Pool, Outdoor Living Spaces and Landscaping Disputes: The primary characteristics of a pool, outdoor living space and/or landscaping Project are: (1) new or remodel pool construction, (2) new outdoor living spaces, to include patios, kitchens and sports courts (3) pond or lake construction or repair, or (4) driveway and sidewalk repair or construction. The typical disputes which occur during these types of Projects include:
- Design Defects: Before Homeowners sign a new construction pool Contract, the pool company typically prepares a beautiful rendering or mockup of the pool so the Homeowners can visualize the final product in their own backyard. Despite that, the final product rarely looks or functions as depicted in the drawings. In fact, most well-drafted pool Contracts expressly state that the renderings are not intended to be a true representation of the final product and that the customer waives any claims against the Contractor for deviations in the actual construction of the pool. Additionally, even though the Contract typically incorporates the plans and specifications, it is so common for pool contractors to inadvertently deviate from the plans regarding the pool’s depth, width, and length, that most pool Contracts allow for a 10% deviation. If the deviation is more than 10%, then the Contract typically contains a formula for calculating the limited compensation the Homeowners are entitled to recover for the deviation. The first step in prosecuting a claim for design defects, it to review or have a construction attorney review the terms of the Contract for provisions that waive or limit the Homeowners’ recovery for design defects. The second step is to retain a forensic pool expert to provide an opinion in support of the claim. Once that has been done, then the next step is typically initiation of the Chapter 27 RCLA process.
- Disputes Over Defective Workmanship: Disputes over defective work typically arise during the Project but might also be discovered sometime after Project completion (g., latent defects). If the Parties are unable to informally resolve the disputed issues, then the next step should be to consult with a qualified construction attorney to review the Contract, analyze the claim, and recommend a course of action. The Homeowners should also retain a forensic pool expert to perform an inspection and prepare a report. The report should identify: (1) the defects or nonconforming work, (2) any code violations or industry standards violated, (3), the proper way to correct the defective or nonconforming work, and (4) the cost to repair. This report will provide the Homeowners with support for their claim and a better understanding of the problem and how it can be resolved. With the report in hand, the next step is to invoke the Residential Construction Liability Act (see below for a discussion of the RCLA process), which is a mandatory step in bringing a claim against a pool Contractor for defective workmanship. Typically, it is advisable to retain a construction attorney to assist with this process. If the claim is not resolved through the RCLA process, then the next step would be to initiate binding arbitration or civil litigation, depending upon which is required by the Contract.
- Disputes Over Work Performed Without Permits and Licenses: All new pool construction located within city limits will require city approval (e., a permit) before the work begins and city inspections for code compliance during and upon final completion of the work (i.e., final inspection). Additionally, any Subcontractor performing electrical or plumbing work must be licensed by the governing Board for that specific trade and present that license to the city in order to obtain a permit. If the city discovers that unpermitted work is being performed, it will shut down the Project until a permit is obtained, and the work is inspected. If the work has been concealed (e.g., plumbing hidden behind gunite or plaster), then the city will typically require the work to be removed and replaced at the Homeowners’ expense. Although city inspections do not guarantee the work has been done correctly, inspections should decrease the likelihood that the work was improperly performed and in violation of code requirements. If work is completed without a permit, when the Homeowners list their house for sale, they will be required to disclose the unpermitted work (or risk being sued for failing to disclose) on the standard TREC Disclosure Statement, which could result in a diminution of the overall Property value. Another common issue that arises regarding permits, is that only the Contractor who obtained the permit can request inspections. Additionally, permits expire and typically only the party who obtained the permit can request an extension. If a dispute arises between the parties, then the Contractor will typically withhold requesting an inspection or renewing the permit as leverage for resolving the dispute.
- Disputes Over Delayed Progress or Completion: Outdoor Projects notoriously take longer to complete than anticipated. Unlike interior construction Projects, rain and bad weather are a common excusable delay for outdoor construction. Further, inclement weather can disrupt a Project way beyond the actual weather event, in that the ground may need to dry before work can recommence and it may be difficult to reschedule already busy Subcontractors. However, substantial delays are likely not caused by an excusable event and are typically related to Project mismanagement, including a lack of available funds to pay Subcontractors and Suppliers. This typically comes as a surprise since most all pool Contracts require payment in advance of the work being performed. This Contractual requirement is problematic because once the Contractor receives payment, it may lack the incentive to quickly return to the Project and may use the funds to pay non-Project related debts. If the Contractor has diverted funds from the Project, then the Contractor is likely in violation of the Texas Trust Fund Statute and may be criminally and personally liable. Another common occurrence for outdoor Projects, especially new pool construction Projects, is when the Contractor has been paid the Contract amount (or almost the entire amount) but fails to complete the final punch list and/or call for a final inspection. Regardless as to when the delay occurs, if it is substantial, then the next step should be to send the Contractor a Notice of Breach & Request to Cure Demand Letter written by a construction attorney.
- Disputes Over Payment: The most common payment disputes arise when the Contractor: (1) is paid money in advance of doing the work and never returns to the Project (theft) or substantially delays performance; (2) demands payment when payment is not due or when the work performed is defective and not corrected; (3) attempts to pass on cost overruns without first obtaining the Homeowners’ written approval or without the Contractual right to do so; or (4) fails to pay Subcontractors or Material Suppliers who in turn threaten to record a mechanic’s Lien against the Property. The Contractor’s lack of moral character and business management skills may be the root causes of the payment dispute. Consequently, most pool Contractors (even the National ones and franchises) live job-to-job and take money from the next job to pay for the labor/materials for the last job. Contractors who use Project funds for anything other than Project expenses violate the Texas Trust Fund Statute and can be criminally prosecuted for a third-degree felony and held personally liable for repaying the diverted funds to the Homeowners. Moreover, pursuant to the same statute, for Projects where costs will exceed $5,000.00, the Contractor is required to maintain and deposit the Homeowners’ funds into a checking account wherein the bank labels the statements with the title “construction account”. Homeowners have the right to review statements from this account to confirm the funds paid were used for Project related debts. Failure to maintain this account is a misdemeanor. Further, under the Texas Prompt Payment Act, Property owners have the legal right to withhold 110% of any amount in dispute from a Contractor’s progress or final payment, upon providing the Contractor with proper Notice as to why the funds are being withheld. Additionally, if the Property is the Property owners’ primary residence (homestead), then no one has the legal right to record a mechanic’s Lien against the Property unless there is a written Contract executed by both spouses. Moreover, Subcontractors do not have Lien rights if the pool Contractor has not satisfied the Contract requirement and if they do not first timely and properly serve a Notice of Claim before recording the Lien. However, the County Clerk will not act as a “gatekeeper” to prevent the recording of invalid Liens and as such, even if the Contractor or Subcontractors are not owed any money or fail to follow the strict Lien laws, the Clerk will still accept the Lien for filing.
