California builders and developers might be interested in learning that the average financial toll related to construction disputes in North America fell in 2016 to $21 million. While the disputes were generally less expensive, they did take two months longer to resolve than in 2015. This is according to a report issued by the consultancy and design company Arcadis.
Arcadis also determined that contract errors and omissions were the most common reasons for the disputes. Unsubstantiated claims and inadequate contract administration were also issues. Public developments had the highest percentage of disputes. Joint ventures were involved in a third of the construction disputes in 2016.
Because disputes happen so frequently in the construction industry, it is essential that contracts detail a resolution process before a project is initiated. The construction industry is moving its focus from traditional contract delivery techniques to methods that employ more collaborative tactics. This is expected to lower the size and frequency of disputes.
Construction defects are a significant cause of insurance claims and construction litigation. In Florida, there were a number of cases related to single-family home and condominium defects that involved major players in residential construction, including D.R. Horton and KB Home. Both companies were required to pay substantial damages for construction defects. KB Home agreed to submit $23.5 million to Florida for purposely selling properties that had building code violations and for not adhering to client specifications. D.R. Horton had to pay $9.6 million for shoddy construction that resulted in defective windows, doors and roofs.
Developers might find it advisable to meet with their attorneys prior to starting a project. Legal counsel can often assist in preparing construction contracts that minimize the risk of a dispute.
