Congratulations! You’re involved in constructing a new building! Maybe it’s your company’s new office, warehouse, or factory. There are often many people and proverbial moving pieces involved when a building is constructed, so there’s a good chance of disputes between parties at some point. If proactively and reasonably handled, they need not be a disruption as a real estate litigation lawyer can attest.

Construction projects require the efforts of: 

  • Architects
  • Engineers
  • Contractors
  • Subcontractors
  • Suppliers

You can also add government inspectors who ensure the building complies with building and fire codes. Each party has its agenda, interests, expectations, and interests. Disputes arise when:

  • Interests collide
  • Parties miscommunicate
  • Contracts are interpreted differently
  • Unforeseen complications and delays arise

Issues beyond the parties’ control, like supply problems, bad weather, accidents, or labor shortages, are also added to the mix.

What Causes Disputes?

  • Contract conflicts

Contractual disputes are common as our friends at Focus Law LA can share. Parties disagree over the contract’s terms and conditions. The contract may be ambiguous, subject to different interpretations, or fail to cover the issue that arose. The parties may disagree over the following:

  • Deadlines
  • Scope of work
  • Payment schedules

You can limit the chances of these problems arising if you use a well-drafted contract where responsibilities are clearly stated. Good faith communications and reasonable parties should resolve issues as they arise.

  • Delays

Delays are almost inevitable but can cause significant disputes because there may be tight schedules, and delays increase costs. Parties may dispute delay causes and who’s responsible for paying unexpected costs. There should be a clear schedule, and parties should keep detailed records of communications and events that take place. This paper trail can be helpful in tracing who’s responsible for what.

  • Payment 

Conflicts may arise over payment timing and the amount owed. If not resolved quickly, a contractor could stop working and cause delays. They may blame others for additional work or material that was needed. Liens on the property or other legal actions could also occur. 

Payment terms should be clearly defined in the contract, including the following:

  • Schedule
  • Milestones
  • Conditions for payment

Open communications and regularly reviewing invoices may help prevent payment misunderstandings and delays.

  • Defects

Defects can cause significant disputes, especially if they impact the property’s:

  • Safety
  • Functionality 
  • Value 

Disputes often involve claims of: 

  • Substandard work
  • Defective or substandard materials
  • Failure to meet building or fire codes and standards

To try to prevent defect issues, have regular inspections during construction and address issues as they arise. Have a process to resolve defect claims in the contract and follow it. 

How Do We Address Conflicts That Can’t Be Resolved?

The contract could require disputes left unresolved to be handled through mediation. If that fails, an arbitration hearing could decide the issue. Mediation involves a neutral third party who tries to guide the parties to a resolution. 

Arbitration is very common in construction disputes. One or a panel of arbitrators, usually attorneys or retired judges with construction law experience, can act as a judge in a private trial deciding the issue. These proceedings are generally faster and less expensive than the court system. But if you’re the losing party, these decisions are nearly impossible to appeal and overturn.

Construction is usually a very expensive process, and the costs increase if there are delays, cost overruns, or defective work or materials are used. Contracts are involved, and if things don’t go well, multiple parties may end up suing each other. An attorney can help you create contracts that protect your interests, negotiate with other parties as disagreements arise, and represent you at a mediation session, arbitration hearing, or during litigation.

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