You’re ready to remodel, so now what?!?

Well, let’s start by finding you a professional remodeling contractor that can guide you through the project from beginning to end.  One of the most obvious places to start your search is by word-of-mouth.  Family, friends or neighbors can be a great resource and provide you with valuable insight; if however, you are not getting the results you would like, try asking the real estate agent that originally sold you the home or by calling the regional remodelers association.  Regardless of how you go about your search, choosing the right professional to give you the master bedroom or gourmet kitchen of your dreams, is easier than you think.

If you find that you are still lost in the process, try starting local.  A local remodeler is likely a part of your community who will run into you time and time again at the coffee shop, grocery store, or gas station.  It’s clearly in their best interest to perform quality work for you.  In an industry that is built upon reputation, that last thing a contractor wants or needs is to be running into a dissatisfied customer on a regular basis. 

Additionally, a local remodeler is likely to be familiar with the local permitting process.  Although the building code is universal throughout New York (except in New York City), each building department will likely have its own quirks, preferences and interpretations.  A word to the wise, more renovation projects than you think require a building permit from your local jurisdiction.  Maybe you want to avoid the process now but when it comes time to sell your home, you are likely to run into a world of difficulty if you didn’t get the proper permits and certificates of occupancy.  

You will also find in New York that licensing of contractors varies from county to county.  In the Hudson Valley only Putnam, Rockland and Westchester Counties currently require contractor licensing, while the rest do not.*  If you live in one of these counties, ask to see a copy of their license and/or contact your county licensing agency to ensure the contractor you have chosen meets all requirements.  

While being licensed should indicate that your remodeler carries the proper insurance (worker's compensation, property damage and personal liability), it’s not a sure thing so regardless of where you live, always ask for proof of insurance.  If you ask for proof of insurance and the contractor balks…  Walk!

Should you decided to solicit estimates from more than one company, be sure that they are all working off the same scope and quality of work.  Discuss any noticeable variations in price and always beware of any estimate that is substantially lower than the others.

At this point in the process, it’s a really good idea to find out if your professional is a member of a recognized trade association**.  Members of these organizations are regularly exposed to enhanced industry knowledge and can provide the consumer with additional education as well.  Factors such as green technology, universal design, lead safety, innovative products, building technique and design trends are all areas to take into consideration.  

Last but not least on your to do list is to check references.  If a professional is not offering references, you should ask for them and then follow up with a site visit or phone call.

_________________________________________________________

*Licensing requirements for electricians and plumbers will also vary from county to county and city to city so if you plan on hiring these professionals directly check on your local requirements.  

**Some of the most easily recognized trade associations for residential remodeling contractors are National Association of Home Builders (NAHB), National Association of the Remodeling Industry (NARI), National Kitchen and Bath Association (NKBA), and the United States Green Building Council (USGBC).  Additional associations to consider are the American Institute of Architects (AIA) if you are selecting an architect as well as the National Association of REALTORS® (NAR) for real estate professionals. 

And the Answer Is...

Each month, Thomas S. Tripodianos, Esq. provides our members with answers to their commercial litigation, labor law, real estate and construction law questions.  Past articles may be found by visiting www.wbgllp.com.  Special thanks to Rick Ward, JD Pace Law School who co-authored this month’s column.


 

Question:  Sureties issued a performance bond to the Public Owner in connection with Contractor's contract.  The Sureties claim the Public Owner made an improper post-termination payment to Contractor to the detriment of their rights as potential subrogees. The sureties neither performed the contract themselves nor financed the project's completion.  Is the Sureties claim proper?

Answer:  Not at this time.

The Sureties issued a performance bond in connection with a public improvement project. The Contractor has alleged the Public Owner is in material breach of the contract seeks to withdraw from the same.  The Public Owner has declared the Contractor in default and asserts that the Sureties have breached their obligations under the performance bond. The Contractor contests the Public Owner's claims of default. The Sureties assert that the Public Owner improperly made a post-termination payment to Contractor to the detriment of the Sureties' rights as potential subrogees.

In the Bond, the Sureties agreed, 

if requested to do so by the [Public Owner], to fully perform and complete the Project to be performed under the Contract, pursuant to the terms, conditions and covenants thereof, if for any cause the Contractor fails or neglects to so fully perform and complete such Project…. [and] to commence the work of completion within twenty (20) days after written notice thereof from the [Public Owner] and to complete such Project within such time as the [Public Owner] may fix.

At the conclusion of the 20-day period, the Sureties notified the Public Owner that they have been unable to conclude that Contractor is, in fact, in material breach of the subject Contract such that it could properly be terminated for default under the terms and conditions of that Contract. Therefore, the Sureties have been unable to conclude that the conditions triggering any obligation under the Bond have been met.

The Sureties further contend that the Public Owner made a post termination payment to the Contractor and in doing so the Public Owner failed to mitigate its damages, to the ultimate detriment of the Sureties.  The Sureties never notified the Public Owner that it should not make further payments to Contractor or that doing so would impair their interests.

The Sureties assert that the Public Owner's post-termination payment to Contractor was improper, notwithstanding that the payment was approved before Contractor's termination. They argue that any balance the Public Owner owes Contractor under the Contract serves as the Sureties' collateral in the event that they are required to pay or otherwise perform under the Bond. According to the Sureties, if the Public Owner is correct that Contractor materially breached the Contract, then payment was an overpayment that impaired their interests in the unpaid balance of the contract price. The Sureties further contend that, in the event that Contractor is found liable and they are compelled to fulfill their obligations under the Bond, they are entitled to a damages offset under the doctrine of equitable subrogation.

Subrogation is the right one party has against a third party following payment, in whole or in part, of a legal obligation that ought to have been met by the third party. The doctrine of equitable subrogation allows insurers to "stand in the shoes" of their insured to seek indemnification by pursuing any claims that the insured may have had against third parties legally responsible for the loss. In short, one party known as the subrogee is substituted for and succeeds to the rights of another party, known as the subrogor. The doctrine of subrogation, which is based upon principles of equity, has a dual objective as stated by New York courts: It seeks, first, to prevent the insured from recovering twice for one harm, as it might if it could recover from both the insurer and from a third person who caused the harm, and second, to require the party who has caused the damage to reimburse the insurer for the payment the insurer has made.

Generally in a public improvement contract, the contractor is required to find a surety that will secure the performance of his contract. Upon default by the contractor, the surety, pursuant to a performance bond, completes the contract, at its own cost and expense. It then becomes equitably subrogated to the rights of the contractor and certain of the rights of the owner in the unpaid balance of the contract price.

Here, it is undisputed that the Sureties have neither undertaken performance of the Contract themselves nor financed the project's completion. The Sureties' lack of performance to date precludes them from asserting an equitable subrogation claim at this time for any improper payments that the Public Owner purportedly made to Contractor. 

Thomas S. Tripodianos is a partner at the law firm of Welby, Brady & Greenblatt, LLP.  Welby, Brady & Greenblatt, LLP emphasizes the practice of Construction Law, representing general contractors, subcontractors, sureties, developers, owners, suppliers, engineers, homeowners and other entities connected with the construction industry in transactions, litigation, arbitration, mediation, public and private construction contracts, mechanics liens, surety law, labor and employment, real estate, and environmental law.  Welby, Brady & Greenblatt, LLP has its principal office in White Plains, New York, and also has offices in Manhattan, New Jersey and Connecticut.  Mr. Tripodianos resides in Orange County.

If you would like more information regarding this topic please contact Thomas S. Tripodianos at TTripodianos@wbgllp.com, or call him at 914-607-6440.

Please understand that this column provides general information only, and should not be construed as legal advice to anyone under any circumstances.  The author reserves the right to modify any questions submitted so as to broaden their appeal.  While we encourage you to contact us, you should not disclose to us any information that you consider confidential unless and until we have formally established an attorney-client relationship, and agreed to represent you in your particular matter.  The opinions expressed in this column are of the individual author, and not necessarily those of the Hudson Valley Builders and Remodeler’s Association.  Citations to legal authority have been omitted.

And the Answer Is...

Each month, Thomas S. Tripodianos, Esq. provides our members with answers to their commercial litigation, labor law, real estate and construction law questions.  Past articles may be found by visiting www.wbgllp.com.  Special thanks to Rick Ward, JD Pace Law School who co-authored this month’s column.


 


Question:  Does a non-managing member of an LLC owe any duty of good faith or loyalty?

Answer:  No

Member A and Member B are the sole members of 123 Main Road, LLC ("LLC") with each having a 50 percent interest therein. The LLC owns a two-story building and ground lease for premises located at 123 Main Road in New York (the "premises"). The accounting firm, Member B, Company, LLC, in which Member B is a partner, is one of two principal subtenants in the building. The other principal subtenant was a separate business run by Member A.

Member A alleges Member B breached its fiduciary duty as a 50 percent member of the LLC. Specifically, the Plaintiffs seek to recover consequential and punitive damages flowing from: (1) Member B's failure to timely advise, and to instead affirmatively mislead, Plaintiffs regarding his intention to have his accounting firm not renew its sublease which expired on April 30, 2013; (2) refusing to allow Plaintiffs the opportunity to show the lease space to potential tenants; and (3) damaging the premises by replacing a set of glass doors with a single wooden door.

Here, Member A and Member B are members of the LLC with an equal interest in its profits and losses. However, the Operating Agreement of 123 Main Road LLC ("operating agreement") identifies Member A as the managing member. Specifically, paragraph 5 of the operating agreement, entitled "Powers", states that the "business and affairs of the Company shall be managed by Member A in his sole discretion. Member A shall have the power to do any and all acts necessary or convenient to or for the furtherance of the purposes described herein, including all power, statutory or otherwise possessed by the members under the LLCL"

The operating agreement specifically delineates Member A as the managing member of the LLC and omits any language granting management powers or duties to Member B. Member B, thus, is a non-managing member of the LLC.

New York case law is replete with cases demonstrating that a managing member of an LLC has a fiduciary duty to other members of the LLC

Pursuant to Limited Liability Company Law §409, "a manager shall perform his or her duties as a manager * * * in good faith and with a degree of care that an ordinary prudent person in a like position would use under similar circumstances." The acts of working in concert and managing a limited liability company clearly gives rise to a relationship among the members which is analogous to that of partners who, as fiduciaries of one another, owe a duty of undivided loyalty to the partnership's interests.

A partner, and by analogy, a [minority managing] member of a limited liability company, has a fiduciary obligation to others in the partnership or limited liability company which bars not only blatant self-dealing, but also requires avoidance of situations in which the fiduciary's personal interest might possibly conflict with the interests of those to whom the fiduciary owes a duty of loyalty.

It is noted that section 409(a) of New York's Limited Liability Company Law sets forth, inter alia, the duties of a limited liability company manager, as follows, "A manager shall perform his or her duties as a manager, including his or her duties as a member of any class of managers, in good faith and with that degree of care that an ordinarily prudent person in a like position would use under similar circumstances". Noticeably absent from the Limited Liability Company Law, which expressly imposes a duty of good faith upon managers of an LLC, is any concomitant duty on a non-managing member

Given the Legislature's intent to specifically omit any duty of good faith or loyalty on behalf of a non-managing member of an LLC, coupled with the fact that the operating agreement gives Member A the sole discretion to manage the business and affairs of the LLC, Member B, as a non-managing member, did not breach any duty to the LLC or to Member A. 

Thomas S. Tripodianos is a partner at the law firm of Welby, Brady & Greenblatt, LLP.  Welby, Brady & Greenblatt, LLP emphasizes the practice of Construction Law, representing general contractors, subcontractors, sureties, developers, owners, suppliers, engineers, homeowners and other entities connected with the construction industry in transactions, litigation, arbitration, mediation, public and private construction contracts, mechanics liens, surety law, labor and employment, real estate, and environmental law.  Welby, Brady & Greenblatt, LLP has its principal office in White Plains, New York, and also has offices in Manhattan, New Jersey and Connecticut.  Mr. Tripodianos resides in Orange County.

If you would like more information regarding this topic please contact Thomas S. Tripodianos at TTripodianos@wbgllp.com, or call him at 914-607-6440.

Please understand that this column provides general information only, and should not be construed as legal advice to anyone under any circumstances.  The author reserves the right to modify any questions submitted so as to broaden their appeal.  While we encourage you to contact us, you should not disclose to us any information that you consider confidential unless and until we have formally established an attorney-client relationship, and agreed to represent you in your particular matter.  The opinions expressed in this column are of the individual author, and not necessarily those of the Hudson Valley Builders and Remodeler’s Association.  Citations to legal authority have been omitted.

Top 5 Reasons Why Millennials Should Consider Enter the Housing Market

With the economy and housing market still recovering, some potential first-time home buyers may be hesitant to invest in a new home. Yet there are several reasons why now is a great time for Millennials and other first-time home buyers to start building their American Dream.

1) Interest rates are low.
Today’s historically low interest rates are helping first-time home buyers find affordable housing options. Current weekly interest rates for a 30-year fixed mortgage remain under 4.30%.

But it’s important to keep in mind that interest rates are sensitive to market forces and can change quickly. There’s no indication that rates will suddenly surge upward, but even a slight rate increase can push monthly payments to the point that a buyer might miss out on their first choice for a new home. 

2) Huge downpayments are not necessary.
 

While lenders are looking more closely at borrowers today than in recent years, there are options for purchasing your first home without a 20% downpayment. For example, the Federal Housing Administration (FHA) offers loans to first-time home buyers with downpayments as low as 3.5%. However, these loans require mortgage insurance.

To ensure that the financing process goes smoothly, buyers should consider pre-qualifying for a mortgage and having a financing commitment in place before shopping for a new home. Buyers also may find that some home builders have arranged favorable financing for their customers or offer financial incentives. 

3) New homes are built to fit your lifestyle.
Designed to accommodate today’s busy lifestyles, new homes – including attached condos and detached single-family homes – feature open floor plans, flexible spaces, low-maintenance materials and other amenities that can appeal to younger buyers.

With energy costs near the top of almost everyone’s concerns, it’s good to know that new homes are typically more energy efficient than ever.  Innovative materials and construction techniques mean that today’s new homes are built to be much more energy efficient than homes constructed a generation ago. New homes are now more affordable to operate, significantly more resource efficient and environmentally friendly.

Most importantly however, the right lender and appraiser can and will readily recognize the positive impact that superior energy efficiency has on a home’s value. 

4) Technology makes house shopping fun and easy.

Today’s tech-savvy home buyers use mobile apps to quickly gather all of the key information on a property and to see extensive photos from their cell phones or tablets. For example, Homesnap allows you to snap a picture of any home and get all the relevant property details, including any interior photos for homes on the market.

If you’re checking out homes in an unfamiliar area, AroundMe helps you get a quick sense of the neighborhood by telling you the location of local restaurants, supermarkets, other businesses and attractions.

If you’re really serious and just beginning your search, Realtor.com is probably the best app because it generally contains the most accurate information gathered from more than 800 local MLSs (multiple listing services).

There also are several free mortgage apps to help you determine how much you can afford and to compare real-time rates from multiple lenders.  Popular mortgage calculator apps include Zillow and Trulia.

*A word of caution:  Although Zillow and Trulia make nice apps for mortgage calculation, they are quite unreliable in determining the value of your home when compared to a state licensed appraiser or sales agent.  

5) Owning a home can help young families build wealth and combat rising rents. 
For most Americans, homeownership is a primary source of net worth and is an important step in accumulating personal financial assets over the long term. Although property values have declined in many markets, Americans have more than $10.8 trillion of equity in their homes, and for most families, home equity represents the largest share of net worth.

At the same time, rent prices continue to climb – 2.8 percent in 2013 – as rental vacancies dropped to their lowest point since 2000, according to a recent report from Harvard University’s Joint Center for Housing Studies. That makes now a great time to start investing in your future – instead of your landlord’s.

For more information on resources for first-time new home buyers in the region, contact the Hudson Valley Builders & Remodelers Association.

Enjoy Summer Living on a New Front Porch

Outdoor living spaces are an "essential design trend" for homes nationwide, according to judges for the Best in American Living Awards, an annual National Association of Home Builders competition, and continue to be on many home buyer and renters’ must-have lists in 2014. Adding a front porch to your home has become increasingly important, whether you are remodeling or selling your home.

The front porch was described as a “transitional space between the private world of the family and the public realm of the street,” by Newburgh's own Andrew Jackson Downing, a well known 19th century landscaper. While the purpose of a porch may have evolved from a place to drink sweet tea and gossip to a place where families sit to enjoy a meal or the sunset together, the fact still remains that a porch is an essential and desired feature for many home owners.

Here are some things to think about when planning the construction of your new porch:

Size

The porch is an accessory, so it shouldn’t overwhelm the main structure of the house. It should, however, be large enough to look like part of your home instead of an afterthought. Think about what you want to use your porch for. If you envision dining al fresco with your family during warm-weather months, you will want a porch that is at least 8-10 feet deep to accommodate a good-sized table and chairs. However, if you just want to place a loveseat or a couple of chairs on your porch, somewhere around 6 feet deep should be sufficient.

Location

If your home has the flexibility, the side of your home your porch is on is important. A south-facing porch will take advantage of the sun’s heat, but could also get uncomfortable during the summer. If the idea of cocktails at sunset is appealing, place your porch facing west. Early risers may want maximum light to read the paper and sip coffee with an porch facing east.

Don’t forget about accessing the porch from the home, and what design impact that may have on the interior rooms. For example, you may want to install French or sliding glass doors from the living room or kitchen to create an entrance to the porch.

Features

To ensure aesthetic continuity, try to use the same materials to build your porch as are used in the home, especially the exterior surfaces. This includes coordinating millwork and other design motifs so that your new porch looks like a continuation of the rest of your home.

You should also take into account any other factors that could affect the enjoyment of your new porch. Consider installing screens if you live where there are lots of flying insects, or glass windows so you can extend the use of your porch into cooler months. If you plan to use the porch during the night hours, make sure you install either sufficient lighting or outlets for lamps. A ceiling fan is a good idea to make the space more comfortable in warm temperatures.

Use social media for some inspiration. Pinterest and Houzz will have some great ideas of ways you can decorate your porch, and of how to make it look more inviting. If you aren’t ready to decorate your porch right away, pin the pictures to your board and come back to them later. Instagram is also another resource you can use to get ideas of how to stylize your new porch.

Before you know it, you and your family can begin to relax and enjoy the summer season from the comfort of your new porch—or have an attractive feature to offer to buyers.

What You Should Know About Hiring a Remodeler

With the ongoing challenging economy, many families are choosing to remodel their homes to fit their changing needs, rather than selling their home and buying another one. Your home is likely your largest investment, and even simple remodels can cost hundreds or thousands of dollars, so you want to make sure you find a contractor you can trust.

As the home building and remodeling industry celebrated National Remodeling Month in May, here are some important considerations to ensure you make the right decisions when you find, evaluate and hire a remodeler.

You should start by asking for referrals from friends, family, neighbors, coworkers, and others who have had remodeling work done. Or, ask local independent trade contractors, building materials suppliers, architects, engineers, home inspectors, lenders and insurance professionals for recommendations.

There are also websites where consumers leave comments about their experience with local businesses, such as www.yelp.com, www.angieslist.com and www.kudzu.com. But be careful about these sources of information, you have no way of knowing who left the comment or if they were honest. 

Once you have a list of potential home remodelers for your project, do research to verify that they are appropriately licensed and/or insured. Contact your local or regional Builders Association and the local Better Business Bureau.  In counties where remodelers are licensed (Westchester, Putnam & Rockland) be sure to verify that the remodeler is licensed.  

When you begin meeting with remodelers, you want to find out information such as: 

• How long they have been in business in your community? Can they provide references from customers and suppliers they work with?
• Ask for a copy of the insurance certificates.
• What is their working knowledge of the many types and ages of homes in the area, and what sort of issues could arise?
• Do they provide a written estimate before beginning the work, and a detailed contract that spells out the work that will and will not be performed, protects both of you, provides a fair payment schedule contract and complies with local, state, and federal laws?
• Do they offer a warranty? What is covered under the warranty and for how long?

For more detailed checklists for finding, evaluating and working with a remodeler, as well as other information about remodeling your home, go to www.nahb.org/remodeling