if any unlicensed or unpermitted work is performed. If a contractor does not follow state regulations, it does not matter whether he was instructed to do so by an unlicensed out-of-state construction manager. The subcontractors and contractors should document all conversations to prove that they were instructed to do something illegal. This will help them in case lawsuits come up due to their involvement in the project.

In any case, the contractors and subcontractors should do to stop work immediately. All work is performed on this project was done without proper permits and a licensed construction manager. This is a major violation of the Florida Building Code, which is against the law in the State of Florida. A historical building has a very different set of rules and regulations governing its construction and repair. General contractors, subcontractors, and designers who are not licensed in Florida should not be working on this project. There are major legal implications, but due to a lack of experience in Florida construction and lack of knowledge about the structure’s history, these out-of-state contractors and subcontractors could cause irreparable damage to this building (Smith and Roth, 370). If I were part of this group, I would contact an attorney and report to this developer for all violations that have already occurred. I would also contact local authorities to make them aware of the situation because code violations can mean the difference between life or death for people living or working in those buildings.

However, there is also a counter-argument that since the Construction Manager has told them that he would handle the permits, they might be inclined not to inquire further about whether or not all of the necessary permits have been secured. The subcontractors will have difficulty determining whether or not this is true since they do not have direct contact with Building Officials. They may also be concerned with compliance with local, state and federal building codes, leading to more serious legal consequences. In addition, due to their lack of knowledge regarding both state and local law, it is possible that some of the design professionals hired from New York may not be licensed in Florida. To protect themselves from potential legal ramifications, the subcontractors should consult with attorneys prior to working on many projects requiring licensure (Barrie, Donald and Paulson, 430). Lastly, There are many reasons why a design professional would not submit their designs to the Miami Beach Building Officials. The design professional may not have a license in Florida, or they may have failed to obtain the requisite permits to conduct business in the State of Florida. The design professional may also be seeking to avoid public scrutiny from city officials who would otherwise require them to conform with state and local building codes.

In conclusion, there are several problems in the case scenario. The construction manager is unlicensed and is not supposed to manage the project. The design professionals are not licensed in Florida, and they did not submit their designs to Miami Beach Building Officials. In addition, the contractors and subcontractors are required to pull permits. Based on this information, they should be fined because it indicates that they were aware of the rules and proceeded anyway. Ethical concerns are probably the most important to deal with. If this project is a historical building, they have to be careful not to damage or ruin the historical integrity of the building. The legal ramifications may come later, but they are still of great concern. The contractors and subcontractors could be liable for damages done if people get injured or killed because of improper safety precautions taken during this renovation. There could also be fines if an investigation occurred after the fact and determined that historical rules were broken. The subcontractors should immediately halt work on this project and contact their lawyer as well as any governing agencies that handle these situations. They should also alert their insurance companies of the situation and ask them how to move forward. I would advise the subcontractors and contractors to walk off the job immediately. If they fail to do so, they are putting themselves at risk of a lawsuit if something goes wrong with the work. They have no assurance that the work was done in compliance with all applicable laws and codes. Alternatively, the subcontractors and contractors should contact a lawyer before starting any work. The first thing the contractor should do is make sure that the hotel has a certificate of occupancy. The contractor and subcontractor may be held liable for civil penalties if they proceed with construction without a certificate of occupancy. Since the structure is a historical building, there are additional concerns. When performing work on a historical building, there is a heightened risk of unfair business practices because the historical nature of the building confers certain protections. The contractor must ensure that he has not been hired to violate Miami Beach’s building code or historic preservation laws. In other words, the contractor must be certain that his work does not violate existing laws or regulations in any way. 

Works Cited

Barrie, Donald S., and Boyd C. Paulson Jr. “Professional construction management.” Journal of the Construction Division 102.3 (1976): 425-436.

Bilbo, David, et al. “Comparison of construction manager at risk and integrated project delivery performance on healthcare projects: A comparative case study.” International Journal of Construction Education and Research 11.1 (2015): 40-53.

Gordon, Christopher M. “Choosing appropriate construction contracting method.” Journal of construction engineering and management 120.1 (1994): 196-210.

Shohet, Igal M., and Shay Frydman. “Communication patterns in construction at construction manager level.” Journal of construction engineering and management 129.5 (2003): 570-577.

Smith, G. R., and R. D. Roth. “Safety programs and the construction manager.” Journal of Construction Engineering and Management 117.2 (1991): 360-371.

West, Nicola, Douglas D. Gransberg, and James McMinimee. “Effective tools for projects delivered by construction manager–general contractor method.” Transportation research record 2268.1 (2012): 33-39.