Virginia Real Estate, Land Use & Construction Law : Virginia Construction Lawyers & Attorneys : Bean Kinney & Korman Law Firm : VA Real Estate, Land Use & Zoning

Modular home construction presents significant potential improvements to home construction: significantly reduced construction time; less material waste; and reduced expense.  If not handled appropriately in terms of contracts and risk, modular homes can translate to a gigantic headache for both the designers, contractors, and the owner.

Last Thursday, Lisa Rein of the Washington Post wrote an article on mansions turning to modular construction to reduce time and costs.  The article caught my eye - while I have noticed this trend over the last 5 years or so, it was the first time I saw local mainstream press pick up on this.  My friend Jamie Baker Roskie at the always interesting Land Use Prof Blog picked up on the article and connected the thread towards local codes discouraging use of shipping containers as building materials. 

Adaptive reuse of discarded materials is one of the best ways to improve our economy's sustainability, and using shipping containers for modular construction is really an interesting approach.  Don't believe shipping containers make good construction materials?  Browse through a search of the articles at the highly informative Jetson Green blog that address containers and you will see some remarkable uses of containers, from emergency shelters for recovery in Haiti to very sweet, upscale small footprint breach structures.

Turning from containers to wood based modular construction, count me as a believer that we will see industry move towards more pre-fabricated assemblies to reduce cost and time of construction.  Despite my views on the future, I have particiated in some pretty ugly cases involving modular construction.  Based on the repetitive nature of these problems, I draw some conclusions about risks involving modular home construction that may help put the Washington Post's article into a legal context:

1. Prefabricated assemblies are sales of goods governed by Uniform Commercial Code not construction
2. Sales of goods involve different potential warranty theories and defenses than construction implied warranties
3. Sales of goods potentially have different statutes of limitations
4. While the install time may be shorter, manufacturing and delivery time may be a very different story
5. Most owner/contractor agreements involving modular construction are very weak on defining the remote manufacturer's role and responsibilities
6. Similarly, most owner/contractor agreements poorly define timing expectations until the modular unit is delivered and set on the building pad
7. Simple units seem to do pretty well; however, quality control seems to vary wildly amongst manufacturers and even within specific manufacturers depending on the specifics of a projects and the design complexity
8. As with other manufacturer's warranties, if there are problems, owners and contractors may struggly mightily to get manufacturers to respond appropriately to warranty complaints

This may be coming from the skewed perspective of seeing these projects in litigation, what do you think?  What have you seen?  Finally, how has the economic downturn improved or worsened working with modular manufacturers?

Images by Terretta

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After much back and forth, the Soil and Water Conservation Board announced on January 14th that they voted to suspend their hotly debated changes to stormwater regulations to permit an additional 30-day comment period.  The stage was formally suspended on January 26, 2010 which means that the status will be stuck in suspension until a new round of comments opens from February 15 through March 17.

We reported on the both the initial regulations and later changes to the proposed regulations which eased some of their impacts on the home building industry.  The Home Builders Association of Virginia indicates that they mobilized significant response and opposition to even the later round of regulations.

In addition to the underlying technical tug-of-war, there are two interesting political subtexts which may sweep this issue off the table.  First, in the intervening time since the regulations were first proposed, the Republican former Attorney General, Bob McDonnell, has won the Governor's race, Governor Tim Kaine has left office,  and Governor McDonnell has been sworn in.  The impact of the new Governor on these regulations is unknown at this point, but the suspension may be a significant indicator of future direction.

The import of state regulation may be swept away by federal intervention.  The US Environmental Protection Agency has sought comments and then transmitted a second notice on specific stormwater management regulations.  Chesapeake Bay run-off continues to generate active press and political reaction, so the states may ultimately be preempted by federal action in this arena.

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Rockville based contractor Hann & Hann will pay $600,000 plus the plaintffs' legal fees to settle a wage and overtime based class action suit.  As reported in the Washington Post by Rubin Castaneda on January 30, 2010, Hann & Hann agreed to pay overtime plus 50% for every employee working with the company not paid overtime between May 8, 2006 and May 8 2008.

There are a couple important subtexts to this case and settlement.  First, reports describe the 200 plus employees and former employees as almost all Spanish speaking immigrants.  This naturally raises questions not only of immigration status, but also of whether the contractor was perceived as taking advantage of employees less able to defend themselves.  In this case, the employees not only had the Immigrant and Refugee Rights Project at the Washington Lawyers' Committee for Civil Rights and Urban Affairs on the case, but also were represented by Arnold and Porter pro bono.

Second, claims by employees for unpaid overtime and wages have been a hot topic over the last several years (some more detailed discussion touching on this is available here at Daniel Schwartz' excellent blog).  In many ways, the issue of classification of exempt and non-exempt employees which dictates whether overtime is required dovetails quite closely with distinctions between independent contractors and employees which we recently discussed.  Back wages, penalties and attorneys' fee claims are a big risk in this arena, as is the underlying threat of more involved scrutiny as the weight of the government comes to bear.  Contractors should:

• Take employee classifications seriously
• Understand that mistakes in classifications can translate to serious damages
• The short term benefit of cutting corners can come at a cost that buries your company
• As a result, handle classifications conservatively and pay out overtime accordingly

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Owners, developers and builders working in the renovation arena beware: the EPA's new regulations on lead paint take effect on April 22, 2010.  The regulations are contained at Title 40, Part 745 of the Code of Federal Regulations.  There are some very important highlights:

Effective April 21, no firm may offer or perform renovations in "target housing" without certification (40 CFR 745.81). Target housing means any housing constructed prior to 1978, so renovators working in homes, apartments or condominiums built prior to 1978 need to take this seriously.

There are only very limited exceptions, such as where a certified inspector has determined the project is free of lead paint beyond permitted levels (40 CFR 745.82). Projects with no children or pregnant woman that are owner occupied can also qualify for excluding coverage, but only if the owner signs off that the firm is not required to meet the regulatory practices (40 CFR 745.82).

• Firm's performing renovations have extensive obligations to give disclosure and notice to building occupants in writing prior to renovation, including providing mandating EPA publications (40 CFR 745.84)
• The regulations further include specific work practice standards, so watch out for potential employee personal injury claims and OSHA inspections and violations as well (40 CFR 745.85)
• Even relatively minor work is swept up in the requirements: generally work disrupting more than 6 square feet of painted area is regulated (40 CFR 745.80, 745.83)
• Persons and firms performing work in this arena must provide their customers the EPA's brochure, Renovate Right (40 CFR 745.81)(please note: the publication requirement is already in effect, so if you are not doing that now, you need to start immediately!).

On a final note, there is an entire training and certification regime established by the EPA.  In a down economy, this may be a good area to jump in and develop expertise and a market niche.

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Abuse of independent contractor status continues to get significant regulatory and legislative attention.  Critics of this practice argue that misclassifying employees as independent contractors is an unfair competitive advantage and robs federal and state governments of justly due employment related taxes.

On the federal level, there have been rumblings over the last year of not only stepped up scrutiny through both the Internal Revenue Service and Department of Labor, but also bills proposed in Congress during 2009 which would curtail the scope of current safe harbor provisions.  I received a note from Associated Builders & Contractors yesterday pointing to a recent new bill introduced by Sen. John Kerry which would rewrite existing safe harbor provisions and require all employers to obtain written documentation from the IRS as a precondition to independent contractor status.

The feds are not the only ones getting in on the action.  Our friends at Aronson have previously reported on the State of Maryland's creation of a multi-agency Task Force to coordinate investgations of work place fraudulent practice including misclassification of employees.  The Task Force report, issued in December 2009, details tens of millions of dollars of lost tax revenue which makes this topic tasty to legislators in these cash strapped times.  Other states are pursuing similar efforts, such as those in Connecticut analyzed by our good friend and terrific employment blogger Daniel Schwartz.

We see this issue continuing to gather steam, especially given the nationwide budget and tax shortfall issues faced at every level of government.  Here are some take-aways:

1. Contractors should be extremely conservative in classifying independent contractors
2. Be wary of exercising too much control over independent contractors
3. Know the regulatory standards and get help analyzing the question
4. Understand the downside: not just payments of the back taxes, but potentially interest, very heavy penalties, imposition of personal liability on corporate owners, and even criminal sanctions.

Image by alykat

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Wading through the various layers of requirements, enticements, incentives and regulations that apply to green building can be overwhelming to anyone, let alone the uninitiated.  This process is made far more complicated by adding the layering of federal, state, and local government efforts in this field.

The United States Green Building Council has this effort very easy with regards to LEED related public policy searches.  USGBC has a search engine with multiple selectable criteria to sift through the oceans of regulations to find what you are looking for.  I cannot say the entire database is perfect, but I can say that it appeared that the Virginia state and local discussion was basically accurate, including the status of the green building ordinances in Arlington County, Fairfax County, and the City of Alexandria.

USGBC naturally has an interest in promoting the USGBC's interests with its efforts and these tools are no exception.  The only pet peeve I have is that some of the commentary seems to slant the discussion entirely towards LEED standards without a recognition of the role other standards may play in these regulations.  For example, the USGBC description of the City of Alexandria policy states,

On April 18, 2009, the Alexandria City Council adopted their Green Building Policy requiring all new municipal buildings to achieve LEED Silver certification and all new commercial buildings to achieve LEED Silver certification. The policy also requires all new residential buildings to be LEED Certified with the intention of increasing the standard over time.

In reality, the City of Alexandria policy expressly recognizes the ANSI approved ICC-700 2008 National Green Building Standard for residential construction.  The ICC-700 standard was developed by the National Association of Home Builders in partnership with the International Code Council.  The City's overall adopted standard further provides that while LEED is typical, to the extent equivalent rating systems are available and can be demonstrated as equivalent to the Director of Planning and zoning, they are also acceptable.

That limited comment notwithstanding, the USGBC search engine is a great free tool to dig out federal, state and local requirements.  Careful and prudent use will require clicking through to the underlying source links and maybe digging a bit for confirmation, but used carefully the search tool can save a ton of time and effort.

Image by Timothy Valentine

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The Washington Post reported on Sunday that the Obama administration will propose taking over safety regulation of subways and light rail, including the regional Metro system.  Metro has been taking a regular beating in the press recently for safety concerns and its anemic response to those concerns.  Metro has apparently gone so far to frustrate efforts to investigate its safety procedures and efforts that it has barred independent monitors from walking along its subway tracks, even escorted by Metro employees, to observe its procedures in practice. 

The frightening revelation is that the safety oversight is apparently imposted by a relatively powerless, "Tri-State Oversight Committee", "which has no employees, office or phone number.  It also has no direct regulatory authority over Metro."   Locally, concerns regarding Metro's safety have mushroomed following a June 22, 2009 crash that left nine people dead and injured 80.  Since then, the Washington Post has reported an another "dangerously close" near miss, an August 9 fatality when track repairman Michael Nash was struck and killed, and another fatality when a Metro technician John Moore was killed in a separate incident in September.

I believe that density based development around the Metro corridors is critical to long-term regional success, reduction of carbon footprint, reduction of use of non-renewable fossil fuels, and reversing or at least slowing down the traffic impacts of decades of sprawl.  A trusted, safe and reliable Metro system is a prerequisite to this entire style of development working.  In particular, the rail extension to Dulles Airport and the interconnected plans to redevelop Tyson's Corner into a more intelligently designed, denser urban center with improved walkability are crucial to the successful continued vitality of the entire region.  Leaving the success of these important ventures in the hands of a powerless committee with no direct regulatory authority is simply not acceptable.

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In one corner, we have the firefighters and sprinkler manufacturers arguing that sprinkler installation in homes and townhouses will save lives and reduce property damage. In the other corner, we have the home builders arguing that adding a sprinkler requirement is piling on more costs on an already battered industry without appreciable benefits. This debate has raged on the national stage for the last several years and now continues on the state level accross the country.

The National Association of Home Builders strongly objected to sprinkler requirements for single family construction as part of the International Residential Code. NAHB relied upon a 2007 study that the average cost for a 2,200 square foot home would be $5,573. According to Michael Toalson of the Home Builders Association of Virginia, the actual cost is $6,700 per home when financing costs and brokerage commissions are added in. These estimates stand in contrast to reports produced by the U.S. Fire Administration which estimates he costs at $2,200-$3,300.

As with the question of costs, the parties have very different views of the safety impacts of sprinklers. The National Fire Protection Agency estimates that the death rate per fire in homes with sprinklers is 80% lower. NFPA further estimates property damages per fire as 45-70% lower. NAHB and its affiliates have countered by indicating that these statistics include older homes without smoke alarms. According to the NAHB, the survival rate is nearly 99.5% in homes with smoke detectors and the incremental safety impact does not justify adding substantial costs on an already burdened industry.

Despite the NAHB objections, the International Code Council introduced sprinkler requirements into IRC and then voted unanimously to reject NAHB’s appeal in December 2008. Since that time, the debate has moved to the individual states where the IRC is analyzed and adopted into state building codes. This process is on-going in Virginia and the sprinkler issue continues to provoke intense dispute.

Pro-sprinkler advocates may have received a recent boost with the recent report from PrinceGeorge’s County, Maryland. That report indicates that from 1992-2007 , there were 101 fire deaths and 328 civilian injuries in single family and townhomes without sprinklers while those with sprinklers had zero fatalities and only six civilian injuries. Calli Schmidt of NAHB has replied that, “According to the United States Fire Administration, there were NO reported fatalities in the state of Maryland in homes that were equipped with working hardwired, interconnected smoke alarms between 2002 and 2006”.

The discussion is on-going in Virginia where the last round of sprinkler subcommittee meetings in September, 2009 failed, not surprisingly, to produce a consensus as reflected in its report. The next meeting is scheduling for December 3, 2009 and we will keep everyone posted with further developments on this important issue. (Hat tip to our friend Imad Naffa for sending us the recent Prince George’s County Maryland survey information. Imad has recently written a nice sprinkler guide).

Image by Moonez

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As noted in our previous stormwater regulation discussion, The Virginia Soil and Water Conservation Board has been considering amending their regulations.  Per the Virginia Association of Counties, the Board adopted an amended version of the regulations last night.  The extensive amendments will translate to a new public comment period to begin on October 26.  The Board is scheduled to vote on final adoption "sometime around December 9" according the VACO.

Amongst other changes, the VACO reports the following changes to the rule:

• The phosphorus limit was raised from 0.28 ounds per acre per year to 0.45 pounds in areas outside the Chesapeake Bay watershed
• Sites under an acre of disturbed land will be allowed phosphorus run-off of 0.45 pounds per acre per year as opposed to the original blanket 0.28 pounds
• Redevelopment projects required to reduce predevelopment load of phosphorus by 20%
• Local governments can adopt urban development areas permitting 0.45 pounds

It appears from the changes that concerns raised by local governments and the home building industry gained some traction.  It is particularly interesting that the argument that the original structure of the regulations actually encouraged sprawl seems to have taken some root with the urban development districts and using a reduction model for redevelopment projects.  (Hat tip to Andrew McRoberts editor of the Virginia Local Government Law blog for passing along this breaking news yesterday on Twitter).

Image by Frames-of-Mind

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The Virginia Department of Transportation and the Virginia Soil and Water Conservation Board are each respectively in the process of examining and issuing regulations impacting the development and construction industry.  The proposed VDOT regulations cover access management and relate to minor arterials, collectors, and local streets.  The public comment period began September 15, 2009 and is set to end on October 14, 2009.

The Soil and Water Board's stormwater regulations include significant amendments to stormwater management and were designed to address water quality and quantity and local stormwater management criteria.  Public comment ended on August 21, 2009 resulting in 408 comments.   The very significant level of commentary reflects a high degree of citizen and business interest and involvement.  The comments range from general but impassioned calls to defend the environment to quite a bit of substantive critical comments from design professionals, builders, and ordinary citizens regarding the regulations and their potential resulting economic impact.    

In a conversation with me today, Barrett Hardiman, Vice President/Director of Regulatory Affairs for the Home Builders Association of Virginia, encapsulates much of the flavor of the home building industry's reaction to the proposed new stormwater regulations:

"We want a regulation that is best for both the environment and the economy.  What they are proposing does not do much for the environment and does serious damage to an already fragile economy and home building industry.  It does not benefit the [Chesapeake] Bay and will likely cost Virginia billions to squeeze the last bit of phosphorus out of new development."

While the public comment period has officially ended, the Soil and Water Conservation Board has scheduled a special public hearing for further discussion of the suggested changes.  That meeting will be held on Thursday, September 17 at 9:30 am. The meeting will be held at the MCV Campus Molecular Medicine Research Center, 1220 E. Broad Street, 1st Floor Multipurpose Room, Richmond, VA 23219. 

Given the uncertain current status of the proposed regulations and their potential dramatic impact on the development process, proponents and opponents would both be well advised to represent their positions at these continuing meetings.

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