Construction Law

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All persons associated with non-public construction projects in Louisiana are affected by, and should be familiar with, the Louisiana Private Works Act. La. R.S. 9:4801, et. seq. (“PWA”).  The two fundamental policies behind the implementation of the PWA summarized are:

  1. To protect those who contribute to the improvement of immovable property by ensuring that the owner does not benefit from their labor without compensating them; and
  2. To incentivize the owner to take reasonable steps to ensure that contractors and suppliers are paid.

The PWA was first enacted in 1981 and was based upon the work and recommendations of the official advisory law revision commission and, the law reform agency and legal research agency of the State of Louisiana – The Louisiana Law Institute. Over the last thirty years, numerous amendments and revisions to the PWA have resulted in piece-meal changes to certain provisions that lead to confusion, ambiguity, and potential traps for the unwary.

Recognizing the undesirable effects of the many revisions, the 2012 Louisiana Legislature has once again turned to the Louisiana Law Institute for its recommendations to simplify and better organize the provisions of the PWA.Continue Reading On the Horizon, Revisions to the Louisiana Private Works Act: “The More Things Change, the More they Stay the Same”

Background of Louisiana Revised Statute 9:4815

Louisiana has a unique statute in its Private Works Act which requires owners to deposit retainage funds in an interest bearing escrow account for construction contracts over $50,000. While a number of other states have statutory provisions as to how much retainage may be withheld under a construction contract, Louisiana’s statute, which does not regulate those substantive terms, instead dictates how those funds are handled during the course of the project.

The statute, found at Louisiana Revised Statute 9:4815, was added to the Private Works Act by Act 638 of 2010. While the bill as originally introduced applied to all funds withheld from periodic payments by an Owner, the final version of the Act applies only to “retainage.”Continue Reading Louisiana’s Unique Retainage Escrow Requirements for Construction Contracts

Almost everyone knows insurance policies provide a defense and indemnity for insureds, if the terms and conditions of the insurance policy are met. Insureds include named insureds, other insureds (as defined by the policy) or additional insureds as provided by endorsement. However, insurance policies may also provide payment and defense to others who are not insureds under the policies.

Most liability policies provide coverage to the insureds for liability when the insureds have contractually agreed to provide indemnity and/or defense to or party to a contract. A typical example of contractual indemnity coverage can be found in a construction contract to supply labor and materials related to electrical wiring in the construction of a home, office, pipeline or oil rig.Continue Reading Contractual Indemnity Coverage Under Someone Else’s Insurance Policy May Provide Coverage in Unexpected Places

The Gulf Opportunity Zone Act of 2005 (the “Act”) added several new sections to the Internal Revenue Code that provide certain tax benefits for affected hurricane disaster areas. Section 1400N(a) authorized the issuance of Qualified Private Activity Bonds (“Qualified Bonds”) to finance the construction and rehabilitation of residential and nonresidential property located in the Gulf…

In today’s political and economic environment, in which public resources available for infrastructure development and maintenance are increasingly scarce, Public-Private Partnerships (PPPs) offer a welcome alternative to traditional financing and operation models. A PPP is a contractual agreement between a public agency (federal, state or local) entity and a private sector entity to deliver a service or facility for public use. The Louisiana Supreme Court has recognized the public benefits of PPPs, finding that “public-private partnerships that take advantage of the special expertise of the private sector are among the most effective programs to encourage and maintain economic development, and that it is in the best interest of the State and its local governments to encourage, create, and support public-private partnerships.” See Board of Directors of Indus. Devel. Bd. of City of Gonzales, Louisiana, Inc. v. All Taxpayers, Property Owners, Citizens of City of Gonzales, 938 So.2d 11, 17 (La. 2006).
Continue Reading A Primer on Public-Private Partnerships

The Louisiana First Circuit Court of Appeals has issued the first Appellate Court decision dealing with the Louisiana New Home Warranty Act and its application to Chinese Drywall claims in the case of Jennifer L. Caminita, wife of/and Frank L. Caminita v. Regina, wife of/and Barney Core, Smith and Core, Inc., et al., State of…

A recent opinion from the United States Bankruptcy Court in Baton Rouge, Louisiana shows that even experienced lenders and developers may not always understand how Louisiana’s Private Works Act applies to their project, and how much leverage a properly filed notice of contract can provide to a general contractor.  Tuscany Reserve, LLC (“LLC”) was formed by sophisticated developers for the purpose of developing a new apartment complex in Baton Rouge. LLC obtained acquisition and construction financing from a bank (1st Bank), which properly recorded its mortgage on the project before work commenced. LLC hired “Contractor” to build the complex; Contractor recorded its notice of contract in the parish mortgage records.  As often happens, a dispute developed between LLC and Contractor regarding the work performed and lack of payment.  Contractor stopped work and filed a lien on the property under the Louisiana Private Works Act for $1.17 million.  Contractor eventually agreed to cancel its lien in exchange for a promissory note and guarantees from LLC’s principals and collateral provided by an LLC affiliate.  Once the lien was cancelled, 1st Bank funded two draw requests on the construction loan.  LLC needed more money for the project and turned to a new lender (2nd Bank) for additional financing.   2nd Bank secured its loan with a collateral mortgage on the immovable property for the project; there were no liens in the property records when 2nd Bank recorded its mortgage.  The relationship between LLC and Contractor soon soured, again, and Contractor filed two liens on the project, one for the original claim amount, plus interest, and another for $250,000.00.  Contractor sued LLC and its principals on the matured promissory note, and also sued LLC based on its rights under the recorded construction contract and the Louisiana Private Works Act. LLC eventually filed for chapter 11 bankruptcy in the Middle District of Louisiana.
Continue Reading Lenders and Developers Need to Understand How Louisiana’s Private Works Act Applies to Their Projects

On March 17, 2010, Mississippi Governor Hayley Barbour signed into law an amendment to Mississippi’s public bid law, more specifically, to Mississippi’s resident “preference law.” Miss. Code Ann. § 31-3-21(3). Under this recent amendment, all non-Mississippi resident contractors who bid on Mississippi public works contracts must attach to their bid a copy of their own…

In an arbitration, the parties agree to hire one or more neutral third parties to hear the dispute and issue a ruling.  The parties further agree to abide by that ruling.  If one party fails to do so, the ruling can be enforced by a court of law just as if an actual judgment had been entered.  Some suggest the process is less costly and more efficient than litigation; however, significant rights can be lost under the guise of so called legal efficiency.
Continue Reading Beware: Arbitration

On September 30, 2010, the Internal Revenue Service issued guidance providing relief to homeowners who have suffered property losses due to the effects of certain imported drywall installed in homes between 2001 and 2009.  In particular, the IRS issued Revenue Procedure 2010-36 which enables affected taxpayers to treat damages from corrosive drywall as a casualty loss and provides a ”safe harbor” formula for determining the amount of the loss.
Continue Reading IRS Issues Safeharbor Relief for Those Impacted by “Chinese Drywall”