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

Last week we brought you the complaint against Castle Construction. This week, we feature another move by Attorney General Lisa Madigan on behalf of home-owners across the state.

With the spring remodeling season underway and construction beginning for many, Madigan addressed the issue – from her press release:

“Home repair, remodeling and construction complaints consistently rank among the top that my office’s Consumer Fraud Bureau receives each year, especially during the warmer months,” Madigan said. “Consumers need to make sure to ask questions before choosing a contractor so that they can avoid the types of companies we have sued today.”

To that end, the Attorney General’s office brought several suits against:

• Boss Construction, Inc., a New Lenox, Ill., based company that sells and installs gutters, downspouts, roofing, siding, doors and windows, and its President Steven R. Smith,
• Alpine Glass & Window Co., a Wilmette, Ill.-based window and door installation company, and its President Carol L. Bernahl,
• John M. Burow, doing business as John’s Home Repair, a Willow Springs, Ill.-based home repair service,
• Shane Rasmussen and Paul Haley of 123 General Construction, Inc., a Frankfort-based remodeling company,
• American Dream General Construction Company, based in Berwyn, Ill., and its President Carlos Villalvazo.

We have the complaint against American Dream and Villalvazo here.

The acts alleged in the complaint are important for home-owners and can act as a guideline or at least offer some insight about things to look for when contracting for repair and remodeling work:

• Make sure your contractor is licensed as a roofing contractor if they’re doing roofing work for you;
• Don’t let payments in advance of work get too costly, you should see some performance before they start taking your money, and then payments should be made incrementally, but not without a waiver (see below);
• Ask for your consumer rights pamphlet on home repair “Home Repair: Know Your Consumer Rights” made public by the Attorney General’s office;
• Check the construction permits to make sure they’re accurate and valid;
• Get a full accounting and demand a written sworn statement and waiver of lien before you make any payments… do not give over any form of large down-payment;
• Know about your three-day right to cancel;
• Do your research – How was this company recommended? Are they a company? Are there online comments about the company or its work? – Is a license required for their specialty?
• If you’re having trouble getting in touch with your contractor, or your phone calls aren’t being returned, you may think about contacting someone who can help;

Protecting yourself and your rights is the first step in making sure you don’t get taken for a ride.

                The Southtown Star has also published an article on this matter.

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For the owner/developer on smaller projects financing is usually the key to the entire transaction. Getting the financing in place and making sure money exists for your draws is one of the tasks you have during the construction phase that gets you to your end profit… be it selling what you’ve built, or having a building of your own.

You really do need to make sure that what you’re getting from your lender is what you want. You need to read the documents and double-check the figures or you could end up with, literally, a hole in the ground.

We’ve heard the radio reports and read the news articles about what some loan companies are alleged to have done to those seeking financing over the past few years. The mortgage crisis is partially a result of supplying loans that weren’t justified by the numbers. But for some developers, even with the numbers, getting the terms they bargained for and the loan they wanted appears to have been a problem. It’s why you really do need to be vigilant even in the beginning of the transaction, not just at closing on the loan.

This complaint reads like a parade of horribles and alleges what must have been a nightmare for the plaintiff.

After purchasing a piece of land and constructing a home for sale the financing errors which were allegedly generated through the application and appraisal process, compounded by the closing documents, and exacerbated by the lenders action in processing payments, resulted in an upside down mortgage situation for a developer now stuck with the fruits of what are allegedly the fraud and deceptive practices people have been reporting on since the crisis began.

You need to watch the financing process like a hawk, especially if no one is there to help explain everything to you.

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Takings are a fact of our constitutional system.  Often, they're the method for beginning any public improvement or development.  Construction lawyers frequently come across the issue in highway expansion or stadium projects.  The results are mixed, and the topic can lead to some harsh rhetoric from critics.  One only has to remember the Kelo v. City of New London opinion and the ensuing humorous attempt at establishing the "Lost Liberty Hotel" in place of Justice Souter's house, to understand just how much people can get worked up.  Few things can have as much sentimental value as someone's home - or in the case of a farmer, as land.  (For an interesting discussion of the Kelo decision and the ensuing problem of the "holdout" owner in takings actions, read this entry by Judge Posner at the Becker-Posner Blog)

Guardian Pipeline v. 950.90 Acres is an opinion about the attempts of farmers to overturn a commission's decision regarding the value of their land.  Guardian Pipeline was authorized by the FERC to construct a pipeline that included the necessary condemnation of portions of more than 100 parcels of land in northeastern Illinois in order to put the pipeline underground.  A commission was appointed by the district court to receive evidence and propose findings to the district judge.  The proposed findings and resulting offers for the land or damage to the land during construction were accepted by all but three defendants.  Those defendants challenged the commissions findings which were adopted by the district court.  The defendants then appealed and the seventh circuit delivered an opinion upholding the decision.

The decision, written by Judge Easterbrook, presents an interesting solution.  Takings of partial portions of land in Illinois are governed by the "unit rule."  (Read the concurring opinion in the cited case to see that the method has its critics.)  In actions involving such takings, the unit rule means that the property subject to taking must be valued as a whole and the owner given the benefit of its assessment at the "highest and best use" of the property at the time of the taking.  Often, comparable parcels of land are sought out by the parties "experts" for evaluation and assessment.  Normally, three to eight parcels (five to seven in most cases) are compiled in a report.  An average value per square foot is assessed for the exemplars.  That value is applied to the total square footage of the proposed portion of the parcel to be taken and the result is the amount of compensation offered by the taking  entity, or the value between the parcel before and the parcel after the taking is assessed with the same per-square-foot methodology being used.  Sometimes assessments include the cost of work to bring the land back into a usable fashion (for instance having to repave a portion of a parking lot that has been decreased in size by a taking).  But often, any such arguments about external factors which the owner feels will require extra compensation are not included in the appraisal and must be argued over in court.

These types of appraisals caused the court in Guardian to wonder:

• "What puzzles us is why both sides were fixated on pairwise comparisons--that is, matching each subject parcel with a supposedly "comparable" parcel that does not have a transmission-corridor easement (whether for oil, gas, or water underground, or rail or electricity above ground), appraising that parcel, and then comparing the appraised value of the "matched" parcel with appraised values of the subject parcel with a pipeline easement. That process is full of problems. No other parcel will be identical to the subject parcel except for its lack of a transmission corridor easement. Location and other attributes always differ, setting the stage for debate about whether an appropriate comparison has been selected. And even if very similar parcels can be found for comparison, the appraisals are just estimates. Each of these comparisons requires two appraisals: one of the "matched" parcel, and one (informed by the comparison) of the subject parcel with the easement."

Suggesting a different approach, based on regression analysis and citing the FJC's Reference Manual on Scientific Evidence, the court opined that:

• "A different approach would be to gather data about the actual selling prices of real estate with and without transmission-corridor easements and use these data to determine how much the easement reduces the value of real estate in real transactions. The law of large numbers would make up for the lack of closely matched comparison pairs. How many feet of transmission easement encumbers a parcel is a continuous variable and could be one independent variable in a regression. Daniel L. Rubinfeld, Reference Guide on Multiple Regression, in Reference Manual on Scientific Evidence 179-227 (Federal Judicial Center 2d ed. 2000), provides a good description. Using real transaction prices reduces the role of guesswork. Although no one suggested such an approach in this proceeding, litigants (and district judges) should keep it in mind for the future, as it has the potential to be faster, less expensive, and more accurate than a parade of witnesses offering estimates that cannot be verified."

This method not only makes sense, it seems to be a more scientific and mathematically sound strategy than a method based on comparative appraisals and should be considered by the Illinois Supreme Court and lower courts as a substitute for the unverifiable method in use today.  Such a method often has "experts" applying "principles" and coming out miles apart in their appraisals depending upon which party to the litigation they represent.

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