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A New Jersey appellate court ruled in Lopez v. Palin Enterprises, Associated, No. A-0886-17T4 (N.J. App. Div. December 5, 2018) that a tenant’s insurance policy was not the primary coverage for an injury to its employee which occurred within its leased premises.

The defendant in the case, Palin Enterprises, Associated (“Palin”) owned a commercial building and leased a portion of it to Agile Trade-Show Furnishings, Inc. (“Agile”).  Agile employed the plaintiff, Teodoro Lopez (“Lopez”).  Lopez was injured using a freight elevator located within the leased premises and sued Palin for damages.  Palin tendered the defense to Agile’s insurance company, Wausau Insurance (“Wausau”), arguing that the Wausau policy was the primary insurance coverage for Lopez’s claim.  Palin was named as an additional insured under the Wausau policy.  The Wausau policy provided “[t]his insurance shall be excess over any other insurance available to the additional insured whether such insurance is on an excess, contingent or primary basis, unless you are obligated under a written agreement to provide liability insurance for that additional insured on any other basis. In that event, this policy will apply solely on the basis required by such written agreement.”

The lease between Palin and Agile required Agile to procure “a comprehensive policy of liability insurance protecting [Palin] . . . against any liability whatsoever, occasioned by any occurrence on or about the Demised Premises.”  The lease did not require such policy to be the primary liability coverage for such occurrences.   The Court found that Wausau was not required to defend the Lopez lawsuit as its coverage is not to all claims, only as to all liability.  The Court ruled that due to the failure of the lease to specify that Agile’s liability insurance policy must be primary, per the terms of the Wausau policy it provides excess coverage and Palin’s liability insurance policy provides the primary coverage.

This case underscores the necessity of carefully drafting indemnity and insurance provisions in contracts to properly allocate risks between the parties thereto, specify the types of insurance each party must carry to cover such risks, and designate the insurance which is primary or excess.

 

 

Developers often employ the “time of application” rule (“TOA Rule”) to avoid having to comply with certain legal requirements enacted after an application has been submitted to a local planning or zoning board.  More specifically, the TOA Rule provides that “notwithstanding any provision of law to the contrary, those development regulations which are in effect on the date of submission of an application for development shall govern the review of that application….”  See N.J.S.A. 40:55D-10.5 (emphasis added).  Notwithstanding this statutory provision, developers must still comply with any new laws that specifically relate to health and public safety.

The TOA Rule replaced the “time of decision” rule, which allowed municipalities to apply new or amended ordinances to pending development applications.  As a result, applicants were often compelled to incur significant costs and delays associated with altering their applications in an effort to meet the new legal requirements.  The TOA Rule only applies, however, once a development application has been “submitted” to a municipality.  Until that time, a developer remains responsible for complying with all legal requirements regardless of when they took effect.

While the term “submission” is not expressly defined under the statute, the New Jersey Supreme Court squarely addressed the issue in Dunbar Homes, Inc. v. Zoning Board of Adjustment of Franklin Township, 233 N.J. 546 (2018).  In Dunbar Homes, the developer filed an application to construct 55 garden apartments on a site where garden apartments were considered a permitted conditional use.  The next day, the Township enacted an ordinance that prohibited garden apartments in the zone where the site was located. The zoning official subsequently determined that the developer had not submitted all documents required by the zoning board’s development application checklist.  The developer was then notified that the TOA Rule was inapplicable and that it would need to file a new application with the zoning board seeking a “use” variance pursuant to the more stringent standards implicated by N.J.S.A. 40:55D-70(d)(1).

The zoning board sided with the zoning official and the developer appealed to the Law Division.  The Law Division judge disagreed and concluded that the application was deemed “submitted” because it provided the board with “sufficient information to begin its review” and, therefore, the TOA Rule applied.  The Township appealed and the Appellate Division reversed that decision after finding that the relevant statute defining the term “application for development” included all documents prescribed by the board’s checklist for development.  Applying this bright-line rule, the Appellate Division concluded that the failure to submit even one of the items on the board’s checklist precluded application of the TOA rule.  The Supreme Court ultimately agreed with the Appellate Division, noting that N.J.S.A. 40:55D-3 expressly defined an “application for development” to include:  “the application form and all accompanying documents required by ordinance.”  Because it was undisputed that the developer failed to submit all required documentation and neither sought nor obtained a waiver regarding any requirements, the Court found that the application was never submitted and the TOA Rule did not apply.

Accordingly, developers must be certain to submit all documents identified in the municipal development application checklist or seek and obtain a waiver.  Only by vigorously complying with the requirements of the municipal checklist can a developer expect to avail itself of the protections afforded by the TOA Rule.

Florida has implemented a rather simple statutory scheme to address claims that a real property owner believes she may have against a contractor, subcontractor, supplier or design professional for construction defects on her property—whether those defects involve construction, repairs, remodeling or alterations to the property.  The law, Florida Statutes Sections 558.001-005, attempts to strike a balance between protecting the rights of property owners and reducing the litigation associated with such claims.

In a nutshell, before a property owner files a lawsuit in court or a demand for arbitration, to the extent arbitration is required, she must first, at least 60 days (120 days if the action involves an association that represents more than 20 parcels) prior to filing that lawsuit or demand for arbitration, serve a written notice of her claim on the contractor, subcontractor, supplier or design professional whom she claims is responsible for the defects.  Defects encompass a number of different deficiencies arising from defective materials, components and products; violations of applicable codes; failure of a design professional to comply with applicable standards; or a failure to build or remodel property consistent with accepted trade standards.

The 60-day pre-suit notice must describe in detail each and every construction defect that the owner believes exists, as well as all known damages resulting from the defects and the location of each defect.  Within 30 days of service of the owner’s notice of claim, the contractor, subcontractor, supplier or design professional to whom the notice is directed is entitled to inspect the property in order to assess each defect.  If the contractor, subcontractor, supplier or design professional determines that destructive testing is necessary to determine the nature of the alleged defects and what caused those defects, there are certain other notice rights and obligations associated with that destructive testing, including the right of the owner to object under Florida Statutes Sec. 558.004.

Within 45 days after service of the property owner’s notice of claim, the contractor, subcontractor, supplier or design professional served with that notice is required to serve a written response which must provide for one of the following:

  • an offer to remedy the defect, at no cost to the owner, with a detailed description of the necessary repairs and the timetable for completion;
  • an offer to settle the claim by a payment of money;
  • a hybrid, for lack of a better term, offer to settle the claim by a combination of repairs and a monetary payment, with, again a description of the required repairs and the timetable to complete those repairs;
  • a statement that the claim is disputed and that there will be no attempt to remedy the alleged defect or settle the claim;
  • a statement that any monetary payment will be determined by the contractor’s, subcontractor’s, supplier’s or design professional’s insurance company within 30 days after the insurance company is notified of the claim. This statement may include an offer under paragraph c.) contingent upon the owner accepting the carrier’s determination whether to make an additional payment of money.

An owner who receives a settlement offer must serve a written notice of acceptance or rejection within 45 days after receiving that offer.  If the contractor, subcontractor, supplier of design professional either disputes the owner’s notice of claim or does not respond to it, the owner can, without any further notice, file a lawsuit or demand for arbitration, where applicable.

If a contractor, subcontractor, supplier or design professional is sued for alleged construction defects without the owner first providing any pre-suit notice, that contractor, subcontractor, supplier or design professional should immediately move to stay the lawsuit under Florida Statutes Sec. 558.003

The Opportunity Zone program enacted as part of the 2017 federal Tax Cuts and Jobs Act is designed to spark long-term capital investment into low-income and urban communities. The 169 Opportunity Zones (or tracts) designated in New Jersey by Governor Murphy are a complete game changer and contain attractive investment incentives for developers and investors.

Via the Opportunity Zone program, developers and investors can tap into and reinvest their unrealized capital gains without paying capital gains for a period of time, if at all. For example, capital gains invested or reinvested in an Opportunity Fund will receive a step up in basis of 10 percent if held for at least five years and by an additional 5 percent if held for at least 7 years, excluding up to 15 percent of the original gain from taxation.

An even greater savings is realized if the investment in the Opportunity Fund is held for at least 10 years. The gain accrued while invested is permanently excluded from taxable income of capital gains upon the sale or exchange of the investment.

With these tax incentives in place, Senator Corey Booker (NJ) believes the barriers between communities and the capital needed to generate economic growth and opportunity will be broken down.

The Opportunity Zones were designated based on key economic indicators in certain neighborhoods and communities such as income, unemployment rate and property values but also consideration was given to accessibility to mass transit and the value of existing investments. The 169 tracts were approved by the US Department of the Treasury on April 9, 2018. You can view the interactive map of designated Opportunity Zones for New Jersey by clicking here.

Home renovations and repairs is big business in Florida, especially in densely populated south Florida where it seems that every available square foot of property is occupied by a residence or commercial building.  That said, it is important to understand the lien rights of contractors, subcontractors and suppliers of materials under Florida law.

First, it is important to understand whether there is a difference between the lien rights of a company that has a contract with the owner of real property as opposed to a company that does not have such a contract.  The prime example of the latter is a subcontractor or supplier of materials for the company that actually does have the contract with the homeowner. One who has a contract with an owner is said to be in privity with the owner, meaning the relationship between the two parties is recognized by law.

The short answer is that both those in privity and those not in privity with owners of real property have lien rights in that Florida Statutes Sec. 713.01 includes in its definition of  lienors, contractors, subcontractors and those who contract with contractors and subcontractors.  The means of perfecting or protecting those lien rights is, however, different.

As an example, let’s say a homeowner contracts with Company A to install a new roof on her property.  The homeowner and Company A sign a clear, definite contract.  Company A, in turn, contracts with Company B to supply it with all of the materials to install the roof.  Company A and Company B have their own separate contracts, but there is no contract between the property owner and Company B.

Once the job is completed the owner refuses to pay the rather substantial balance that is due and owing to Company A.  Company A, in turn, does not pay the balance that it owes to Company B.  How do each of these respective companies perfect its lien rights on the owner’s real property?

For Company A, the process is quite simple.  Under Florida Statutes Sec. 713.08, it must record a document known as a claim of lien in the county where the real property is located within 90 days of the last date that it provided labor, services or materials.  The statute sets forth, in detail, what must be contained in that claim of lien, and the actual form is provided in Florida Statutes Sec. 713.08.   Amongst other things, the claim of lien must include the name and address of Company A; the labor, services and materials that were furnished and the contract price or the value of what was provided; the name of the owner of the real property; a description of that real property; when labor, services and materials were first and last furnished; and the amount unpaid.

Company B’s ability to perfect its lien rights is a bit more involved.   Although it, too, must record a claim of lien and comply with the requirements of Florida Statutes Sec. 713.08, it has an additional step it must take to ensure that its lien rights are protected.  Pursuant to Florida Statutes Sec. 713.06, prior to furnishing materials or within 45 days of first furnishing such materials, it must serve the owner with a document known as a notice to owner.  Again, the statute  sets forth the actual form—which is quite brief and straightforward– that must be provided, and that form will contain Company B’s name and address, the description of the real property and a description of the materials that were supplied or are being supplied.