Law

Construction & Real Estate Clients Often Require Vigorous Advocacy

Construction & Real Estate Clients Often Require Vigorous Advocacy

 

THE LEGAL ISSUES THAT ACCOMPANY construction and real estate transactions require vigorous advocacy, from protecting clients from unnecessary liability to guiding decisions that minimize risk and that offer an upside. These case studies illustrate that fighting can be avoided with the right counsel and, if it becomes necessary, having a top attorney in your corner is always a good strategy for the complicated issues that are common for these key industries.

 

B. Gardner ResizedCole Schotz P.C.
By Brian Gardner, Esq., Chair, Construction Services Dept.

Cole Schotz P.C. successfully represented a New Jersey authority in a matter that resulted in a clarification as to when payment bonds are required on certain work. Here, suit was brought by a foreign manufacturer of amusement ride components that were to be incorporated into a large regional development project on property leased by our client to a private developer. The principal claim by this subcontractor against our client was negligence in failing to require that a payment bond be posted for the project under the New Jersey Bond Act. We filed a motion to dismiss this claim based on numerous grounds, including the inapplicability of the Bond Act to the particular project (as, among other things, all improvements were to be at the expense of the private developer and for its benefit), a lack of jurisdiction by the trial court relating to state agency determinations, and immunity under the Tort Claims Act for acts or omissions of a public entity. The court, after hearing oral argument, issued a detailed written decision in favor of our client based on the multiple grounds argued in our motion to dismiss and ordered the claim be dismissed.

 

McBride ResizedConnell Foley LLP
By Michael X. McBride, Esq., Chair, Construction Group

Connell Foley advised an international organization dedicated to providing food, shelter and crisis care to homeless and runaway youth in resolving a major construction defect issue related to significant water/leaking/mold conditions at the organization’s rights-of-passage building. The facility houses at-risk street youths, who for the first time in their lives are working, paying rent and supporting their families. Due to the mold conditions, the building’s residents had to be temporarily sheltered in facilities located in other towns, making transportation to and from work very challenging. Connell Foley developed a strategy to work with the construction manager, architect and certain trade contractors to devise a repair program to be implemented on an expedited basis. Collectively, the parties reached an amicable solution, contributing funds and repairing the water damages and mold conditions, thereby avoiding time-consuming litigation, while at the same time allowing all of the parties to reserve their rights under various contract documents. Within three months, the work was complete, and the formerly homeless and runaway youth were back in the building. Thanks in part to the efforts of Connell Foley, these youths are embarking on a brighter future.

 

Gianetti_Craig_ResizedDay Pitney LLP
By Craig Gianetti, Esq., Real Estate Partner

We were contacted by a client that was considering relocating its headquarters and warehouse/distribution facility, currently in New Jersey, out of state in order to take advantage of logistics benefits. The client heard about New Jersey incentives available to keep businesses and jobs in New Jersey. After contacting us and identifying a possible alternative location in New Jersey, we performed an analysis of the incentives that could be available to the client under the GrowNJ program if they relocated to this alternative site. After performing the analysis, we prepared a memorandum outlining the incentives available through tax credits, as well as bonus opportunities. After discussing the results of the research with the client, we worked with the client to prepare a GrowNJ application and worked with the NJEDA representatives in processing the application. The client was eventually awarded tax credits to remain in New Jersey and did not relocate out of state. The client has now moved into the new, larger location and has added additional jobs to its workforce.

 

Bershad, R ResizedGibbons P.C.
By Russell B. Bershad, Esq., Co-Chair, Real Property & Environmental Dept.

Your client is a major conglomerate that owns dozens of domestic facilities and leases hundreds more in the United States and overseas. What do you do when the client announces it plans to divide into three new companies, divide its facilities among them and asks you to spearhead the real estate work involved in transferring the facilities? First step, you put on your management hat, organize a team of lawyers to handle the work, set up a database to assemble and report critical information and enlist the assistance of other lawyers in the firm who are fluent in a dozen or so languages needed to review the overseas leases in-house, while engaging outside lawyers for the balance of the agreements. While many overseas agreements are written in English and the local language, others are not and you need to understand the terms related to transfers and assignments. With lead lawyers negotiating new headquarters leases and a great team of lawyers, well organized and led, completing the reviews, populating the database, managing outside counsel, and carrying out the transfers, Gibbons got the job done on time and within budget—and the “spin” transaction was successfully completed.

 

Estis_Dennis_Headshot ResizedGreenbaum, Rowe, Smith & Davis, LLP
By Dennis A. Estis, Esq., Chair, Construction Practice Group

Our firm represented a northern New Jersey condominium association in a construction defect lawsuit against a developer. Almost all of the unit owners in the building, a newly completed 18 story highrise with Hudson River and New York City skyline views, had entered into mortgages that were “taken back” by the developer, which had offered the loans as the mortgagee when the units were purchased. The mortgages were then sold by the developer to a bank at a discount, with the developer’s principal executing estoppel certificates as required by the bank. Developers have historically been reluctant to take back mortgages and be faced with waiting decades for their money, but this permitted the developer to sell the loans at a discount, and receive the bulk of the payments. The court ruled in favor of our client, the association, on its defective construction claim, and judgment was entered in an amount slightly under $3 million. The developer, however, believing it was judgment-proof as it had discontinued operations and distributed all of the dividends to stakeholders long before the judgment was rendered, refused to pay. With our strategy now refocused on getting our client paid, the bank was then joined in the action. The developer sought to dismiss our claims against the bank, but the trial court denied that motion and determined that the association had the legal right to go after the money owed on the mortgages issued by the developer. In turn, the bank applied some pressure of its own, demanding that the principal of the developer, who had guaranteed the loans when they were sold to the bank, make payment to our client in full. With no realistic course of action left to pursue, the developer paid the judgment in full, thereby avoiding being subject to available sanctions by the bank.

 

PetitJ_HR-c ResizedMcCarter & English, LLP
By Jeffrey A. Petit, Esq., Practice Leader, Real Estate Group

The benefits to locating a solar project on a closed landfill are many and great. The state’s Energy Master Plan specifically encourages the use of closed landfills for energy generation. It is a commercially and environmentally smart reuse of land that is otherwise unusable. The remote location of landfills avoids issues with neighbors. There is usually nothing to obstruct the sun, and it’s far preferable to clearing woodlands or using otherwise fertile farmland. That’s why our client PSE&G has incorporated such projects as a major part of its Solar 4 All™ Program. With opportunity, however, come issues: addressing the presence of hazardous materials, avoiding damaging the landfill cap, ensuring the structure remains effective if the landfill shifts or settles, and sometimes, relocating a gas-collection system. PSE&G recently consummated a lease of the closed Kinsley landfill in Deptford, with the assistance of our commercial leasing expert Thomas DaCosta Lobo and our environmental expert Keith Lynott. The project, which was named the “Renewable Energy Project of the Year” by the New Jersey Association of Energy Engineers, comprises 36,841 solar panels on 35 acres and generates enough electricity to power 2,000 average-sized homes.

 

Norris McLaughlin & Marcus- NJ 5102Norris McLaughlin & Marcus, P.A.
By Tim McKeown, Esq., Partner, Real Estate Practice Group

I recently reviewed a lease for a tenant containing provisions that not only favored the landlord, but exposed the tenant to potentially devastating financial consequences. All too often, small businesses pay little attention to their lease documents or even understand their significance until it’s too late. For example, the lease had no requirement that the landlord have insurance. The tenant could face termination if something happened to the premises and the landlord did not have sufficient funds to make the repairs. The lease also contained a unilateral waiver of subrogation, which exposed the tenant to a damage claim by the landlord’s carrier in the event it paid a claim by the landlord. Also absent was a mutual release of liability which protects the tenant from exposure as a result of a shortfall in insurance coverage. Also, instead of a mutual indemnification provision, the lease contained a unilateral indemnification provision which served to expose the tenant to liability costs arising out of landlord’s negligence. Fortunately, we were able to employ an exit strategy that got the tenant out of the lease and into a new and more reasonable lease, thereby significantly reducing its financial exposure.

 

OLYMPUS DIGITAL CAMERANPZ Law Group, P.C.
By David H. Nachman, Esq., Managing Attorney

Low interest rates continue to drive the growth of the real estate and construction sectors. Our firm continues to assist international businesses with visa and immigration law compliance to relocate their executives and managers in the United States. NPZ Law Group was recently involved in the restructuring of a high-profile Canadian-based real estate and construction company. Executives were sought to head up U.S. operations after solidifying business operations throughout Canada. Transfers of this nature (L-1) are relatively swift and encounter little resistance from the U.S. Department of Homeland Security (DHS). However, in this case, the organization was structured (from a tax perspective) to maximize limited liability and this structure was seemingly adverse to the equity ownership interest required for the use of the L-1 visa. Working closely with the Canadian financial partners and U.S. accountants of our clients, our team of U.S. and Canadian immigration attorneys convinced the DHS that the organization maintained a “qualifying relationship” allowing for the proper use of the L-1 intracompany visa classification. Now, the door is open to allow for the transfer of other organizational employees in the H-1B Professional, the E-1 Treaty Trader/Treaty Investor, and other non-immigrant visa classifications.

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