Illinois Construction Law Blog : Illinois Construction Lawyer & Attorney : Foran Glennon Palandech Ponzi & Rudloff Law Firm : Chicago IL

Two new bills have been introduced to change the Condominium Property Act.

• HB 5037 - Will allow municipalities the ability to appoint receivers for distressed condominium properties and eventually have the properties sold.  Of interest is the definition of  "distressed condominium property":

"Distressed condominium property" means a parcel containing condominium units which are operated in a manner or have conditions which may constitute a danger, blight, or nuisance to the surrounding community or to the general public, including but not limited to one or more of the  following conditions:  

(A) the building is substantially unoccupied, or  has serious violations of any applicable local building code;  

(B) 60% or more of the condominium units are in foreclosure or are units against which a judgment of foreclosure was entered within the last 18 months;

(C) there has been a recording of more condominium units on the parcel than physically exist;

(D) any of the essential utilities to the parcel or condominium units is either terminated or threatened with termination;

(E) there is a delinquency on the property taxes for at least 60% of the condominium units; or

(F) the board of managers has not met within the last 12 months or is otherwise not functioning."

While the act gives the receiver the power to enter into a sales contract for the property with court approval, it appears to be silent regarding any applicable standards for pricing the sale, or achieving any form of FMV.   

• HB 5189 - In a possible response to a fluctuating real estate market, the bill would amend the act to statutorily provide that owners can rent up to 20% of the properties and that no condo board can enact rules to the contrary. 

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The concept of having to obtain a surety bond shouldn't be of any new relevance to anyone doing public work.  Knowing the full extent of the provisions in the surety instrument and having a chance to properly negotiate might not seem all that important to a contractor who plans on completing its obligations.   Negotiating those terms or being aware of the full force of any personal indemnity provisions could be the difference between large-scale financial ruin and being able to get out of trouble with your reputation and bank account in tact.  On the flip-side, knowing whom you're granting surety to, and whether or not they're worth it is equally important.

The recited facts in United Fire v. Bartlett Bituminous should allow everyone to understand that the plaintiff will likely never see its money. (The defendants didn't even bother to respond to a motion for summary judgment.)  With the amount in controversy close to exceeding six million dollars, the point well taken is actually two-fold; one, sometimes you should cut your losses and know when you're sunk and two, performing research on the assets and background of the company you're dealing with is research worth doing.  A little foresight can go a long way.

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In a decision sure to be pertinent to landlords and honing their pleadings in disputes with tenants, the First District has decided that attorney's fees should not be awarded in breach of contract actions against tenants.  After reading Willis v. NAICO Real Estate, perhaps landlords will want to consider exactly how and under what statutes/agreements they look to recoup money from tenants.

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©    Maintaining the copyright in a design can give an architect or engineer another tool in ensuring payment and completion of the contract.  The right to come in and take back the designs or to seek an injunction has teeth and copyright is a limited issue in most standard form contracts.  While disputes based on the licenses and the copyright terms of the contract carry meat, the A/E might consider registering their plans with the US Copyright Office prior to turning them over to other parties.

        Having the protection of the registered copyright allows for the statutory provisions of US Copyright law to be used as well as seeking the remedy under the contract and can offer the added benefit of allowing the A/E to seek to recoup statutory damages as well as legal fees.  A short primer is available from the office, and the limited fee, especially on designs that may be used multiple times can offer an added assurance that payment in full will occur.  

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    For anyone practicing law in today's information age, the constant fees and assessments put forth by different counties for access to recorded documents, court filings, or any other public record is well known.  In fact, the charges for information can sometimes be exorbitant if someone is getting involved in multi-party litigation.

    This newly proposed Senate Bill #2175 should come as a welcome proposal to the small practioner concerned about handing over the expense of accessing public data to a client.

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The new ConsensusDOCS forms were published late last year and will be the subject of the ABA Construction Industry Forum's 2008 Fall Meeting.  With all the buzz we thought it would be pertinent to sit down and read these documents.  This posting is one of many expected to come regarding the new ConsensusDOCS.

            The language implying a fiduciary duty hasn't changed much over the years and is often described by the courts as a "relationship of trust and confidence" between parties.  With that definition entrenched in case law we thought it a bit peculiar that the normal contracting relationship between an architect and an owner would be particularly described as one of "trust and confidence" in ConsensusDOCS 240 section 2.2. 

In the construction setting, plaintiff's with claims have been seeking to impose a fiduciary relationship in one form or another on contractors and architects to gain more damages and a heightened standard of care for some time.  Thankfully, many courts have often struck down the concept of parties contracting for construction services as entering into a fiduciary relationship thus allowing plaintiff's to bring causes of action outside the normal breach of contract claim or based on a heightened standard of care.  (See, 262 F. Supp. 2d 1004; 812 F. Supp. 72)

With the concept of "trust and confidence" and its implication of a fiduciary relationship in mind, it's odd that the ConsensusDOCS Guidebook from October 31, 2007, would explicitly delineate that the contracting parties should not be agreeing to a heightened standard of care:

• "Standard of Care (Section 2.1): A definition of the standard of care applicable to architectural and engineering services performed under this Agreement is not included in this Agreement (previous additions of AGC contracts did include such a definition). The drafters of the new Consensus documents determined that it would be better for the design professionals to be held to a standard imposed on them by their own profession, rather than one defined by this Agreement.

• "Contractors and Owners should not modify this Agreement by adding language that would hold any design professional to a standard of care that is above that which is customary and normal for design professionals in the same time and location, because that might result in the unintended consequence of voiding errors and omissions coverage available to the respective design professionals."

 
But then go on to say that the A/E is accepting a relationship of trust and confidence in Section 2.1 of document 240:

 

• "Relationship of the Parties (Section 2.2): This provision requires the Architect/Engineer (A/E) to accept the relationship of trust and confidence in exercising its skill and judgment in furthering the interests of the Owner and expressly affirms the A/E's representation that it possesses the requisite skill, expertise, and licensing to perform the required services. The new language is preferable, but it should be noted that it was not included in the previous AGC 240 Owner-Designer professional Agreement, no longer published."

       It is also a bit boggling that understanding the implication of the "trust and confidence" language, that no other provision in the document would specifically state that nothing in the contract should be construed as creating a fiduciary relationship between the parties.  Perhaps the authors just thought such a provision unnecessary given the lack of case law supporting a fiduciary relationship in such a setting.  But why then be specific as to the language of "trust and confidence" between the parties?  Why not just state that the parties agree to "good faith and fair dealing" or accept a "contractual relationship for the provision of A/E services"?  And, even if a standard of care is not affected by the language, could "trust and confidence" through its fiduciary implications mean that there are now added duties that the A/E must be aware of?

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        In this recent opinion from the First District, the Court has upheld that a general's control through asserting its authority to stop work due to safety violations by its sub; the mandate that the sub hold weekly safety meetings and submit the minutes of those meetings for the general's review; and the subs contractual obligation to submit a site-specific safety plan all amount to enough retained control to present an issue of fact as to the general's liability under §414 of the restatement of torts.

            §414 states in relevant part that:

            "One who entrusts work to an independent contractor, but who retains the control of any part of the work, is subject to liability for physical harm to others for whose safety the employer owes a duty to exercise reasonable care, which is caused by his failure to exercise his control with reasonable care."

            In the case of Wilkerson v. Schwendener (1-06-2653) the plaintiff was the employee of a sub and was placing some joists on a second floor of a retirement home project when his co-worker handed him a joist and struck him in the foot.

            The general had won summary judgment on the issue of §414 liability where it claimed to not have retained control of its subs work.  The Court found that the general had retained control where it required its sub to (1) comply with a 21 part list of safety regulations generated by the general; (2) hold weekly safety meetings and submit the minutes of those meetings; (3) prepare and submit a site-specific safety plan; and (4) attend the general's weekly safety meetings.  Additionally, at some point prior to the plaintiff's accident the general had sent a letter to the sub stating that the sub needed to get its safety program in order or the general "WILL STOP" (yes, it was all caps in the actual letter) the sub from continuing its work.

            The Court noted that generally, just having a supervisory role over safety would not have implicated the general in §414 liability, but here, with all the factors taken into account, and the threat of stopping the work if safety was not performed properly, the general did retain sufficient control and with it, liability.

            This raises some interesting questions regarding safety.  We know that a general wants to eliminate workplace accidents and that if it is not in charge of workplace safety, its subs might not toe the line (as here).  We also know that a general can't be everywhere at once on a job site.  So what should a general do now?  Should they be standing back and not getting involved in safety programs and full-on supervision?  Would that increase the number of accidents, but shield generals from liability under §414?  It seems a bit ridiculous that because a general was concerned with safety (preventing accidents) and interceded in different ways to increase safety (increase the prevention of accidents) that it should be held to be liable under §414 where its sub didn't have adequate safety in place in order to protect its own employees but where it did try to get the sub to conform to the plan and put adequate protections in place.  If the general hadn't had a plan and hadn't butted in, and hadn't threatened to stop the subs work, the accident would have happened, probably sooner, but it would be able to stand back and have a better argument against §414 liability.  The general didn't control all the safety, and unless there's a reason to believe that the sub would have put in place different and better safety measures than it could under the general's program, it's a bit ridiculous to say that the general should be at fault because it took certain steps to get the safety program of its lackadaisical subcontractor.

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       It started with a simple article about developers paying to have their properties re-zoned in a Sunday edition of the Chicago Tribune.  The expose blossomed into a myriad of comments and subsequent features and commentary all the way to a piece soliciting comment from the Mayor.  Chicago Neighborhoods were beginning to look a bit more like the image below with set-offs and accommodations made in different zones for single-zoned lots and properties:

    That media attention and discussion has now resulted in Senate Bills 2014 and 2022.   SB 2014 seeks to allow de novo review of decisions regarding zoning applications, altering the previous system of review upon the approval and adoption of a zoning decision.  SB 2022 alters the notice times for publication regarding hearings for changes, and in unincorporated parts of the state, requires that notice be sent to adjacent parcels within 1.5 miles of the proposed re-zoning.
    These changes come too fast on the heals of those articles and reports to realistically be deemed anything but fallout from scrutiny into the development practices going on in the State.  Thus, developers should be aware that they may soon have a few extra technical hurdles to overcome before getting those zoning requirements they need for their projects.

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            This is an interesting decision from the Northern District, the plaintiff, a surety company paid out on bonds to subcontractors when the bank that a general had deposited the money into took the funds the general had for payment to the subs to satisfy the general's obligations to the bank.

            The surety had three theories, conversion, a claim for a trust under the mechanic's lien act, and constructive trust.  The court found that because the surety was not suing as subrogee to the general, but rather as subrogee on the funds it paid out to the subs and because it had failed to allege that the bank had knowledge that the funds were for the subcontractors none of the counts could lie.  The Court also held that the bank was not implicated or obligated under the terms of the mechanic's lien act.

            While it initially looks like the failure of the plaintiff to properly plead the facts necessary to maintain the claim resulted in the dismissal, much of the language used implied that in order to maintain the actual claims, the surety should step in as subrogee to the general and not to the sub. 

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    These pesky forum selection clauses keep popping up, but in this interesting twist, the court is now enforcing them when they're not part of the original contract or negotiations with someone, but arrive after work has been started on the back of a purchase order.  In Compass Environmental, Inc. v. Polu Kai Services, LLC, it was Polu Kai's fault for not objecting to or raising an issue about the forum selection clause printed on the back of a purchase order.  But, even if they had, what were they to do when they had already started work on the project?  Would it be an actionable repudiation if Polu Kai had just walked, four days into its job, after it received its purchase order and didn't like the terms printed on the back... terms which weren't negotiated between the parties beforehand and now appear to be deemed accepted unless action is taken?

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            We haven't seen as much discussion as would seem to be merited by the provisions of the Illinois Contractor Prompt Payment Act (815 ILCS 603/1 et seq.).   This act has written itself into every construction contract in the State of Illinois (excepting public works, single family homes and buildings with fewer than 12 family units, of course).  This lack of constructive commenting is likely because the Act didn't become law until August 31, 2007.  However, from the comments and criticisms we have seen, there's an extremely important and sure to be contested issue that needs to be addressed:  Is it possible to "opt" out of the provisions of the Act?

The original version of the House Bill (HB 0743) that introduced what later became the Act included language at the beginning of Section 10 which read:

• "Construction contracts.  All construction contracts shall be deemed to provide the following unless they expressly exclude the provisions of this Act"

            This provision was the sole subject of Senate Committee Amendment No. 1, which was adopted by the Senate and the House and incorporated into the Act and struck the "unless they expressly exclude the provisions of this Act" language from the Act.

            This creates a strong argument for anyone wishing to claim that it was the express intent of the legislature to not allow parties to "opt" out of the act.  Combine this with the ideas that the public policy of the act was to ensure prompt payment to contractors and subs as defined by the Mechanic's Lien act; to allow contractors and subs an additional recourse should payments not be forthcoming; to shorten the time it takes for payment and approval of work, and we end up with a decent case that parties could end up contracting around the act for naught.

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    For those interested in timing requirements on their mechaninc's liens and those having had the arduous experience of title searches or property transfers recorded but not appearing of record during the process, the Illinois House Bill 4698 may come as a welcome relief.  HB 4698 proposes a change to the Conveyances Act and the Counties Code, which, if enacted would require, not only that deeds be filed within 7 days of execution, but would also require that any party with an interest in the property be notified of the deed as well.

    Previously, the recorders office only sent notice to the previous owner of record.  Now, with recorders sending notice to any "party with a record of interest in the property," could the recorders' notices be relied on in filing the lien claims and naming parties?  Will a recorder's determination of a "party with recorded interest", or the failure to notify a recorded party of interest be actionable?

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            For those out-of-state contractors, architects, and builders working on projects in some other place for Illinois' residents, there are some interesting lessons in the Fourth District's Isringhausen v. Prime Contractors and Associates, Inc., opinion regarding keeping yourselves from being subjected to Illinois law.

            It should come as no surprise that a Florida company working on building a house in Florida that was contacted and did no business in Illinois was not subject to Illinois jurisdiction.  But, what if the Florida contractor was advertising here in Illinois, or had made a few trips to Illinois to complete the contract?  What if the escrow or some other portion of the contract were to be completed in Illinois so that the contractor, although minimally, were availing itself of Illinois law?  It would be wise to work out the full details for out-of-state construction both for owners in Illinois and contractors elsewhere, lest the parties find themselves in costly litigation hundreds or even thousands of miles away.

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            If the story in this case (Klose v. Mende, (3rd Dist.)) were about saving a school or an orphanage, it would be a made for TV Movie.  A town found documents from 1856 while cleaning out the old town hall, and those documents were enough to save their proposed plan to repave a portion of their roads.  The lack of the documents had forced a court to rule against the town and in favor of plaintiffs - who did not want a portion of their property paved over.

            After finding the records, the town made their deadline for filing before the limitations period ran and it looks like they'll be getting their road.

            The lesson for everyone here cannot be underscored enough, save the documents.  From lien waivers to deeds and even mortgage releases, the chance that they could defeat some form of litigation is worth placing them in a safe or safety deposit box, and if nothing else, they may serve to clarify some issues that might otherwise be disputed.

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            We're constantly in wonderment over the different building initiatives and collaborations that can occur when good people get together for something important and worthwhile.  This recent article at Quad-Cities Online reports on one of those projects in the making.

            Apparently, the fine developers at Artspace are again eyeing Illinois for a project, this time in Rock Island.  As part of the growing trend across Illinois' different towns to revitalize downtown areas as a place for community and commerce to interact, Rock Island's own District project is well on its way.

These initiatives are bringing construction work to many areas, and as public interest projects and artistically centered and planned locations, are allowing architects to have some free reign in progressive and green design.  We think an Artspace project in Rock Island would make a fine addition to their downtown, which already merits a visit in its own right and includes some delectable treats like The Blue Cat Brew Pub, and Lagomarcino's vintage confectionary just across the Mississippi river.  And, we'd be remiss to not mention that the area is home to a true Illinoisconstructionblog "must-see", Saarinen's John Deere Corporate Headquarters.

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