Coronavirus & Construction FAQs: Tips and Advice from Attorneys and Financial Experts

Coronavirus & Construction FAQs: Tips and Advice from Attorneys and Financial Experts

In this video, construction attorneys and financial experts addressed some of the most popular Coronavirus FAQs from contractors. You don’t want to miss out on these tips from experts.

Full Transcript

Seth:
Good afternoon to everyone. My name is Seth bloom. I’m the senior director of attorney services at levelset here in new Orleans. And that’s where I’m broadcasting from today. I’m super excited to have a Q & A, question and answer panel today from a number of, uh, attorneys and experts in the field. Um, I’ll go around real quick and do an introduction. We have Ben house, uh, who’s an attorney, uh, Greg Reaume, an attorney as well. And Scott Peper, the CEO of mobilization funding. It’s a finance company. So I will start with, uh, Ben and they will all do a much better job than I just did, um, introducing themselves.

Ben:
well, I’ll start I guess. Uh, as Seth said, I’m Ben house. I’m a, I’m a Texas construction and commercial litigation attorney, uh, um, trial trial lawyer. Uh, I do, so I handle, uh, these claims typically from the very beginning where, you know, right after you’ve worked with levelset and, and filed your Texas lien, sent your notice letters and uh, you know, you’re still not getting paid. That’s, that’s where you get to me. And then I got to kind of take it home. Uh, so that’s what I do. Um, uh, the Texas Aggie graduate, uh, graduate of the construction science school at A & M, uh, got some commercial construction experience myself, a little bit of residential experience.

Seth:
Scott?

Scott:
Thank you. My name’s Scott Peper. I’m the CEO of mobilization funding. We’ve been helping contractors for the last six and a half years. Get started on projects with early funding that can be used for any material labor costs essentially that are associated to the project. Uh, benefits of our program is you can use the, use the money when you need it on the project and you can be paid, you pay it back as you earn your way through the job with your pay applications. We primarily work with commercial subcontractors in the early trades, um, but throughout the project too, and we have lots of clients, lots of experience around the Southeast, East coast, West coast, and even middle America. So look forward and thank you for the opportunity to be on the call today. Look forward to talking to everyone.

Seth:
Greg?

Greg:
Hi, my name is Greg Reaume. I’m an attorney with McInerney & Dillon, which is a construction litigation firm based out of Oakland, California. Um, they’ve been around since the fifties. I’ve also been involved with construction my whole life. My family owns commercial construction companies and, and residential construction companies. Um, have, uh, bar licenses in California and Colorado. Um, but primarily practice here in California doing contracts and litigation, um, mostly commercial and some, uh, some residential. Uh, happy to be here. Um, and look forward to getting started.

Seth:
Thank you everyone. And uh, we appreciate those introductions and really for everyone, all of our participants out there, this is for you. This is a question & answer session. Thank you for, uh, the people that have already submitted questions and I’ll ask some of those, but please feel free to submit some questions. I know all of our participants today want to answer them. So I’ll just kick things off with a pretty general question and we can go in that same order, uh, Ben, Scott, and Greg. But, uh, I know you’re in different parts of the country. We’ve been going through this epidemic. What are some of the changes you’ve seen in your clients or customers need during this time, Ben?

Ben:
Um, I’m sorry, Seth, uh, you broke up. I missed the middle of it. Could you run me through it very quickly?

Seth:
Sure. What are your clients difficulties or challenges during COVID? What’s been some of their needs?

Ben:
Uh, it’s, it’s really been, um, functionally the same need and, and Scott can talk a lot to this probably as well. Um, cashflow, cashflow is just in trouble right now and it’s what, what is specific about the COVID situation is that it’s cashflow of the owner, it’s cashflow of general contractor. It’s cashflow of the subcontractors, sub subs, material man, you never know which party’s in the worst shape. And it only takes one party to cause consternation between the contracts go on the other way from that party. So it’s, it’s lent itself to extreme unpredictability and payment all the way across, uh, the construction spectrum in such a way that, you know, usually I can predict kind of where, where the trouble is going to come from after. But, uh, under these circumstances, even with really well-funded owners, really well-funded general contractors, really well-funded subcontractors, even, uh, I, I’m seeing just a, uh, a lot of holdup of payments. People getting very strict with their contracts, uh, people asking more than they usually do. Just regular, longstanding, uh, relationships between builders, shifting to more aggressive, more, more, you know, self-protective. Um, and, uh, that’s, that’s probably the best general way I can put it. But it’s, it’s, it’s led to a lot of unfortunate situations that I’m seeing.

Scott:
well, Seth, I would add to that. Do you want to, I’m sorry, did you want me to go next?

Seth:
Sure. And anyone, I said before in the same order, but you know, I think these things, we can make it a little more natural. So whoever wants to jump in and I’m sorry, we’re having a little bit of zoom delay.

Scott:
Yeah, that’s okay. Um, I would add to that. Um, a couple things. One, cash flow are the biggest things we’re seeing. Um, frankly, depending on the part of the country that we’re talking about, we haven’t, some things, some places we haven’t seen a single thing changed. I mean work’s been done. It’s either in certain geographical areas or certain types of projects. Um, obviously New York city is the epicenter of the COVID 19 disaster. So you’d think construction in that area would also be impacted just as great. And depending on the project it has, we’ve had, um, I think any, any type of private development has seen significant impact. Um, however, we have some contractors working on, um, the metropolitan transit authority jobs projects where, you know, the subway has been shut down, so they’ve had free reign to get going and be even more efficient on that.

Scott:
So it really depends on the overall project. Uh, and particularly the owner of the project. Um, I do think it trickles downhill as Ben said. Um, if the owners are gonna have problems, then everyone’s gonna have a problem. And I think from a subcontractor perspective, they folks really need to think about who am I working for right now? Um, think from a perspective that just because I put a pay application in, I’m guaranteed a payment. I don’t think anyone really believes that. But I think now more than ever, just because you put a pay application, it definitely does not mean you will get paid and it doesn’t mean you’ll just get paid late or whatnot. But if there’s a problem with that owner or the financing of the owner or the project, there could be real problems all the way down. Um, frankly, those are the types of things that we worry about all the time.

Scott:
When we look at financing a job, we always look at where’s the money on the job? Is it financed by a bank? Is the bank fine? Is the bank in good standing or in good spot? Is it privately financed? Or obviously is it a government entity? Those same questions or things you really want to know. Now more than ever while you’re either starting a project or especially if you’re starting a project, but even if you’re on a current project, you want to know where that, where everything stands and it’s well within your rights to validate that and ask those questions. Um, really look at your contracts and understand what your opportunities are and are not based on contract laws that you’ve signed because you can’t just stop working, you have to work, but you need to be cognizant of what you’re doing and who, if you’re going to get those pay apps.

Scott:
And so those are the things we’re talking to clients about overall though in general. Um, again, we work primarily with larger construction projects and the commercial space project size overall, you know, our typical contractors will have between a few hundred thousand dollars scope of work to several million. For the most part. We’ve seen a lot of those projects still ongoing. I think it’s a little too early to say whether the money on the job is at significant risk or not overall. But, um, so far we’ve seen our fair share project of slowing down and new COVID rules and guidelines. Um, and we’ve certainly seen contractors worrying about, you know, payment and cashflow a little bit more than maybe normal, but, um, the folks that have got the PPP loans in and disaster loans in and have been, um, financed or in a better spot. So those are the things that we’re seeing right now. I think getting the right type of financing to solve your problem is also of a, of a very important concern. Don’t just take out any loan or anything assuming that you’ll get paid. Those are the types of things that we’re seeing so far from, uh, from construction changes related to covid.

Seth:
Greg?

Greg:
Yeah, I’ll jump in here real quick. Um, uh, you know, same thing, you know, we’ve seen the city start to see some slow pay. Um, also a lot of people coming to us and asking about delay, how to preserve their rights. Um, if the owner starts to stop the project or, or, um, you know, starts intimating that that might happen. Um, you know, the basic kind of guideline here for that is just document everything that happens and try and keep open lines of communication with the general. If you’re a sub or with or with the owner. Um, you wanna, you want to preserve exactly what’s happening to be very clear about what’s happened. The other thing is safety, uh, documentation. There has been a, there’s been just a ton of legislation out here in California that’s come through. So, you know, it started out that construction and I’m not sure how it works in the other States, but was deemed an essential business.

Greg:
Um, cause there’s, there’s a several industry groups here and I’m lucky to be in Sacramento. So kind of right in the middle of that. So construction was an essential business, meaning you could carry on, um, despite all the shutdown orders. But the flip of that was that everyone had to be, you know, you could see all the workers right out on site because no one else is out here. So, um, all the, the industry organizations were saying, be very careful to show how much you’re using masks. And saying six feet apart. Um, so there was a, there’s been a big increase on, uh, on safety and, and you know, people asking what to do. Um, and then there’s been this patchwork of County responses as to whether or not, you know, how, how much they’re, um, enforcing the local safety rules. Um, that’s one thing.

Greg:
What’s starting to come out now, now that there’s more, you know, now some time has passed, is, um, our questions around workers’ compensation. Um, you know, I just saw today that, um, the, for the department of insurance in California, they’re, they might be saying something like, if people are staying home and getting, uh, you know, so they’re not out in the work site, then are they exempted from paying their workers comp, uh, amounts for that time or that, that, you know, that, that rate of workers comp for that time. So, but that’s all kind of coming down the pipeline and, you know, not in effect right now. Um, so a lot of interesting stuff.

Seth:
Well, great. Um, and actually we’re getting quite a few questions right now as live, so whoever feels like they want to answer them, just go for it. James has asked, are there any ideas on whether there may be a lien period extensions due to all the courts being closed? And I guess it’s probably best for, Greg, you can speak about California and Ben on Texas if you’ve heard about any of these extensions.

Greg:
Yeah, I’ll jump in there real quick just because that, you know, I don’t know about that question specifically in California, you know, specifically with liens and the recorder’s office, but, um, there is a 60 day here in California, kind of extension of everything, so all the courthouse is closed and if you had something filed then you tack on an extra 60 days to whatever your due date was. So, um, that’s come up for me, you know, in, in discovery disputes and stuff like that. But so far it hasn’t come up specifically, uh, with the lien date, but I imagine that it would, um, uh, you know, it’s generally applies to most things. Um, so, so for, so for liens it, it would, you know, for the most part in California. Um, but I’m not sure how, how about you Ben? Have you seen something, anything like that?

Ben:
yeah, our, in Texas, our Texas Supreme court came out and said, uh, our courts are open, uh, in Texas we’re just not having jury trials. But the Supreme court set down, uh, I think several orders now. They did it about every week and that, I think they backed them off a little bit further and they said basically your trial deadlines, your court deadlines, all these drop dead deadlines that us as lawyers have to deal with. Those are off the table. My advice would be to my clients is pretend they’re not, don’t ever rely on it. Don’t, don’t, don’t think it’s going to save you because the statutory language in Texas is, there’s a couple of dates. If you miss on your notice letters or your lien filings, you are in, you’re in more than trouble. You’re, you’re, you’re done with your lien under certain circumstances.

Ben:
So, uh, pretend like COVID never happened. Uh, you typically if you, if, uh, your lawyer’s office is closed for whatever reason, a lot of them are, a lot of firms are struggling with this or they, they can’t get workout as fast as they usually can. I mean call around, use services like levelset, get put yourself, you know, take action to put yourself in the best possible place. You can. Don’t rely on any of these orders because at the end of the day I don’t have any idea if, uh, if that order’s going to be capable of saving, saving your bacon down the road. And I, I wouldn’t want to depend on it, but uh, Greg is absolutely right. There is a, you got a pretty solid basis for extending those deadlines. Maybe the most solid basis we’ve ever had, at least since I’ve been practicing, but don’t rely on it would be my advice.

Seth:
Okay. Um, I think this is a pretty interesting question and Scott, you may have some insight on this. How do you research the construction company you’re working for? Imagine, Scott, you do quite a bit of due diligence before, uh, uh, you’re, you’re doing any financial assistance, uh, for a company like that. Maybe you can talk about that and if the attorneys have anything to add, that’d be great.

Scott:
Yeah, you broke up a little bit in the middle of it, but if I think I heard you correctly, um, you really, it was noted as, as good to check in on the financing of the overall job and knowing the owner’s financing. But how do we go about doing that on our end? Is that the question?

Seth:
Yeah, I mean, how, how do you do some research on a construction company? And maybe you can talk about it, you know, financially, uh, I guess as far as credit worthiness, but I think Regina is asking what if you’re working with someone too that you’ve never worked with before? So maybe Ben or Greg could talk about that part.

Scott:
Yeah, so, um, a couple of things and the same things we do, any, any contractor can do. It’s not like we have a special service or whatnot and we pay for some services that we can get information from. But, uh, we rely on a couple of different things. One, a good old Google search is amazing for what you can find. Um, it candidly, I pay thousands of dollars for different information on credit worthiness and other, but nothing really holds up as well as Google does. If you just spend the time reading and understanding previous projects, past projects, articles that were done on the projects of the developer or the owner or the city or state. Um, obviously if it’s a city or state municipality, you know, the money is pretty good on the job. I mean, obviously there are some cities and States that are worse condition than others, but for the most part they’re not the concern we have as much as we do the private projects.

Scott:
Well, you can look at those developers. They’ve done projects before. Um, the single entity LLC developed project is obviously something to worry about. Um, they’re going to protect themselves. Well from a, from an insureability perspective or, or, um, what’s the word I’m looking for? Liability. You know, if something goes wrong and they can financially protect themselves from certain and using the entities and financing. But if they’re, if they’re consistently performing and they’re developing in a single entity, it’s not a big deal. If they do, if they know what they’re doing and they get it well financed, you want to make sure the bank loan or if there is a lender in place that they’ve actually closed on that loan. Um, you know, a lot of times projects can get started with just the equity on the overall project and then the lender never closes for one reason or another.

Scott:
Like Coronavirus for example, if you started on a site as a site contractor, the developer wanted to get going on the project before they had what we would call a complete capital stack, meaning equity cash that developers put in and then alone on top of that. But they get started on the project to clear the site and do work and they’re using the equity or the cash on that before the loan closes. You know, that’s where problems can occur. So you just want to make sure that the lenders financing is in place and it’s overall secure. You can do that by just doing quick searches on the property to see if liens on the actual property address had been placed. A lender would, a lender would obviously do that. Um, those are simple things we use. Um, other sources like D and B Hoovers, uh, look their work, what their credit ratings are, the size and entity, and then obviously the Google searches.

Scott:
The other thing you can do to protect yourself, um, is you can always look and inquire with a credit insurance. You can use some of the major carriers, um, that provide credit and insurance. And essentially what credit insurance is, is an insurance company will look at what your contract is and who’s who’s owed, who’s supposed to pay you. And they can give you a little idea of if they would insure them, what their insureability is. For example, if you have a million dollar contract working for a general contractor or an owner developer directly and you asked for them to credit insure them, what they’re essentially saying is if you invoice them per your contract and you follow all the terms of the contract and you do the work you are and they, they owe you the money, but for some reason they don’t pay you, then that insurance company will step in.

Scott:
You can put a claim in and get to the insurance company and they’ll pay you. It’s great to buy those policies if you’re really concerned, if you’re working for somebody from the very beginning. But even if you don’t buy the policy and you, you build a relationship with them, you can at least reach out to them and ask them what the insureability is. And the insurance companies have a really good way of finding information and knowing the credit history of these companies and whether or not they’re good payers. And it gives you a good barometer to know whether you can work for them or not. Obviously if you go to an insurance carrier and they say, look there, there’s no credit history and we don’t, we wouldn’t provide you insurance. Even if you’re willing to pay us, well then you might want to inquire with the general contractor or even the owner developer and just show, have them provide you proof that you will be paid. You know, they have, they have financing in place. Those are easy questions. They’re good to ask. It doesn’t make you look bad. Frankly, if I was an owner developer, my subcontractors were asking that question, I would pay much more attention to those subs and give them a lot more credence in my mind than I would the ones that just blindly walk onto a job and not think about it at all.

Seth:
Okay. Um, and I’m sorry, I understand my zoom can be going in and out. I’ve been told, so I apologize. Um, I know Greg, you touched on this before, uh, and this was around workers’ compensation. So it’s kind of a two part question. Um, and anyone can, can take a stab at it. But what do you do? How do you plan if an employee applies for workers’ comp after getting COVID and then what do you do if after they’re sick, they return to work? Um, what’s kind of been the policy you’ve seen so far and how that’s playing out in reality?

Greg:
Um, that’s a good question. I want to go, I just want to say two things about, uh, the previous question, how to research, um, companies. If you’re in California, um, look them up on the contractor state license board website. Um, and then also, you know, look them up on the secretary of state website. Um, you know, that’ll give you two quick kind of grounding points, you know, and then, and then, uh, if they’re not on one of those, you got a problem. And if it’s a lender you’re interested in looking, you know, finding out about under the, under California law, if you asked the contractor, they have to tell you who the lender is or the owner rather. Um, so just ask, you know, that’s, and they’re required to tell you, um, about the workers’ comp stuff. Um, and this is, this is another California specific thing.

Greg:
Um, employment law in California. It’s like, I can’t, you know, it’s, it’s like its own universe, you know, so I don’t see very much of it. It’s, it’s, um, typically we stick to, you know, lawsuits with contractors that are businesses fighting each other. Um, you know, maybe there might be some personal injury or OSHA stuff. Um, but once you start getting into employment law, you really, you should find someone that specialized… Employment lawyer, California employment lawyer. Um, you know, I haven’t, we haven’t come across anything right now with the workers’ comp stuff, um, on that. Um, and I wouldn’t want to lead you, lead you astray, but it’s, it’s highly specialized here. I mean, there’s just so much, there’s so much. It’s its own world. So, um, I don’t know. How about, how about you, Ben? Any, any ideas on that?

Ben:
Uh, Texas is very much the same, although, uh, uh, politically employment-wise probably the reverse of California, but it’s just as complicated for pretty much that reason. Uh, you know, employment law is so all over the place across the 50 States because it’s usually a state beast, uh, other than other than certain areas. All I can speak to generally is I am seeing a lot of class action lawsuits being filed against, uh, the larger companies. The one that comes to my mind immediately is I believe Walmart. There’s been a class action filed against Walmart, uh, related to, you know, basically allowing employees to come back to work. I’m not an appointment law specialist in any way, shape or form, but I just have noted those cases occurring because I get the question, uh, from my, my, uh, uh, clients of, Hey, you know, what, if somebody gets sick, what do I do?

Ben:
And generally I do what Greg did and said, Hey, if this is going to be a concern, uh, across your worker base, uh, you need to get an employment lawyer involved. And secondly, uh, absolutely as an absolute baseline, whatever orders in place in your County, whatever order, uh, your government, your governor has, uh, created and uh, whatever federal guidelines, CDC guidelines, look if you’re on the right side of all the guidelines that were available to you. Uh, it’s not a, it’s not a complete defense, but man, it can’t hurt. So be on the right side of every rule you can find. Um, and, and honestly, I’m not even sure how much the employment lawyers are going to be able to tell you at this point because this is unprecedented. None of this stuff has gone to trial yet. You know, we’re at the petition stage of a lot of this stuff. So be on the right side of the rules that have been published by the federal and state agencies. It’s about as best you can do, in my opinion,

Scott:
I would add one thing… The one thing would add to that is, um, look, if you’re an employer, this is just practical experience. If you’re an employer, I think you should really be careful to leave work with your employees and look like you are someone who is working on behalf of your employees. The department of labor is definitely going to look much more to the employees side of things and they ever are the employers side. So if you take a strong stance, even if you’re right, you could very well be wrong and it’s going to hurt like it was wrong even if you were right. So the best thing I would advise you to do and practically speaking is work with your employees. Um, come to terms with them and something. If it’s not working out, get a release from them, give them something in return. That’s your best course of action than worrying about what the law might say, practical or not. And of course I would always seek legal counsel, but, um, practically speaking, at least that’s my experience. What I’ve seen as it relates to those types of matters.

Seth:
I think that’s something that’s unique about levelset is we’re here to help. And I think everyone’s described that you really sometimes need a lawyer that really focuses on a certain type of area of law. Uh, I practiced criminal defense for almost 16 years and you wouldn’t want me working on your sophisticated construction project. Having said that, I’ve represented a lot of contractors that did really bad things. You wouldn’t want me working on your criminal defense case study that no man would have a clue. Um, this is an interesting question. I guess it’s just kind of a state of what’s going on. Um, Alison asked in general, would medical buildings and hospitals still be a good bet in the long run, in the long run when funding and the industry slows down?

Scott:
My, my opinion on that, I, I would be, I would think so. I would look out for your, uh, I’d be a little more cautious of your rural community hospitals, um, depending on who they’re partnered with or what affiliations they have. Um, even if they are affiliated with a big group and let’s just say for example, you have, I don’t know where, what state you might be able to down, let’s just say you’re in Tennessee and you’re, it’s HPG or a large health system of some kind. Just because they have that large health systems name on the, on the hospital does not mean that they’re financially backed by that entity. So you really need to be cautious of that. Um, in general, if I were to guide you, I would say your smaller community hospitals, I’d be a little weary of where they’re at and how that’s working.

Scott:
Um, but if you’re in a, if you’re in a metropolitan area city or, or some something that is financially backed either by the city, state municipality or just a larger, you know, been around a really long time hospital, one of those places where, you know, bad hospital can’t really go down, it would really hurt the community. Um, I wouldn’t worry as much about those in general, but you know, I would carve out the smaller rural hospitals and the rest of it, I would probably be thinking that it’s a favorable place to go work or take a job.

Seth:
Okay. Um, I, I’ve gotten on some other webinars people have asked. Um, and I’m kind of summarizing Deanna’s question here. Um, what are some of the responsibilities now that we know as phase one’s happening, uh, and companies will have to ask their employees to let’s say wear masks or do other sort of, uh, you know, disinfectant. Who’s responsible for that? Uh, and who pays for that? Can you pass that over to the customer? Um, how does that work within the construction world being that there’s going to be all these new, um, restrictions and can you go back to your a customer? Now I need to do all these things.

Greg:
Um, I could jump in on that. One thing Seth, you should, you know, you should make sure that your face is in a good, a good position because it’s freezing a lot. So, you know, we need…[laughter]. But just real quick, um, that’s come up, you know, so a couple of people have asked, can we issue change orders, um, for the increased safety requirements that are now being thrown out by Cal OSHA. Um, and you know, I who knows, you know, I mean, you could try I think. I think it’s definitely worth a try. It’s just like a delay. Um, you know, most construction contracts, you know, there’s kind of a template. A construction contract is a, is a good one. Um, a good template family. Um, if there’s an unanticipated delays, I’m sure you guys all know, um, or, or you know, in an anticipated, um, circumstances you come across, you have the right to ask for an increase in time or an increase in the contracts.

Greg:
And it depends if you can characterize, if there’s a cost is big enough, you should be able to characterize the coronavirus as, as one of those unanticipated changes. Whether or not the owner is going to accept that, um, who knows, you know, and whether or not you want to, um, risk your social capital, fighting about something that might be a small cost is another question. But if it’s a big cost and you get a huge job, that almost lends itself to the argument that, you know, that, look, this is no one saw this coming, it’s not in the contract. Um, we didn’t estimate this. Um, so, so give us a change order for it.

Ben:
Um, and I’ll hop in very briefly for more practice. I said at the beginning, I’m a trial lawyer, so my, my brain always goes to the jury. and, uh, if I’m the owner and, uh, the cases come to it and I’m sitting there as a veneer person, a juror, and, and the owner gets up on the sand and says, you know, they asked me to pay more money to give these folks a protective gear. And I said, well, I wasn’t in the contract so I’m not doing it. Um, that’s not going to go, well, that’s going to be a really bad thing for you. So, so it’s you just never as an owner, you as a contractor, as a subcontractor when you’re entering negotiations about getting paid a little bit more for this PPE, which is as, as Greg said, absolutely reasonable, probably going to end up at being, having been legally required. I think some juries are going to decide that down the road. Did you meet the CDC requirements? Did you meet the governor’s requirements? Did you meet the County judges requirements? If it didn’t, Oh, did you keep your people safe? Um, at the end of the road? Uh, well at the beginning of the road right now as you’re negotiating that thing, sure you can talk about what’s in the contract and what’s changed. But really at the end of the day, you know, are you guys, are you being serious right now?

Ben:
I’m asking for more money for PPE. You got a bank loan on this project and, and we’re not going to fund PPE or we’re not going to fund a, you’re not going to give me more time because I can’t use as many people in a confined space as I could before. So I need more time to do the same amount of work or I just can’t use as many people generally. Um, and so it affects costs, uh, for the actual construction as well as cost for the PPE. There’s a lot that this changes. I did a force majeure talk about this, um, on kind of that basis. But there’s the leverage right now you have for the PPE is nobody wants to be the guy who turned down increased payment to protect workers on their site. Nobody wants, nobody wants to the buck. Nobody wants the buck to stop at them as having made that decision. Nobody wants to do that. Uh, so that’s your leverage right now to get your workers protected and to get paid for that protection because on well-funded projects, that should absolutely be a change order. I, I can’t think of a contract other than a napkin, uh, that, that wouldn’t have the language in there that could at least arguably cover that. And even if it is a napkin, you got a pretty good argument for, to, to amend the contract.

Scott:
I would add one thing to that. To have a better, have the best chance of success. Um, when you do that, I would do exactly what Ben said. Well, you know, do it at the time they’re changing the guidelines and do it at the time that you actually have to incur the cost. And before you’re putting the people on and before or as you’re making those changes, don’t just make the changes work for two, three months and then at the end of it, or even two or three weeks and then at the end of it or middle of it, then bring it up as an, Oh, I ran extra or this was costly. Like bring it up in real time while it’s happening. Show the documentation, be upfront. Look, I didn’t, and I’m sure you didn’t budget for this, but I didn’t either. You know, I’m not working off of some extraordinary margin here and this impact of only having this many people on the site at one time versus this many that I actually bid the job on is going to cost me this many dollars. This is the impact and therefore I’m trying to invoice in a change order. Some of these costs, like really lay it out, have a well thought out, logical argument and time your, your, your ask at the point in which you’re incurring the changes to the job. I think that’s your best chance of success with an owner or developer of looking reasonable and, and then, and then awarding them, awarding it to you.

Seth:
Um, here’s a question. Can you ask your employees to wave suing you over getting COVID?

Greg:
That’s okay. I don’t think you can do it. I mean, I wouldn’t do that, you know,

Ben:
I doubt it. I really, I’m with Greg.

Greg:
Can you imagine like Ben was talking about before the situation in the jury room with that?

Ben:
Yeah, seriously. Like you, you can do it. The answer is yes you can. Is it a good idea? No, and I don’t really have a legal basis for that other than if it rings really ugly, it’s probably gonna sound ugly in front of a jury or judge. So you know, when in doubt do what’s right.

Seth:
Okay. I have one more, it’s all hypothetical on here, but it’s this contractor’s question. It’s a little bit more granular. Um, this, this gentleman remodels bathrooms for a property manager, not the owner directly. Uh, he finished the work and everything in the bathroom except some lights sanding and one electrical connection. The basement, um, the owner then put a stop payment on the check. What’s the best mechanism for collecting?

Greg:
is it- was the state specified?

Seth:
it was not, so it was not.

Ben:
Greg, you want to?

Greg:
Yeah, I mean, I guess you could. You could, if he’s, um, I guess the question, I guess we can a little bit more facts, but I mean, you know, there’s several things, you know, I’ll just kind of give you a general answer, right? What I would do in this situation, it sounds like it’s a smaller job, right? If it’s a, if it’s just a bathroom, so it’s not, we’re not talking like an arena or something like that. And that kind of situation, a lot depends on your interaction with the person who’s hiring you. So the cheapest thing is going to be to, um, uh, just try and, you know, talk with the guy, finished the work and get paid, you know, and that, that’s gonna be cheaper than hiring a lawyer.

Greg:
Um, next thing if you finish, if you’re in California, you finished the project. If you actually, you know, substantially completed, um, you could put a lien on there. Uh, you know, if you’re in direct contract with the guy, um, and just doing that might, uh, uh, might prompt them to pay. Again, depending on the size of the project, if it’s a small project like that, um, here in California, you can go to small claims court. It’s really easy. Um, you know, that’s that .

Ben:
Same here, same inTexas.

Greg:
And I tell people that all the time for these small projects. Um, it’s something that’s quick and easy and just getting the notice will usually prompt them to pay. Um, so that’s, you know, that’s, that’s where go with something like that.

Ben:
Yeah. Well, Seth, you’re going to love me here. Here. Here’s your plug. I’m not, I’m not affiliated with a levelset, but here’s the deal. Yeah. That’s where levelset gets real handy. because a lot of folks don’t know how to send notices, don’t know how to file liens. Well all of a sudden I’ve been through it. It’s got this fancy thing and tells you exactly what you need to do regardless of what you do. Just like Greg said, your lien rights are probably the thing, if you get organized in that regard, that’s probably the thing that’s going to get you paid the fastest. It just is. And that’s why, that’s why lawyers are most interested in preserving those rights.

Seth:
Okay. We have another one and this is tech specific, but again we can talk about it. What, what, what may occur in other States, Um, a subcontractor lien was placed on a house in January of 2017 alleging the contractor had not paid the subcontractor. The lien was never answered and the contractor went bankrupt in 2017. the subcontractor has not replied to mail.

Seth:
Is there a statute of limitation on this lien? And how does the homeowner go about getting the lien removed? And I know a lot of you guys do commercial, but that is a residential question and Ben, it’s in Texas. I’ll let you kick it off.

Ben:
Yeah. And I do, I do handle, I handle residential and commercial as well. Okay. Statute of limitations on a residential lien filing that the person who the contractor files the lien, uh, uh, has, uh, one year on a residential project to file a lawsuit. Okay. If he hadn’t filed the lawsuit, uh, he missed a statute of limitations. Problem is there’s no easy method to strike a lien in Texas. Uh, some States have a method where if you can test the lien in a certain period of time and they don’t re contest the lien, they don’t file suit and say a 30 or 60 day period, uh, then the lien falls off. Texas doesn’t have anything like that unfortunately. So what do you have to do to get the lien off? Well, if you can write a letter to the contractor, if, and I can’t remember from the notice if, if the contractor actually filed the lien is still in business, I think it was a subcontractor who filed the lien, in which case, if that subcontractor is still in business, reach out to them, tell them, Hey, because there was no hurting, you’re not hurting yourself here.

Ben:
Tell them, Hey, get rid of the lien. Otherwise I’m going to have to file a lawsuit to get rid of the lien. And in Texas you can actually get your attorney’s fees back following the lawsuit, uh, to, to, uh, dump a lien like that. Um, so, so you have some leverage there, but it’s the faster, easier ways to reach out to them and say, guys, this is, this is gone. They’ll call their lawyer or whoever and he’ll probably agree and then they’ll either strike it or they’ll completely ignore you, in which case you got to call a lawyer and get it knocked off. It’s a, it’s, it’s going to cost some money, but it’s unfortunately under Texas law, uh, under Texas residents lien laws. The only way to get the, uh, get the lien off the property.

Seth:
Okay. Um, here’s another question. Um, will we be able to go after the contractor to get funded as he is the only signer on our proposal? Also, the contractor did not provide us with the contract to sign. So the only legal documents we have is ours is, is, are signed by contractor proposal.

Greg:
Could you read that one more time?

Seth:
Yeah. Um, will we be able to go after the contractor to get funded as he is the only signer on our proposal. Also, the contractor did not provide us with the contract to sign. So the only legal documents we have is, are signed by the contractor proposal. So they’re only have a proposal. They don’t have a signed contract.

Greg:
Yeah, you could definitely go after someone if you’ve done work for them, you know, it’s, it’s, you know, a contract. It is just an agreement whether or not it’s written down, you know, it can be an oral agreement. So long story short, you know, if you have, you have nothing, then you have an oral agreement. If you have something, it’s a way of proving your own agreement. If you have kind of a formal contract, you can just, there it is, you know, it sounds like in this case, um, if there’s a proposal and you’ve done work, um, that’s evidence right there of an agreement. So you can, you can, if you end up going to court, that’s what you’d, you’d be pulling that out and arguing that that’s what the agreement really was.

Seth:
Okay. And um, what happens when a client wants to cancel a contract because of the work layoffs with COVID or just, uh, something else happens?

Ben:
um, I guess I’ll address that one because I, I gave a a webinar I think with levelset about a situation about that, which is basically it comes down to what’s in your contract. Uh, the AIA consensus docs. Um, uh, there, there are several form contracts that you can use that, that all speak to, uh, like completely unforeseeable events, acts of God, stuff like that. So under the AIA and consensus docs, there’s, there’s paragraphs that pretty clear that, that COVID is expected to when all the litigation comes and goes here is expected to, uh, fall under. Uh, and that will allow for, um, recission.

Ben:
Typically I’ll speak to the AIA for instance, the, Hey, if something happens like that and the contract needs to be pulled, typically the contractors get paid for what they’ve already incurred. And under some circumstances they get the profit on the job. And on our other circumstances they just get paid for the expenses incurred and then they’re cut loose. So it just, it just depends on which part of the language is utilized. Now, if you’re working with a very basic contract that just says how much and when, you don’t have that language. So if the, and that’s kind of unfortunate for the paying party because if the constructor, the, uh, the performing party is willing and able to go forward and build your project and you can’t fund it anymore and you don’t have these, uh, force majeure clause, act of God clause, uh, uh, no, no damage for delay clause, something like that. You’re in trouble, uh, as the owner of the project because they can perform and you’re not allowing to, and that’s where that ugly breach word comes in. You’ve breached your contract. Um, and then they, so, so the, the damages there is the profit that the, uh, that the contractor would have made on the project, not the overall price, but the, the profit. And so then it becomes a negotiation.

Ben:
Well, we’re, we’re running out of time here and we’re getting a lot of questions, but I thought it, if any one of our panelists, uh, has kind of a closing statement to make about anything within this, uh, construction time or dealing with, uh, feel free to have the floor, uh, for a minute or two.

Ben:
Okay. Um, we’ve, we’ve covered, uh, a lot of, I’m just first on a little thing, so I’ll just go first. I guess we’ve covered a lot of, uh, critical stuff. Um, uh, Scott’s input was great about financing to be in a finance position right now is awesome. Uh, I know a lot of subcontractors aren’t, it’s just, uh, it’s just a great way to do business. Um, and then, uh, Greg discussed the other points. Um, I, I don’t think either Greg or I are employment lawyers, but that’s a big thing coming up right now. So, uh, um, Scott’s advice on what to do with your employees is great. Come to an agreement, figure out what they want to do, uh, let them have a voice, uh, you know, decide and then, uh, you have the leverage that I spoke about, about, you don’t want to be the guy who doesn’t pay for the PPE.

Ben:
You don’t want to be the guy making that argument. So, well-funded owners aren’t going to have a problem, uh, funding that. It’s, it’s where you get with the owners that were kind of stretching in the beginning and there are a lot of them out there. You know, like Scott said, the name of the building doesn’t mean they’re the real owner. It’s usually some development group that they invented last week and got a and then like signed on the loan. Um, before I go. Uh, one thing that actually a client, uh, brought to my attention, um, was for PPE. There’s lots of companies that provide PPE. So if you’re looking, like Scott said, to, to come up with pricing immediately before the fact to tell your folks how much this is going to cost. Okay, that sounds like a big project or not your area of expertise because it’s not something you’re used to coming up with the cost for these companies who provide these kits, they’re providing them for everybody right now.

Ben:
Now the kits and equipment are hard to come by, but if you contact these companies, they’re for profit companies, they want to sell to you and they want to tell you how much it’s going to cost. So a lot of times you can get a quote directly from them of all the PPE required and they’ll say all the PPA required by the CDC. All the PPE required by, you know, sometimes state level, it’s usually federal. Uh, and uh, they’ll say, if you want to meet this standard, um, this is, this is the kit and you need to buy this. These are the face masks, these gloves, this is, this is the stuff you need to buy and here’s how much we charge you for it based on how many people you have on the project. So you just take those papers, take it to the next guy, regardless of if you can buy from them. Cause who cares? Take it to the next guy and say, this is, this is approximately how much we’re looking at here. Can we figure this out?

Scott:
I would, um, just in closing, I let you know anybody, if you have any questions that weren’t answered and you think that I might have a, it’s a question that’s not legal. I’m not a lawyer, but a question that I could, you’d like my opinion on or I can answer for you, you can please email me directly. I’ll get to all the questions or someone on my team will get all back to you on everything that we know. Um, I don’t know, Seth, if you guys are going to post our direct emails or whatnot, but I’m happy to share mine or you can post it. But um, my email is just S as in Scott. Dot. Pieper P. E P. E. R, so it’s like pepper but only one P in the middle. And then@mobilizationfunding.com. Um, I did see some of your questions on the PPP loan.

Scott:
Um, when this all came out, there’s a lot of questions on PPP loan. How do I use it when I get it? What requirements do I have? I did a six or seven part series on the COVID 19 related questions. One with insurance agents with payroll and HR with um, our bankers and with the, uh, and then specifically later the SBA. And we also created a tracker for the PPP loan. If you go to our YouTube channel, um, it’s just mobilization funding. You can see all of those videos, you can watch them at your leisure, they’ll give you the exact information as from the SBA lender directly. Um, you can see it all in real time. I’ve asked them the questions, many of which you guys had, you’re more than welcome to ask us as well. I can also share with Seth the tracker that we came up with for the PPP loan that was given to us by the bank so that you can track exactly what money you got, the amount, the payments you make towards payroll so that ultimately you can prove and document what you should be, what should be forgiven.

Scott:
I’ll share that with Seth and Seth that you can share that out with the group or the attendee lists. That’s no problem. Great. Um, and then any other questions? Like I said, I’m more than happy. You can email me directly. I’ll answer them for you or help you best guide to where I can, we can get them from a lot of the stuff you can find specifically as it relates to COVID 19 or PPP loans or banking or the construction site itself as it relates to these times directly. Um, on our YouTube channel. You can see a lot of that stuff is just happens to be where we posted it when we did that series.

Seth:
Greg, any closing thoughts?

Greg:
Um, you know, I’ll say something that’s kind of random and I probably should’ve said in the beginning, but, um, just so you know, if you have your commercial general liability insurance, um, it’s, it’s not covering any delays or problems with stuff like this. So, so that’s kind of a public service announcement. You know, I’m not a big fan of insurance in the oil industry, you know, cause they never seem to pay out after you pay them all your money. Um, almost uniformly. So I’m just kind of right in line, you know, they’ve, I’ve had a couple clients like try and make claims, you know, on their projects, um, to their insurance. You know, um, and uh, sure enough, one of the endorsements, if you go through, you know, it excludes pandemics. Amazingly, an app would never thought of that. Just to kind of, that would have been, that’s sort of in some of the beginning or asking what we saw.

Greg:
Um, that’s it. You know, this is a, I think level set is, is doing a great service. Um, you know, it’s, it’s very well done website. Um, and it gets stuff done quickly. A lot of my clients, I’ve turned them on to it, um, for especially for preliminary liens. Um, I mean, sorry, preliminary notices, um, you know, some upfront to, to not forget. So, um, it’s a great website. It’s, it’s good to see people here on it. So, um, thanks for, uh, letting me Blab on here and, uh, you know, if you have any California construction problems, you know, let me know. Otherwise, I’ll see you on the website.

Seth:
Well, I just wanted to thank all of our panelists today. Uh, you know, we’re here to promote them. Um, as much as we want to promote the expert center, uh, at levelset. Uh, if you didn’t get, we didn’t get to your question today, please post it on the expert center. You can also contact all of our, um, panelists today directly. We welcome that. We’re here to get them business but also check out our level set products and please post any questions we didn’t answer today. Um, on the expert center. We also, if you asked a question and we didn’t get to it, we’ll get you a written answer. Uh, yes, the webinar will be available on our site. And again, I’m very sorry. Um, sometimes my zoom connection’s perfect. Other times it’s a little shaky so I’m trying to smile. Like Greg told me in case it’s freezing, but really thank you.

Seth:
It sounds like the next one needs to bleed into business interruption insurance, but we’ll have a different panel for that.

Ben:
But I’ll be watching that one. I’m fascinated about how that’s worked cause I’m, I’m hearing the business interruption insurance is not being… Well that’s awesome.

Scott:
Well, to Greg’s point there, they’re not covering that either. Right?

Seth:
Seeing the plaintiff lawyers are running commercials. Uh, but then I also was watching the house, um, house committee today. Uh, and, and, and, you know, the, the guy that was in charge of it said this has been, um, something that could have happened for years now. So I, it’s going to be a tough fight, um, to, to make those BI claims, but you never know. So thanks again. I really appreciate it and thank you to all the panelists and thank you everybody. Thanks Greg and Ben. Thank you. So you guys later.