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Robert McNevin

Jan 24
0
construction law

Home Owners vs Bad Contractors

By | Real Estate Law | No Comments

HOMEOWNERS

VS

UNSCRUPULOUS HOME IMPROVEMENT CONTRACTORS

Each year thousands of Hoosier homeowners fall victim to unscrupulous home improvement contractors. Homeowners frequently report shabby workmanship, unfinished work, over billing, building code violations, high pressure sales, and disappearance upon receipt of down payment money. In a culture where so many have grown accustomed to doing business on a handshake, the unsuspecting homeowner is ripe for the picking, thus the beginning of the nightmare of home owners vs bad contractors.

construction lawThe Indiana legislature became aware of these complaints in the 1980s and developed several statutes with the specific intention of protecting consumers. These statutes are generally regarded as consumer protection statutes and they impose an obligation on the merchants and/or contractors to deal fairly with their customers or expect to pay for your transgressions. In the realm of home improvement contracts, Indiana law has developed a general deceptive sales act and a more specific home improvement contract act, with work together for the benefit of the consumer. The more general Deceptive Consumer Sales Act lists among its many prohibited acts, any violation of the Indiana Home Improvement Contract Act (HICA). The latter mandates the minimum requirements of an Indiana home improvement contract, and the former sets forth the sanctions for such violations.

The most updated version of the Indiana Home Improvement Contract Act, which became effective July 1, 2017 contains the following requirements:

(a) A real property improvement supplier shall provide a completed contract to the consumer before it is signed by the consumer. Except as provided in subsection (c) below, and subject to subsection € and section 10.6 of this chapter for contracts entered into after June 30, 2017, the following minimum requirements must be incorporated:

  1. The Name of the consumer(s), and the address of the property where the work will be performed.
  2. The name and address of the contractor, and for contracts entered from July 1, 2017 and thereafter, an e-mail address where the consumer can communicate with the contractor by electronic mail. If a separate person, address, phone, or e-mail is designated for consumers to report problems or make inquiries, then the name, telephone number, and e-mail address for the individual to whom problems or inquiries may be directed.
  3. The date the contract was submitted to the consumer, and any time limitations for the consumer’s acceptance. [Where a contract was procured by either door-to-door or telephone cold calling, the consumer has three days in which to rescind the contract].
  4. A reasonable detailed description of the home improvements to be completed, or a statement that the specifications of the home improvement project will be supplied to the homeowner at a later date, but prior to the commencement of any work, and notice to the consumer that their separate written approval shall be required before the commencement of any work. If the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable, the description must set forth the specifications to the extent that the damage, loss, or expense is reasonably known by the home improvement supplier. Alternatively, if the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable the description may be satisfied with a statement that the real estate will be restored to the same condition in which the real estate existed before the damage, loss, or expense occurred or a comparable condition.
  5. If the description required by subdivision (4) does not include the specifications for the real property improvement, a statement that the specifications will be provided to the consumer before any work begins and that the contract is subject to the consumer’s separate written and dated approval of those specifications, before the work will commence.
  6. The approximate starting and completion date for the project. If the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable, the approximate start and completion dates must be stated to the extent that the damage, loss, or expense is reasonably known by the home improvement supplier. Alternatively, if the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable then the completion date may be expressed in terms of the number of days elapsed from the date when sufficient approval of the insurance carrier authorizes adequate repair or restoration of the property.
  7. A statement of any contingencies that might delay the start or completion dates. If the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable, the statement of contingencies that might delay the start or completion of the project must be stated to the extent that the damage, loss, or expense is reasonably known by the home improvement supplier.
  8. The price of the home improvement project. If the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable the contract may express the price in terms of the consumer’s liability for payment after the application of the insurance proceeds or payments from a liable third party.
  9. Subject to subsections (b) and (c)(8), a statement as to whether any third party, including subcontractors, vendors, or other persons, who are not a party to the contract, will be furnishing or leasing any labor, services, materials, equipment, or machinery to or on behalf of the home improvement contractor in conjunction with the home improvement project. If the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable, the contract must contain a statement that neither the supplier nor any third parties not a member to the home improvement contract, but who otherwise lease or furnish labor, services, materials, equipment, or machinery may initiate or pursue any claim with the insured consumer’s insurance company.
  10. Signature lines for the home improvement supplier or its agent and each homeowner to sign and a space for each name to be printed either directly below or after the signature.

(b) The contract must be in a form that each consumer who is a party can reasonably read and understand.

(c) If the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable the contract may permit the commencement of work prior to the approval by the insurance carrier, but such election must be in writing, signed by the consumer, and specify the consumer shall only be liable to the extent the contract contains written specifications, and if applicable is approved by the insurance carrier.

(1)If the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable and the project includes one (1) or more exterior improvements, the contract must inform the insured consumer of the insured consumer’s rights under section 10.5(b) of this chapter (I.C. 24-5-11-10.5) by furnishing the consumer with a typed statement in duplicate easily detachable from the home improvement contract that in the event the consumer’s insurance carrier that all or any part of the claim is not covered under the loss provisions of the insurance policy, then the consumer may use the attached form to send notice to the home improvement supplier of their intention to terminate the home improvement contract within three (3) days of the insurance carrier’s notice.

For contracts signed after June 30, 2017 which contain one or more exterior improvements, the following notice must also be included:

[ “You may cancel this contract at any time before midnight on the third business day after you have received written notification from your insurance company that all or any part of the claim or contract is not a covered loss under the insurance policy. See attached notice of cancellation form for any explanation of this right.”]

A boldface “NOTICE OF CANCELLATION” for in duplicate must also be attached to the contract, which is easily detachable, containing the following notice in 10 point type or larger:

“If you are notified by your insurance company that all or any part of the claim or contract is not a covered loss under the insurance policy, you may cancel the contract by mailing or delivering a signed and dated copy of this cancellation notice or any other written notice to (the home improvement supplier, with the address provided thereon) at any time before midnight on the third business day after you have received such notice from your insurance company.

If you cancel the contract, any payments made by you under the contract will be returned to you within ten (10) business days following receipt by (real property improvement supplier) of your cancellation notice, minus any amounts you may owe for work already done by (real property improvement supplier).

I HEREBY CANCEL THIS TRANSACTION

_____________________________________

(DATE)

_____________________________________

(INSURED CONSUMER’S SIGNATURE)]

(2)If the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable, and the home improvement supplier and consumer DO NOT HAVE A PRIOR BUSINESS RELATIONSHIP, then the home improvement supplier may not enter into a contract with an Indiana consumer, unless one of the following apply:

  1. The supplier resides, is domiciled, or is authorized to do business in Indiana.
  2. The supplier maintains one (1) or more fixed physical locations within the state of Indiana where the supplier engages in or solicits home improvement contracts with consumers; or
  3. The supplier has appointed a resident agent in Indiana to receive service of legal process.

(3) For real property improvement contracts executed after June 30, 2017 the contract must inform the consumer that neither the real property improvement supplier nor any third party subcontractor, material man, or equipment lessor, may initiate or pursue a claim with the insured consumer’s insurance company.

(d) The act, while not requiring any particular language be inserted into the real property improvement contract, strictly bars the real property improvement supplier from enforcing any modification to the original contract, unless it is in writing and signed by the consumer.

(e) The act appears to reiterate the requirement that the contract contain a notice to the consumer that neither the real property improvement supplier nor any third-party subcontractor, material man, or equipment lessor, may initiate or pursue a claim with the insured consumer’s insurance company.

(f) A real property improvement contract may not assign any rights of the consumer to any supplier or third parties.

(g) A real property improvement contract must reflect the full amount of the contract price less any discounts offered.

(h) Finally, a real property improvement supplier or third party who recklessly, knowingly, or intentionally impersonates a consumer commits a Class A misdemeanor.

HICA also prohibits the supplier from assigning any rights of the consumer to any supplier or third parties.

  1. HICA requires the home improvement price be stated in the contract complete with any offered discounts.
  2. HICA makes it unlawful for any supplier to impersonate a consumer for any purpose, including making contact with the consumer’s insurance company.

These contractual requirements apply to home improvement contracts, rather than commercial contracts. The Indiana legislature has imposed a code of conduct and imposed it upon home improvement suppliers with the aim of leveling the playing field. Law makers reasoned that by imposing these minimum requirements on the home improvement suppliers, the consumer would have better odds of securing a contract with reasonable terms.

The prospect of enforcement is somewhat burdensome on the consumer, and that fact may be by design. When a consumer finds themselves in trouble with a home improvement contract gone bad, their right to sue the home improvement supplier is regulated by a number of legal hurdles. For this reason, it is crucial for the home owner to seek legal representation by an experienced construction law attorney, who has experience with HICA and the Indiana Deceptive Consumer Sales Act in order to insure they secure the protections afforded them by these consumer protection statutes.

The consumer, at the very least, must provide written notice to the home improvement supplier of its violations of the statutes, with proper citations to the statute, and permit a thirty (30) day period within which the supplier may be permitted to submit an offer to cure. Great care must be taken by the consumer, or their counsel, to insure the notice is provided exactly as required under the Indiana Deceptive Consumer Sales Act.

OTHER SUPPLIER VIOLATIONS

While the HICA is listed within the list of potential violations under the Deceptive Consumer Sales Act, it is certainly not the only act proscribed by that body of law. The list is broad, because it is intended to apply to virtually all consumer related sales within the State of Indiana, even those that do not fall into the category of home improvement contracts. Among those acts that often relate to a home improvement act, the Deceptive Consumer Sales Act lists the following as “Deceptive Acts”:

  1. Failure to obtain a license or permit to conduct the work or service engaged in with a consumer, when the law requires the supplier to hold a license;
  2. That the supplier claims a repair or replacement of any item is necessitated, when it is not;
  3. That the supplier claims to have sponsorship, approval, or affiliation, which the supplier does not have;
  4. That the supplier can complete the project or repair within a period of time, if the supplier knows that it could not reasonably meet the promised completion date;
  5. Engaging in a replacement or repair that is not authorized.

Perhaps most importantly, it is extremely important for the consumer to take action quickly, as the enforcement provisions within the Deceptive Consumer Sales Act bar the filing of an action for any consumer action where the consumer fails to give written notice to the supplier within the sooner of six (6) months of initial discovery of the deceptive act, or one (1) year following such consumer transaction, or not less than thirty (30) days of any warranty period applicable to the consumer transaction. Then, in addition to the notice requirements described above, the consumer is barred from filing any action more than two (2) years after the occurrence of the deceptive act. With these restrictions sewn into the statute, consumers must take care to act quickly, or they may lose their right to sue under this consumer protection statute.

The consumer’s golden nugget is found in this paragraph, as the importance of these two consumer protection statutes is brought to light. In most consumer contracts, the supplier controls the terms. The print up the standard contracts and submit them to the consumer for inspection and review and the consumer is expected to sign the contract with little or no wrangling over the terms. It is quite common for these contracts to be written in such a way that the home improvement supplier provides a right to recover attorney fees, in the event they are forced to sue the consumer to recover the balance on their contract, while leaving the consumer without any recourse for attorney fees. However, the Deceptive Consumer Sales Act, provides for an award of attorney fees to the prevailing party. While it is a double-edged sword, it does provide the consumer with an opportunity to recover attorney fees, where no such right exists in the contract.

If you are the victim of a home owners vs bad contractors nightmare and you need counsel to assist you in preserving your rights, give us a call today at 317-939-3000 and someone from our staff will be happy to discuss your matter right over the phone with you at no cost.

Robert McNevin, Jr. is a partner with the Indianapolis law firm at the Indy Advocate. His practice is primarily focused on construction and real estate law.

Jan 09
0
purchase agreement

How to Terminate an Indiana Purchase Agreement

By | Real Estate Law | No Comments

HOW TO TERMINATE AN INDIANA RESIDENTIAL PURCHASE AGREEMENT

Buyers who find themselves shackled to a contract or purchase agreement for the purchase of a new home sometimes wish they could rescind the whole deal. When they tell their Realtor, they want to surrender their earnest money and back out of the purchase agreement, they are often told it’s too late. They are told they will be liable to the sellers for any losses they incur in trying to sell the house to another buyer and may also be obligated to pay their real estate agent’s commission to boot. However, the discovery of significant conditions effecting the use and enjoyment of the property after signing, can serve as the buyer’s basis for terminating the agreement.

purchase agreementSignificant conditions typically include such things as deed restrictions and covenants, special tax assessments, or plans to alter neighboring infrastructure or zoning. There is no established list of conditions that would fit this category, but certainly any number of conditions might materially impact the use and enjoyment of real estate. Of course, the trigger for escape arises only when the condition is discovered after signatures bind the buyer to the agreement. Certainly, raising such concerns over conditions known to the buyer before signing, would not typically give rise to the right to terminate.

In central Indiana, most Realtors use standard purchase agreement forms provided to them through the Metropolitan Indianapolis Board of Realtors (“MIBOR”). MIBOR purchase agreements currently in use (as of 1/1/17) contain a paragraph that deals with the parties’ obligations concerning homeowner associations and covenants. The form is designed to allow the parties to negotiate the number of days in which the seller is required to disclose the HOA info and covenants, and the number of days in which the buyer has to object and rescind the entire agreement. Failure of the buyer to raise a timely objection will generally result in the buyer’s right to terminate. Similar provisions may be found in purchase agreements used throughout the state of Indiana whether they are boilerplate or uniquely drafted.

The language used in the standard MIBOR form is intentionally designed to close the loophole that would otherwise give buyers an out. Had such a provision not been included into the terms of the parties’ agreement, it would remain for the buyer to raise the issue any time prior to closing, provided the substantial condition(s) was or were discovered after signing the agreement.

It is important to note Indiana law requires the seller to provide information regarding the homeowner’s association, their contact information, assessments, and copies of the covenants. This is required pursuant to I.C. 32-21-5-8.5. However, failure on the part of the seller to provide this information does not limit the enforceability of the covenants. It may, however, open the door for the buyer after closing to sue the seller for a rescission of the sale based on a theory of “fraud”, since failing to disclose such information would be a failure to speak where the law imposes an obligation to disclose such information.

The great advantage of using the objection provided for in the standard MIBOR form, is that by using the escape clause built into the agreement, the buyer is more likely to terminate the agreement without incurring liability to the seller or any of the real estate agents, recover their earnest money, and avoid costs associated with defending a lawsuit.

Robert McNevin, Jr. is a partner with the Indianapolis law firm at Indy Advocate. His practice is primarily focused on construction and real estate law.

Nov 19
2

10 Common Questions Asked About Indiana Mechanic Liens

By | Mechanic's Lien | No Comments


Indiana Mechanic Liens

1. What is a lien, and what does it do?

  • ANSWER: A lien is a right that attaches to the property of another individual or entity. Once a lien is created the lien holder generally has the right to restrict the transfer of title to the property, whether that property is an automobile or a parcel of real estate.

2. How do Indiana mechanic liens differ from other types of liens?

  • ANSWER: Mechanic liens are generally created the minute a contractor provides services in the building, remodeling, or repair of a structure that is or will be permanently affixed to real estate. Other liens arise from other types of activity, such as a warehouseman’s lien for unpaid storage, a mortgage lien when a home buyer borrows money from a lender, or a judgment lien, when someone loses their case in court.

3. How is a Mechanic Lien created?

  • ANSWER: Generally, the minute a contractor, subcontractor, material supplier, or equipment rental company provides services, materials, or equipment for the construction, remodeling or repair of any type of structure, such as a home, commercial building, or a bridge, a lien against the structure being built, modified or repaired is automatically created as a matter of law. However, the mere creation of the lien does not make it enforceable.

4. When and how does a mechanic lien become enforceable?

  • ANSWER: In order for Indiana mechanic liens to become enforceable, it must first be “perfected”. In order to perfect a mechanic lien, the lien holder must follow the statutory requirements for recording the lien and observe the time limitations for recording the notice with the county recorder’s office. Mechanic liens on “type 2” structures, which are essentially all single or double unit residential homes, must be recorded within 60 days of the last date work, material or services were provided, or the mechanic lien is void. For all other structures, including commercial buildings, the lien holder has up to 90 days from the last date work, materials or services were provided on the project. Indiana requires a pre-lien notice be recorded in the office of the recorder 60 days from the first day work is performed on a residential type 2 structure and 90 days for new residential construction.

5. What can a property owner do to remove the lien from the real estate?

  • ANSWER: If the lien is valid and there is no dispute over the amount owed, then paying the lien holder in exchange for a release of lien or satisfaction of lien document may be the easiest way of removing it. If the amount demanded by the lien holder is unacceptable to the property owner, then the property owner may wish to challenge the lien. Indiana mechanic liens might be defeated for a number of reasons, including the failure to “perfect the lien” properly, or the failure to respond to a properly worded written demand to the lien holder to foreclose within 30 days or lose its lien rights, or through litigation that places the issues in dispute in the hands of a judge for resolution. A bond may also be secured to insure the payment of the lien, if the dispute can’t be resolved quickly, and the property owner needs to free up the property for the purpose of resale or refinancing.

6. How long does a mechanic lien last?

  • ANSWER: Indiana mechanic liens are good for one year from the date the notice of intention to hold a mechanic lien is recorded with the county recorder’s office. If the lien holder fails to file a lawsuit within that one-year period, the lien becomes void automatically by operation of law.

7. Who is responsible for paying attorney fees, when a mechanic lien is recorded?

  • ANSWER: Indiana courts, like most other states, follow the American Rule when it comes to awarding attorney fees. Under the American Rule each party is responsible for paying their own attorney fees, unless there is a provision written into a contract which is at the heart of the dispute, or there is a statute that gives the right to recover attorney fees to one party or another. Indiana’s mechanic lien statute just happens to be one of those statutes. In other words, if the contractor who properly records his lien notice has properly perfected his lien, and the contractor becomes the prevailing party in a lawsuit to enforce or foreclose on the lien, then it would be entitled to recover attorney fees. There is one exception, however, and that exception is created when the property owner has paid the general contractor the full amount of the contract prior to a subcontractor filing its lien notice. The subcontractor in that situation would still be entitled to recover the amount of his lien, but would not be entitled to recover attorney fees from the property owner.

8. What can be done if the contractor overstates the lien amount?

  • ANSWER: There are very few Indiana cases (common law) that discuss the ramifications of a mechanic lien that overstates the amount that is actually due. There is at least one Indiana case that appears to say the intentional act of grossly overstating the amount due on a mechanic lien may void the lien, while good faith and inadvertent mistakes will not void the lien. However, it also appears that the intentional act of grossly overstating the lien amount must also have either defrauded the property owner or caused some other type of harm. As of 3/26/2016 this issue has precious few appellate cases from which to turn for guidance. The door is open, however, and it is likely more appellate cases will develop to help clarify this issue.

9. Can real estate be sold with a mechanic lien filed against it?

  • ANSWER: Legally, the property can be sold by the owner, but the lien goes with it, so the new buyer will inherit the lien. The practical effect of this is to essentially bar the property owner from selling or refinancing the real estate. However, there are a number of ways to sell the property with a lien on it and they include the posting of a bond to remove the lien and/or escrowing funds from the sale of the property to insure payment of the lien pending the outcome of litigation.

10. What does it mean to foreclose on a mechanic lien?

  • ANSWER: Once Indiana mechanic liens are recorded and perfected, the lien holder may file a lawsuit to have its mechanic lien reduced to a judgment. The judgment then becomes a lien on the real estate. Although there may be other liens on the real estate that come before the mechanic’s lien and therefore have a priority status, the real estate can be sent to a Sheriff’s Sale after the lien holder secures a judgment. At the Sheriff’s Sale, the property will be sold to the highest bidder, subject to any other liens that have not been reduced to judgment as part of the litigation. The lien holder who becomes the judgment holder may bid some or all of its judgment at the Sheriff’s Sale, and if it is successful, the Sheriff will issue the successful bidder a new deed (a Sheriff’s Deed) to the real estate. For this reason most mortgage companies will call the loan and join in the foreclosure proceedings, when a mechanic lien foreclosure lawsuit is filed.

Rob McNevin is partner in the law firm of Kreider McNevin Schiff, LLP and an Indiana trial lawyer whose practice is primarily focused on issues pertaining to real estate and construction law. If you have questions about this article or the law to which it relates, contact him by e-mail at Rob@indyadvocate.com or by phone at 317-939-3000.

Nov 13
1
Home Contractors

Building an Energy Efficient Home – Solving Disputes over Indiana Energy Codes

By | Contractor Law | No Comments

Building an energy efficient home is an exciting and sometimes daunting project. Most people in this energy minded century want their home to be as energy efficient as possible within their means. Disputes may arise during the process regarding codes and in particular the 2012 Indiana Energy and Conservation Code 


Building an Energy Efficient HomeArchitects and builders have had some trouble complying with these recent codes. So, what is a home builder/consumer to do when disputes arise? One avenue now available to home builders, who may also be consumers, is the following:


“Indiana Code 22-13-5 grants the Building Law Compliance Officer (formerly known as the Building Commissioner) in the Indiana Department of Homeland Security the authority to interpret a building law or a fire safety law. These interpretations may be issued upon the written request of an interested person, which refers to a person that has a dispute with a county or a municipality regarding the interpretation of a building law or a fire safety law. Further, the Building Law Compliance Officer may issue a written interpretation of a building law or fire safety law whether or not the county or municipality has taken any action to enforce the building law or fire safety law. This means a home builder does not have to wait to be red tagged before requesting a written interpretation. Finally, a written interpretation binds the interested person and the county or municipality with whom the interested person has the dispute until the written interpretation is overruled by the Indiana Fire Prevention and Building Safety Commission. A written interpretation of a building law or fire safety law binds all counties and municipalities if the Building Law Compliance Officer publishes the written interpretation of the building law or fire safety law in the Indiana Register.”


Home builders or any “interested person” who have disputes regarding these Codes can now contact the Building Law Compliance Officer to have code interpretations reviewed and interpreted. Once the interpretation is published by the Compliance Officer and if favorable to the builder or “interested person”, it can only be overruled by the Indiana Fire Prevention and Building Safety Commission. So, building can continue until that time.


An interested person “ refers to a person that has a dispute with a county or a municipality regarding the interpretation of a building law or a fire safety law”, which if interpreted correctly, includes consumers as well as builders. However, it’s highly likely that those who will use this new avenue for dispute resolution, will in fact be general contractors or professional developers/builders, who may be found to be non-compliant. Savvy consumers acting as GCs for the building of their own homes may also be able to use this to their advantage. But how the average consumer, who hires a builder or developer, but has issues with potential non-compliance, will use this avenue of dispute resolution, if at all, remains to be seen.


Though likely to be used mostly by professional builders, this option for disputes could also be an avenue for the normal consumer who hires a GC to build their home. IF, they know about it, that is. If you have concerns or questions on building an energy efficient home, contact Indy Advocate on more information on this subject matter.

 

Jul 11
2
mold on wood

Problems With a Home Warranty

By | Contractor Law, Real Estate Law | No Comments

For one Indiana consumer, doing business with one of Indiana’s largest custom home builders was an absolute nightmare.  At the conclusion of the construction process, the builder, Hallmark Homes, Inc., persuaded her to sign a “zero punch list” based on the builder’s promise to remediate all problems under the builder’s “bumper to bumper home warranty”.  Then when she asked the builder to make good on their promise, the builder told her those issues weren’t covered under the warranty.

home warrantyAmong the issues Hallmark refused to remediate was a perpetually wet crawlspace that lead to a massive breakout of mold, and warped vinyl siding.   Adding to her frustration was the realization that she had signed a contract drafted by the builder that required her to use the builder’s pre-selected arbitrator to arbitrate the dispute.  The contract and home warranty were perfectly legal documents designed to essentially protect the builder at every turn.  That’s when she hired a construction attorney and began the arduous task of turning the tables on her builder. Shari Obermeyer stated, “

  • How did you come to select this builder?
  • What did you do to investigate the builder prior to signing a contract with them?
  • What did your attorney do that turned this thing around for you?
  • Did you get a good result in your arbitration award?
  • What advise would you give someone who was preparing to hire a builder to build their new home?

Indianapolis attorney, Rob McNevin, a partner with Kreider McNevin Schiff, LLP, said there are a number of things you should know before contracting with a builder.  Among the most important things a consumer should know are:

  1. Hire a real estate or construction attorney to look over the contract before you sign it.
  2. Don’t depend on the warranty to address pre-closing issues.  Force the seller to complete all issues prior to closing, while you can rely on contract principals to enforce your rights.
Apr 02
7
real estate fraud

Real Estate Fraud in Indiana

By | Real Estate Law | No Comments

real estate fraudIt is fundamental that sellers are motivated to get the highest price whenever a sale takes place. This is true for almost everything, including real estate. Conversely, buyers want to purchase for the lowest price. Everyone engaged in a real estate purchase wants to buy low and sell high. This fact of human nature sometimes causes people who are generally law abiding citizens to engage in conduct that is intended to deceive, especially sellers who need to sell their home.

Real Estate Fraud

Indiana has attempted to do away with this problem by requiring every seller to fill out and sign under oath a disclosure form stating the status of various components of the real estate. This form is called the Indiana Seller’s Disclosure Form and it is intended to eliminate fraud from the residential real estate sales market. All licensed real estate brokers in the State of Indiana as well as sellers who sell their own real estate (For Sale by Owners) are required to make that form available to any prospective buyer who expresses and interest in purchasing residential real estate. That form must be updated at the time of closing to demonstrate any changes to the original information and to confirm everything on the original disclosure remains unchanged.

Despite the requirement for the form, some sellers put false information on the form and buyers who rely on that form often become the victims. Where deceptive acts are intentional, such actions are fraudulent. They may also be fraudulent where they are merely accidental, as might be the case when someone declares something with careless disregard for the truth. In either case the victims of fraud now have a written sworn statement by the home seller, which they can use as compelling objective evidence to help prove the seller committed fraud. For the victim, this often times proves to be very helpful, especially when they end up in court seeking damages from the seller.

Unlike a simple breach of contract claim, real estate fraud gives way to punitive damages, which can total up to three times the actual damages suffered by the victim and also allows the Judge to award attorney fees. This makes the would-be advantages of committing a fraud much less attractive. Another remedy a victim may seek is rescission of contract. A rescission is a return of the home to the seller and a return of the money to the buyer. This may be more complicated where the buyer relies on mortgage financing and a bank or other financial party are involved.

Buyers should take great care to submit purchase offers that make the sale subject to inspection. They should also take care to secure the services of a reputable home inspector. Since most home inspectors limit their liability by contract, it is crucial to employ a home inspector who will conduct an extremely thorough inspection of the whole house. If problems are discovered and the parties reach agreement through the inspection response phase, buyers should have the home re-inspected to insure the problems the seller agreed to fix were completed satisfactorily. Realtors should bring this to their client’s attention and either insist that they do so or have their client sign a waiver releasing the realtor from liability for the buyer’s failure to have follow up inspections completed.

Real estate fraud is rampant in the real estate world and even law abiding citizens sometimes engage in deceptive practices to achieve their goals. Whether you are purchasing from a complete stranger or your best friend, be sure to review the Seller’s Disclosure form and hire a reputable home inspector. Following these tips will help insure you buy a problem free home. You can find more information on real estate and our attorneys that can help you in your unique case.

Mar 18
3
Indiana Home Improvement Act

Indiana Home Improvement Act

By | Contractor Law, Real Estate Law | No Comments

Indiana Home Improvement ActHomeowners in Indiana are protected from unscrupulous contractors by a consumer protection statute called the Indiana Home Improvement Act. The statute can be found at I.C. 24-5-11-1. While this statute is designed to protect homeowners, it can be difficult to read and comprehend. One of the more confusing aspects of this statute is that it does not tell the consumer what to do if the contractor they are working with violates the statute. In order for the consumer to take action under the Indiana Home Improvement Act, they must apply Indiana’s Deceptive Practice Act.

Indiana Home Improvement Act

Indiana’s Deceptive Practice Act, which can be found at I.C. 24-5-0.5-1 prohibits many commonly used business practices which are deemed unfair to consumers. Indiana’s Deceptive Practice Act specifically lists violations of Indiana’s Home Improvement Act as being a deceptive practice act. The two acts must be read carefully and followed precisely in order for a consumer to secure the protections both statutes were designed to provide. Unfortunately for most consumers they either don’t know about the protections of these statutes, or they fail to understand how to use them. Consumers and even attorneys who fail to properly apply the law may lose out on some very helpful features hidden in the confusing language of those statutes. Consumers would be well advised to hire an attorney with experience in handling matters that fall under these statutes. If you have had a problem with contractors regarding faulty fire pit additions that have been installed an attorney that is skilled in mechanic liens is advised.

One of the key advantages consumers may gain by properly following these two consumer protection statutes is the right to recover their attorney fees, if they hire a lawyer to enforce their rights. This is a very important advantage in disputes with contractors, because generally litigants in civil lawsuits do not have the right to recover their attorney fees, unless they have a contract which gives them that right or a statute that provides for that specific type of recovery. Since contractors rarely write provisions into their contracts that give homeowners the right to recover their attorney fees, the Indiana Deceptive Practice Act does just that. Having the right to recover attorney fees is a huge advantage in any dispute and that fact can make all the difference where consumers are simply engaged in pre-litigation settlement discussions, and quite obviously after litigation begins.

If you have a dispute with your contractor, be sure to hire a lawyer who knows how to use these statutes to your advantage.

Feb 16
2
Indiana lien law

No Lien Contracts in Indiana

By | Contractor Law, Liens, Mechanic's Lien | No Comments

No-Lien Contracts in IndianaUnder Indiana law suppliers of labor, materials and equipment have the right, under certain circumstances, to hold and enforce a mechanic lien to insure they are paid for their efforts.  Those lien rights can be quite vexing for the property owner, when payment issues arise.  In order to avoid the problems associated with mechanic liens, property owners and general contractors may specify in their contracts that the contractors and subcontractors waive their rights to record a mechanic lien.  However, such provisions, under Indiana law, are null and void on commercial construction projects pursuant to Indiana Code 32-28-3-16.

No Lien Contracts in Indiana

Essentially, no lien contracts in Indiana are fair game for Class 2 structures.  Under this same statute, “class 2 structures” as well as projects involving certain types of public utilities, are excluded.  Indiana Code 22-12-1-5 defines a class 2 structure as any building that contains one or two dwelling units.  It does not require the owner to live in one of those units, but it does require that the unit(s) be used as a residence.  Essentially residential buildings with one or two units are exempt from the prohibition of the commercial no-lien contracts.

Where a contract for a commercial project contains a no-lien provision, the contract itself is not void, but rather the offending provision(s) within the contract are void and unenforceable.  Any provision in a commercial construction contract that attempts to bar contractors from filing such liens or otherwise contain language that would require them to waive such lien rights before they are paid for their services is void and unenforceable.

It is apparent that the general assembly felt the size and scope of commercial projects had the potential to do great harm to subcontractors, if no-lien contract provisions were permitted.  They did not have the same concerns for subcontractors working on residential properties and therefore, subcontractors working on residential properties should take care to insure that the owners has not recorded a no-lien contract with the county recorder in an effort to eliminate those lien rights.

The no-lien contract provision is alive and well for owners or general contractors who wish to keep liens from being recorded and enforced on residential construction projects in Indiana.  The statutory support for this no-lien contract is found at Indiana Code 32-28-3-1(e) and (f).   In order to properly utilize this no-lien provision, the contract must be in writing, provide an accurate legal description of the real estate, be notarized, and recorded with the county recorder within five (5) days of the date the contract was fully executed.  Failure to satisfy these requirements will void the no-lien provision.

Feb 05
2

Indiana Mechanic Lien For Residential Real Estate

By | Mechanic's Lien, Real Estate Law | No Comments

INDIANA MECHANIC LIEN FOR RESIDENTIAL REAL ESTATE

Anyone who deals with the construction or remodeling of a new home in Indiana should have a basic understanding of Indiana’s mechanic lien law. When contractors, suppliers, or equipment rental companies provide labor, material or equipment for the construction or improvement of a residential property, they may have lien rights. If they do not get paid, they may file a lien against the property. The filing of a lien against any real estate will in most cases prevent the owner from selling or refinancing their home, and it may also be construed as a breach of the terms of a promissory note and mortgage on the property. Consequently, a properly filed mechanic lien can be a powerful tool for a contractor, supplier or equipment rental company to collect money due them for the project.

The actual filing of a mechanic lien requires the contractor, supplier or equipment rental company prepare and record duplicate copies of a written notice to the owners of the property that they intend to hold a lien on the owner(s)’ real estate. According to the Indiana Mechanic Lien statute, the holder of the lien must provide a written notice to the owners which contains the name and address of the lien holder, the amount of the lien, the last date labor, materials or services were provided to the job site, a statement that the lien is being filed within 60 days of the last date labor, services, or equipment was provided to the job site, a brief description of the labor, materials or services provided. The notice must be signed and notarized and recorded with the county recorder in the county where the property is located. The recording of the notice must be technically accurate and timely filed, or the lien may be invalid. Real estate attorneys are generally very well equipped to make sure the liens are perfected, which is to say filed in accordance with Indiana law.

Once a Indiana mechanic lien for residential real estate is perfected, the holder of the lien has one year in which to file a lawsuit to foreclose on the lien. Failure to file a lawsuit within the one year period, will cause the lien to become void and unenforceable. If the holder of the lien fails to foreclose on the lien before the one year expiration date, he or she may still have the right to sue the general contractor or the property owner under a theory of breach of contract or unjust enrichment, but unless there is a contract that gives them the right to recover attorney fees, they will not be able to recover attorney fees, as they might when suing to foreclose on a mechanic lien.

Contractors who work under other contractors rather than the property owners must record a “Pre-Lien Notice” with the county recorder’s office within 60 days of the first day they provided labor, materials or services to the job site. Failure to record and send the owners a copy of the pre-lien notice will invalidate any subsequently filed mechanic lien on a residential property. The purpose of this notice is to give the property owner sufficient notice that someone other than the contractor they contracted with is working on their home and may ultimately file a lien on the property, if they are not paid. By having notice of the identity and the scope of the work being performed by subcontractors, the homeowner can take steps to insure the subcontractors are properly paid and, accordingly, no liens are filed. Obtaining lien releases or putting every contractor’s name on the check may help guard against the filing of a mechanic lien.

If the contractor contracts directly with the homeowner then no pre-lien notice is required. However, the lien notice on a residential property must be recorded within 60 days of the last day labor, material or equipment was provided to the website, whether a pre-lien notice is required or not. For commercial projects, no pre-lien notice is ever required and the lien notice must be filed within 90 days of the last date labor, materials or equipment was provided to the job site.

This article is a general overview of Indiana’s mechanic lien statute (sometimes referred to as Indiana’s Mechanic’s Lien Statute). There are many technicalities to the statute and property owners and contractors would be well advised to hire a qualified real estate lawyer to assist them where a mechanic lien is an issue.

For more information on mechanic lien resolution recording and enforcement see our real estate page.

Jan 04
2

Indiana Mechanic’s Lien Statute

By | Mechanic's Lien, Real Estate Law | No Comments

Indiana Mechanic’s Lien Statute

NUANCES OF INDIANA’S PRE-LIEN NOTICE REQUIREMENTS

FOUND WITHIN THE INDIANA MECHANIC’S LIEN STATUTE

Indiana, like most states, has enacted a mechanic lien law designed to help insure those who provide labor, material and services on construction projects get paid. The statute found at I.C. 32-28-3-1 through I.C. 32-28-3-18 seeks to protect the contractor rather than the consumer. However, like any good sword, it has a sharp edge that can cut both ways.

This article provides a brief description of some of the appellate cases in Indiana that help shape the landscape of the Indiana Mechanic’s Lien Statute law within the state. These rulings help define the meaning of the words and establish boundaries for applying Indiana’s mechanic lien laws.

NEW CONTRACT-NEW RULES:

Where a “no-lien” contract was signed by the property owner and the general contractor, and the contract was recorded within 5 days, as required by the Indiana mechanic lien statute, neither the general contractor nor the sub-contractors working under it had any legal right to file a pre-lien notice or a lien notice. However, despite that fact, a sub-contractor, who was initially barred from filing a lien, was entitled to file a lien and was not required to record and give a pre-lien notice when he later contracted directly with the property owners after the general contractor walked off the job. Feitler v. Springfield Enterprises, Inc. ,981 N.E.2d 155 (Ind.App. 2013).

AN OWNER IS AN OWNER UNLESS:

Other cases have wrestled with meaning of the term “owner” within Indiana’s mechanic lien statute. In the Shackelford case, the Court determined that the contractor (Shackelford) properly perfected his lien by serving a pre-lien notice on the builder, who was the owner of record since there was no recorded evidence of the identity or address of the intended buyer of the house.

Shackelford v. Rise, 659 N.E.2d 1142 (Ind.App. 1996).

Conversely, in the Mid America case, the court held Mid America’s lien invalid even though they served the owner of record with a pre-lien notice. The Court in the Mid America case held that although Mid America followed the precise language of the mechanic lien notice statute by serving the owners of record at the time the notice was recorded, Mid America’s strict reliance upon the statute essentially frustrated the purpose of the statute by giving notice to a party who would have no interest in it. They had no interest in it because they had sold the property to the Horns and Mid America knew that was the case and failed to serve the new buyers. Consequently, the Court in the Mid America case, held Mid America failed to perfect its lien rights with the recording of the “technically correct” pre-lien notice.

For contractors, the take away should be send a notice to anyone they know or suspect to be an “owner” whether they are buying or selling.

WHAT’S IN A NAME?

In the Von Tobel case, the Court held that where the lien holder’s name on a pre-lien notice is sufficiently similar to that of the name on the actual lien notice as to apprise the property owner that the claimant has a lien for materials furnished, the lien should be perfected and validated. In that particular case the name on the pre-lien notice was from Von Toble Lumber & Home Center, Inc.” and the lien notice from Von Tobel Corporation.” The former being a wholly owned subsidiary of the later.

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