Table of
contents
FORWARD....................................................................... xiii
Acknowledgements................................................. xv
About the Authors................................................. xvii
CHAPTER 1
SOURCES OF KENTUCKY
CONSTRUCTION LAW
By: Ryan
R. Loghry
1.1 Statutes
And Regulations.................................... 1
1.2 Common
Law (“Case Law”)............................... 1
1.3 Local
Ordinances................................................ 2
CHAPTER 2
BUSINESS ENTITY TYPES
By: David
E. Longenecker
2.1 Sole
Proprietorship............................................. 3
2.1.1 Structural
Considerations.................................... 3
2.1.1.1 Tax
Considerations............................................. 4
2.2 Partnerships........................................................ 4
2.2.1 Structural
Considerations.................................... 4
2.2.1.1 General
Partnerships........................................... 4
2.2.1.2 Limited
Liability Partnerships............................. 5
2.2.1.3 Limited
Partnerships........................................... 6
2.2.2 Partnership
Tax Considerations.......................... 7
2.3 Joint
Venture...................................................... 7
2.4 Limited
Liability Company................................. 8
2.4.1 Structural
Considerations.................................... 8
2.4.2 Tax
Considerations............................................. 9
2.5 Corporations....................................................... 9
2.5.1 Structural
Considerations.................................... 9
2.5.2 Tax
Considerations........................................... 10
2.6 Piercing
The Corporate Veil.............................. 11
2.6.1 Personal
Liability for Nonpayment When a
Corporate
Owner, Officer, or Director Abuses the
Corporate
Form, or When A Subsidiary is a Tool of
its
Parent........................................................... 11
PRACTICE POINTERS:..................................................... 13
CHAPTER 3
Construction Lending
By: James
R. Williamson
3.1 Introduction...................................................... 17
3.2 Construction
Loan and Permanent Loan Interplay (Commitment Issues) 17
3.3 Risks
Associated with Construction Lending.... 20
3.4 Construction
Loan Agreement.......................... 22
3.5 Due
Diligence................................................... 24
3.6 Advancing
of Construction Loan Proceeds....... 27
3.7 Defaults
and Remedies..................................... 31
PRACTICE POINTERS:..................................................... 33
CHAPTER 4
DESIGN PROFESSIONAL AND CONTRACTOR
LICENSING
By: Ryan R. Loghry
4.1 Licensing
Of Design Professionals................... 35
4.1.1 Engineering....................................................... 35
4.1.1.1 The
practice of engineering.............................. 36
4.1.1.2 Engineers
performing services that do not constitute
the
“practice of engineering”............................ 36
4.1.1.3 Business
names and advertisements using
“engineer”
or “engineering”.............................. 37
4.1.1.4 When
an engineering license is not required..... 38
4.1.1.5 The
practice of engineering through business entities 38
4.1.1.6 Reciprocity....................................................... 39
4.1.2 Architecture...................................................... 39
4.1.2.1 The
practice of architecture.............................. 39
4.1.2.2 Exceptions
to the licensing requirement............ 40
4.1.3 The
practice of architecture through business entities 41
4.1.4 Reciprocity....................................................... 41
4.2 Enforceability
of Contracts by unlicensed
Design
professionals......................................... 42
4.3 Expert
testimony............................................... 43
4.3.1 Engineers.......................................................... 43
4.3.2 Architects......................................................... 43
4.3.3 Analysis............................................................ 43
4.4 General
Contractor licensing............................. 45
4.4.1 Plumbers........................................................... 45
4.4.1.1 Plumbing
defined............................................. 45
4.4.1.2 Insurance.......................................................... 45
4.4.1.3 Reciprocity....................................................... 46
4.4.2 Electrical
Contractors........................................ 46
4.4.2.1 Electrical
contractor defined............................. 46
4.4.3 Asbestos
Contractors........................................ 46
4.4.4 Fire
Protection Sprinkler Contractors................ 47
4.4.4.1 Exceptions
to license requirement.................... 47
4.4.4.2 Special
restrictions............................................ 47
4.4.4.3 Local
work....................................................... 47
4.4.5 HVAC
Contractors........................................... 48
4.4.6 New
boiler and pressure vessel contractors...... 48
4.4.7 Underground
petroleum storage tank contractors 49
4.4.8 Local
Licensing and Registration Requirements
for
General Contractors.................................... 49
4.4.9 Lexington Fayette Urban County Government. 49
4.4.10 Louisville-Jefferson
County Metro Government 51
PRACTICE POINTERS:..................................................... 51
CHAPTER 5
BUILDING CODES AND PERMITS
By: Angela
R. Stephens
5.1 Applicable
codes.............................................. 55
5.1.1 2002
Kentucky Building Code......................... 55
5.1.2 2002
Kentucky
Residential Code..................... 55
5.2 Enforcement
of codes Through Civil Actions... 55
5.2.1 KRS
198B.130................................................. 55
5.2.2 Building
Inspectors........................................... 56
5.2.3 Certificates
of Occupancy................................ 56
5.3 Building
Permits............................................... 57
5.3.1 When
Is A Permit Required.............................. 57
5.3.2 Process
To Obtain A Permit.............................. 57
5.4 Buildings
that must be designed by A licensed
architect
and/or A Licensed engineer
(KRS
323.033)................................................. 57
5.5 Kentucky State Board on Electric Generation and
Transmission
Siting........................................... 58
5.6 Kentucky Cabinet for Natural
Resources:
permits
for air emissions, water withdraws,
erosion
control, and discharges and solid
waste
disposal................................................... 59
PRACTICE POINTERS:..................................................... 60
CHAPTER 6
BIDDING AND OTHER PROCUREMENT METHODS
By: Buckner
Hinkle, Jr. and Mark W. Leach
1.1 Introduction...................................................... 63
1.2 The
Scope Of Kentucky’s
Procurement Statutes 63
1.3 Construction
Procurement Procedures.............. 64
1.4 Methods
Of Contracting................................... 64
1.5 Criteria
For Award............................................ 64
1.6 Exemptions
From Competitive Bidding............ 65
1.7 Public
School And Local Government Projects 66
1.8 Bidder
Prequalification..................................... 67
1.9 Bidding
Mistakes.............................................. 68
1.10 Subcontracting.................................................. 68
1.11 Bid
Protests....................................................... 68
1.12 Unfair
Trade Practices...................................... 70
CHAPTER 7
CONSTRUCTION CONTRACT LAW
By: Gregory P. Parsons
7.1 Contract
Essentials............................................ 75
7.2 Types
of Contracts........................................... 77
7.3 Contract
Interpretation...................................... 78
7.3.1 The
Parol Evidence Rule.................................. 78
7.3.2 Intent
of Parties................................................ 79
7.3.3 Common
and Technical Meanings of Contract
Language.......................................................... 79
7.3.4 Contracts
to be Interpreted Reasonably............ 79
7.3.5 Contract
Interpreted as a Whole........................ 80
7.3.6 Course
of Performance or Prior Dealings......... 80
7.3.7 Ambiguous
Terms Construed Against the Drafter 80
7.3.8 Specific
over General Terms............................ 81
7.3.9 Handwritten
Terms Preferred Over Typed or
Printed
Terms................................................... 81
7.3.10 Exclusion
by Inclusion..................................... 81
7.4 Key
Contract Clauses....................................... 82
7.4.1 Incorporation
By Reference............................. 82
7.4.2 Flow
Down Clauses.......................................... 82
7.4.3 Choice
of Law.................................................. 83
7.4.4 Forum
Selection Clauses................................... 83
7.4.5 Scope
of Work and Changes............................ 83
7.4.6 Liquidated
Damages......................................... 84
7.4.7 Indemnity......................................................... 84
7.4.8 Notice............................................................... 85
7.4.9 Time
of Completion......................................... 85
7.4.10 No
Damage for Delay....................................... 85
7.4.11 Right
to Stop Work........................................... 86
7.4.12 Right
to Terminate............................................ 86
7.4.13 Waiver
of Consequential Damages................... 86
7.4.14 Alternative
Dispute Resolution......................... 87
7.4.15 Changed
Conditions......................................... 88
7.4.16 Contingent
Payment Clauses............................. 88
7.5 Applicability
of the Uniform Commercial Code
to
Construction................................................. 89
PRACTICE POINTERS:..................................................... 90
CHAPTER 8
BONDS AND INSURANCE IN KENTUCKY
By: Anne
E. Gorham
8.1 Bonds............................................................... 95
8.1.1 Bid
Bonds......................................................... 96
8.1.2 Performance
Bonds.......................................... 96
8.1.3 Payment
Bonds................................................. 97
8.1.4 Insurance
for Construction Projects in
Kentucky.......................................................... 98
8.1.5 Rules
of Interpretation for Insurance Policies
in
Kentucky...................................................... 98
8.1.6 Builders’
Risk Insurance vs. Property
Insurance.......................................................... 99
8.1.7 Commercial
General Liability Insurance and the
Indemnity
Agreement....................................... 99
PRACTICE POINTERS:................................................... 100
CHAPTER 9
CHANGE ORDERS
BY: Joseph L. Hardesty, Matthew A. Gillies, Angela R. Stephens
9.1 The
Reality of Construction Contract
Modification................................................... 103
9.2 Change
Orders In General.............................. 103
9.3 Formal
Change Procedures............................. 104
9.4 Change
Orders v. Construction Change
Directives....................................................... 105
9.5 Change
Orders v. The Cardinal Change Doctrine 105
9.6 Consideration
For Contract Modifications...... 106
9.7 Contractor’s
Duty to Proceed with Disputed
Work;
and Constructive Changes.................... 107
9.8 Over-Meticulous
Inspection and the Acceptance
of
the Work.................................................... 107
9.9 Public
Contracts.............................................. 108
PRACTICE POINTERS:................................................... 108
CHAPTER 10
MECHANICS’ AND MATERIALMEN’S LIENS
By: Ryan
R. Loghry
10.1 Right
To A Mechanics’ Lien........................... 111
10.1.1 Nature
of services rendered and materials
furnished........................................................ 112
10.1.1.1 Labor.............................................................. 112
10.1.1.2 Materials......................................................... 112
10.1.1.3 Supplies.......................................................... 113
10.1.1.4 Preparatory
or fabricating work...................... 114
10.1.1.5 Overhead,
insurance, taxes, and profit........... 114
10.1.1.6 Delay
damages............................................... 114
10.1.2 Necessity
of written contract or consent of
owner............................................................. 114
10.1.3 Persons
entitled to a lien................................. 115
10.1.4 Engineers’,
architects’, and land surveyors’ liens 115
10.1.5 Residential
Construction Liens....................... 116
10.2 Interests
Subject To Mechanics’ Liens............ 116
10.2.1 Private
projects............................................... 116
10.2.1.1 Projects
involving leasehold interests.............. 116
10.2.2 Fixtures........................................................... 118
10.2.3 Public
projects................................................ 118
10.3 Perfecting
A Mechanics’ Lien......................... 118
10.3.1 Private
projects............................................... 119
10.3.1.1 Preliminary
statement of lien.......................... 119
10.3.1.2 Preliminary
notice of intent to file a lien......... 119
10.3.1.2.1 Extra
work...................................................... 120
10.3.1.3 Filing
the statement of lien.............................. 122
10.3.1.3.1 Time
for filing................................................ 122
10.3.1.3.2 Form
and content............................................ 122
10.3.1.3.3 Place
for filing................................................ 123
10.3.1.4 Notice
of filing............................................... 124
10.3.1.5 Amendment
of lien statement......................... 124
10.3.1.6 Filing
one or more lien statements.................. 124
10.3.2 Public
projects................................................ 124
10.3.2.1 Preliminary
lien statement............................... 125
10.3.2.2 Filing
the statement of lien.............................. 125
10.3.2.2.1 Time
for filing................................................ 125
10.3.2.2.2 Form
and content............................................ 125
10.3.2.2.3 Place
for filing................................................ 126
10.3.2.2.4 Perfecting
the lien........................................... 126
10.3.2.2.5 Protest
by contractor....................................... 126
10.4 Operation
And Effect Of A Perfected Mechanics’
Lien
on private projects.................................. 127
10.4.1 Amount
and extent of lien.............................. 127
10.4.2 Accrual
and duration of lien........................... 127
10.5 Lien
priority.................................................... 128
10.5.1 Priority
between mechanics’ lien claimants and
other
creditors................................................. 128
10.5.2 Priority
between general contractors,
subcontractors,
and materialmen.................... 129
10.5.3 Limitations
on the amount of mechanics’ lien
claims............................................................. 130
10.5.4 Public
projects................................................ 131
10.5.5 Kentucky cases involving
the priority of
mechanics’
liens............................................. 132
10.6 Enforcement
Of A Mechanics’ Lien............... 133
10.6.1 Time
to sue..................................................... 134
10.6.2 Parties
To The Lawsuit................................... 134
10.6.3 Venue............................................................. 135
10.6.4 The
Complaint................................................ 135
10.6.4.1 Other
claims................................................... 135
10.6.5 Execution
And Enforcement Of Judgment..... 136
10.7 Lien
Prevention And Defenses....................... 136
10.7.1 Pre-Project
Due Diligence............................... 137
10.7.2 Payment
Bonds............................................... 137
10.7.3 Contractual
Mechanics’ Lien Waivers............ 137
10.7.4 Releases
And Waivers Of Lien During
Performance................................................... 139
10.7.5 Bonding
Off Liens.......................................... 139
10.7.6 Payment.......................................................... 141
10.7.7 Releases
of Mechanics’ liens.......................... 141
10.8 Sales,
evictions, and forfeitures...................... 142
10.9 Bankruptcy
issues........................................... 143
10.9.1 The
automatic stay.......................................... 143
10.9.2 Kentucky bankruptcy
cases............................ 144
PRACTICE POINTERS:................................................... 146
CHAPTER 11
CONSTRUCTION DISPUTES – THEORIES OF LIABILITY
By: Ryan
R. Loghry
11.1 Breach
of contract.......................................... 153
11.1.1 Breach
of warranty......................................... 153
11.1.1.1 Express
warranties.......................................... 153
11.1.1.2 Implied
warranties.......................................... 154
