Not only has the pandemic created a plethora of challenges for society as a whole, but the construction industry is dealing with a difficult set of complications. The unique combination of lumber shortages around the country have caused building costs to rise. Further, the Phoenix real estate market has been active, which has led to the rise of and demand for new construction. New construction, combined with shortages and supply chain issues, has created several legal challenges. Here are a few things to understand when dealing with construction delays and their costs.
Lumbar Shortage Across the Country
Many lumber mills across the country shut down at the beginning of the COVID-19 pandemic. According to a Fox 10 Phoenix News article from last September, most were closed during March and April and some stayed closed longer. Thus, supply dropped while the real estate markets saw rising prices and increased activity. The article points out that many in the lumber industry forecasted slowdowns in construction activity and housing as a part of the pandemic. With the rapid bounce back of demand for housing and construction, especially in Arizona, the lumber industry has struggled to keep up with large order volume.
A related article from East Valley Tribune noted that the lumber shortage had increased the cost of building materials and construction process has put upward pressure on the price of residential homes in the valley. The inventory of single-family homes for sale has remained at historically low levels. This has generally meant that resale home values have increased as the cost of new construction has significantly increased.
Dealing with Construction Delay and Costs
Whether you’re a contractor, builder or homeowner, the impact of construction delays is being felt by most of the housing industry. The biggest challenge for anyone working on an active construction project or bidding out a prospective job is trying to sort out the increased costs and factor in further increases and delays of key building materials. This can naturally lead to some difficult decisions and potential legal issues. As we previously detailed in our article on Coronavirus construction delays from last year, the question of what party bears responsibility for the cost of delays should be addressed in the contract.
Whether you’re hiring a contractor for a small project or quoting a large construction project, the point of solid contracts is the accurate establishment of responsibilities, reasonable assessment of risk and compensation for any failures to deliver. A well-written contract will not need to specifically discuss lumber delays and associated increased costs during a pandemic if it includes sections for unforeseen risks and force majeure, often referred to as Acts of God.
A typical contract will cover reasonable or excusable delays, like inclement weather and natural disasters. It will also cover unreasonable delays, which often result in contractors and builders bearing responsibility for the costs. An unreasonable delay could range from simple mistakes to complete negligence that makes it so the project is not completed on time. Industry-wide lumber shortages and the on-going impact of a global pandemic are certainly not within the control of a contractor or builder. If the contract leaves open the possibility of increased costs of building materials, then those costs would likely need to be covered by the homeowner.
Fundamentally, Contracts are meant to allocate the risks and obligations between the parties. They are meant to consider such things as “Acts of God.” While certainly no one predicted a year-long pandemic, contracts should have provisions that account for any and all possibilities, including unforeseen problems such as lumber shortages. At MacQueen & Gottlieb, we take a wholistic review of all Contracts to make sure our clients are protected in all scenarios.
Value of an Experienced Real Estate and Construction Attorney in Phoenix
The attorneys at M&G Law regularly represent contractors, builders, investors, and individual homeowners with construction law issues in Arizona. We can assist in assessing a current matter caused by the delays or planning for an upcoming project. Our team of experienced attorneys can draft and review the contracts necessary to avoid any unnecessary liability with construction projects in Arizona. M&G Law can also help assess which party bears responsibility for any unforeseen increased costs in a project due to material shortages or procurement delays. Contact us today at 602-533-2840 to schedule a consultation or make an appointment online.