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The
State of Nevada’s Construction Industry – Today and Tomorrow |
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The
Construction Zone recently conducted a frank and wide-ranging interview with
Cindy Creighton, the Executive Director of the Nevada Subcontractors
Association (NSA) – one of the real behind-the-scenes leaders of
Nevada’s construction industry, and one of the most articulate and
effective advocates of the construction industry in Nevada. Q:
How did the last Legislature “work” for the construction
industry?
A:
The
bills that we advocated and pushed in the Legislature in 2007 did not pass,
for a variety of reasons, but perhaps most importantly because the
construction industry did not present a united front. This session proved the importance of the varied representatives of the industry working together with a consistent message if we want the legislature to pay attention to our needs. This is our goal for the 2008 election and the 2009 legislative session, and we’re already working on strengthening ties with others in the industry – the state of our housing industry is also a motivator for working together. |
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Obviously
we’re moving forward with the issues that impact subcontractors – a
moving target because of the housing industry right now – to ensure that
the 2009 session is more successful. Q:
In what ways are the markets a “moving target” and how does that impact
subcontractors?
A:
Subcontractors – especially those in the housing area – are
laying off or downsizing because of the housing industry.
Q:
Are Construction Defects still a hot-button issue or has the Supreme
Court ruling “solved” that problem A:
Construction
defects lawsuits are still prolific, though their nature has changed.
There are lots of single-house lawsuits, whereas before we’d been
contending primarily with class action – but there are subcontractors are
still dealing with both. For
instance, that case in Anthem with the defective alternative-to-copper
plumbing material is both a class action suit and a series of individual
actions. We
hope that once the lower court begins ruling based on the Supreme Court
decision a month ago, this will change – we’ll see more individual
actions with more specificity – allowing subcontractors to fix their own
errors and ignore the errors of others not related to their work.
This
ruling is going to stop a lot of needle-in-a-haystack searches by
subcontractors who literally didn’t know the full nature of the complaint
– and without that knowledge, they couldn’t make an informed decision to
fix the problem or turn the complaint over to insurance.
When
facing construction defect claims and suits before, we “never knew” what
the problem was – so we couldn’t fix it.
However, with this new ruling, we should know what the problem is
before a repair-request becomes a case.
We’re trying to narrow complaints down to “legitimate cases”
and eliminate opportunistic suits. No more will we be confronted with
“we’ve tested 10 percent of 300 homes, and found plumbing errors in 10
percent of them” – now, contractors have to know which house, which
defect in which room – so we can decide to fix it or turn it over to
insurance. The
subcontractor community now has to be allowed to go in and fix a problem –
that’s the legislative intent – before the lawsuit is filed.
This is a major move forward – but there may be unintended
consequences. Now, for class
action suits, the problems have to match (ranch homes won’t be included in
suits about two-story houses with plumbing defects on the second floor, for
instance). Also,
the subcontractors will only have to deal with claims that involve their own
work – landscapers won’t be doing roofing inspections when threatened
with suits, etc.
However, in the inevitable realm of “unintended consequences,” we
expect that inspection costs, expert witness fees and other costs will go up
– but claims will probably decrease. Nobody
can be sure until the ruling is interpreted, but this is what we expect.
In
addition, because the suits are now single-home suits – one member of NSA
received 32 suits last week – but they are all discrete claims from
individual homeowners – each complaint lists what is wrong – and where
– and our member can now decide to fix – or fight – or turn the claims
over to insurance. Under
the new Supreme Court ruling – which serves to protect homeowners and
contractors – if the homeowners don’t provide contractors and
subcontractors with specificity in terms of the complaint, then they don’t
have a basis for suit. Further,
if homeowners don’t come through with proper notifications as spelled out
in the 2005 legislation – notification intended to allow contractors to
actually make repairs – then they have no basis for a suit. Now,
under the Supreme Court ruling, subcontractors can fight back against
abusively vague class-action and personal lawsuits. However,
this ruling wasn’t issued to help the subcontractors – instead, the
court ruled on the intent of the legislature, which sought to level the
playing field and provide a balance between the legitimate needs of
homeowners and contractors. In
every “real” construction defects case, both the homeowner and the
subcontractor want to be made whole – the homeowner wants the product they
bought, the subcontractor wants to fix the problem so the client is
satisfied – with no need for lawsuits.
Both homeowners and subcontractors – and contractors – have felt
frustration over the previous system. For
homeowners, it was all about subpoenas and discovery and testing and chaos.
The status quo system usually proved overwhelming to homeowners as well as
contractors – especially when the construction defects claims dealt with
whole neighborhoods. In those
neighborhoods, the homeowners are all affected, and they all suffer.
With one-on-one repairs, the resolution of a construction defect
claim is far less intrusive. Subcontractors
can finally make the homeowners whole with minimal intrusion and disruption,
and without having to hire lawyers to watch their backs. Real problems can
be fixed now – instead of only after years in the courts.
If homeowners are part of a lawsuit, they can’t allow
subcontractors – or others – to fix the problem until the insurance
company and everybody has inspected and documented the problem. That could
take years of living with the problem. If it is a real problem, tying things
up in the court – is that good public policy? If it’s not a real
problem, and the homeowners can live with it, is that problem really worth a
major punitive claim? But
there is opposition to a peaceful and constructive resolution to the ongoing
construction defect issue. There
is a cottage industry in the construction defect field – specialized
lawyers, full-time professional “expert witnesses” – this group
doesn’t want to see things resolved easily.
They’ll keep pushing to block rational resolutions that offer
contractors and homeowners a win-win solution – that would put these
professional construction defect hangers-on out of business. With
few exceptions, homeowners want things fixed fast – and they want to fix
them outside the legal system. Except
for the few opportunists who don’t care about what’s right, but only
what they can get, there’s no “lobby” for continuing the complex and
unfair system that has been bedeviling homeowners and contractors for
decades. Those who want to
litigate – hoping to win a legal-system lottery – are not good for our
economy or our country, but those instances where homeowners want to cash in
are few and far between. There’s
currently an incentive to start a lawsuit – legal fees, expert witnesses
fees are guaranteed (Nevada is the only state that does this – and the
Supreme Court didn’t address this). And
while the subcontractors can now fix problems instead of having to go find
their attorneys every time a complaint comes in, they’re still liable for
legal fees if suits have been filed (Chapter 40.655 – Limitations of
Recovery – sections B and F). That’s
a big incentive for plaintiff’s lawyers to push for “sue first”
approaches. These cases don’t
have to start based on merit – and all too often they don’t.
We want the system to transform from being money/settlement driven
and revert to a “merits of the case” structure, which offers an
incentive to fix it instead of worrying about suits and costs and related
issues. Of course, the professional litigators remain incentivized to oppose
rational change in favor of a status quo that benefits them. The
Supreme Court took a step in the right direction – subcontractors have to
be told what and where the problem is, and they can then go fix it and
short-circuit the lawsuit process (but if suit’s been filed, there are
still legal fees). Only the
subcontractor who is responsible for the problem has to address the issue
– before, when the contractors didn’t know the nature of the problem,
all the subcontractors were included – which is not equitable. Q:
What do you see in 2008? A:
Into
2008 – the NSA staff and members will be very active with all branches of
government, explaining the story to anybody who has an interest, to anyone
who can provide relief to homeowners or subcontractors.
That includes educating the candidates – even those who don’t win
are better educated, and that has to be a good thing – they’ll still
contribute to society. Also, we
know that educating the public is important – and this applies beyond
construction. The better
informed the electorate is, the better we’ll all be.
The
long, drawn-out presidential election will make it hard to reach the
electorate on local issues, but that doesn’t make it any less important
– and, despite “conventional wisdom” that the Presidential race is
what most impacts people, the local races are where quality-of-life issues
– water districts, utilities, municipal codes, etc. – are decided.
In many ways, these kinds of issues impact citizens more than the
Presidential race. Important as
national political elections are, as Tip O’Neal said, “all politics is
local” – and local issues are the ones that impact us the most. If
there’s going to be a major issue facing our industry in 2008, its
immigration reform. (Editor’s
note – an estimated 24 percent of Nevada construction jobs are held by
immigrants – there are no good estimates of how many of those workers may
have immigration-status issues). The
Feds have failed to do anything constructive about this issue, so the local
candidates will feel that they have to do something – if only because
immigration reform is the issue that local candidates will hear as they go
door-to-door. Nationwide, there
are over 1,000 pieces of local/state legislation addressing immigration that
are waiting to be passed. While
nobody supports illegal immigration, there is no consensus on the solution
to this issue – so instead of getting a consistent, rational and
nationwide answer, we’ll get a host of localized opinions creating local
laws. It’s not good for the country when there’s a national problem like
immigration reform begging for a national solution, but because there
isn’t, we can expect a lot of local solutions. Beyond
the election, there are many other serious issues coming to a head in 2008.
Unfortunately, for subcontractors, construction defect litigation is
just one more thing on the citizen’s “plate” – a bad solution hurts
them in the wallet (homes are their biggest investment) – yet they don’t
understand what a good solution is, or should be.
Without guidance, the Legislature would normally not be inclined to
take bold action. We’re hoping to turn this around in 2009, but to do
that, we need to elect pro-solution state assembly representatives and
senators. As
an association, it is our role to keep the legislative and executive
branches notified about the real-world impact of issues such as construction
defects, and to weigh in on the Supreme Court elections.
We see ourselves as an education resource – which is why we are
involved in elections. We provide input, ask intelligent questions of
decision-makers, offer research, and represent one of Nevada’s largest
industries. Decisions are better
when all sides are at the table, and when decisions are “informed.”
We never ignore candidates who are not likely to win (who are likely
to vote for or against us) – we educate them and build relationships –
they’re homeowners, and they could be back later for another shot at being
part of government. Besides, no
election is a “done deal” until the vote has taken – we’ve all seen
front-runners melt down and dark horse candidates win at the last minute. Q:
Looking Ahead – what will be hot for Nevada’s construction industry in
2008:
A:
For
2008, nationally the analysts say the economy isn’t going to improve –
locally, this translates to meaning more of the same – more depressed
housing construction, more struggling for contractors and subcontractors who
build new homes. Of
course, Nevada has a unique economy, with huge big-box casino growth on the
Strip, but this flat national economy and equally-flat house-construction
market, will tamp down homeowners’ big purchases.
Typically,
the Presidential election will also get people thinking “let’s wait and
see who gets elected” – and this year, the election cycle has grown to
two years, with an extended damping impact on the economy and on
individuals’ purchase choices. We
can expect more remodeling and not more new-home purchases – most of this
is about the election, and people’s collective individual choices to
“wait and see” – especially when so many big issues are debated.
The news that comes out of election campaigns, with charges and
counter charges, can be frightening. When
people are scared, they tend to nest – to wait and see what’s coming. Remember
how it was after the 2001 terror attack. People flew less – they still
traveled, but by car. To survive in an “on-hold” economy, we have to do
things in new ways, to keep growing and changing and responding.
Don’t
expect a positive turn-around in the economy in 2008 – the Presidential
election cycle will see to that. However,
I hope people note that the bottom of the ticket – the local races – may
have more impact on their lives than the top of the ticket (President) –
and act, and vote, accordingly. |
Call (702) 615-7644 |
