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PREFACE ............................................................................................ xiii
ACKNOWLEDGEMENTS....................................................................... xv
ABOUT THE AUTHORS....................................................................... xvii
CHAPTER 1................................................................................................ 1
SOURCES OF NEVADA CONSTRUCTION LAW...................................... 1
1.1 STATUTES AND REGULATIONS............................................... 1
1.2 COMMON LAW OR "CASE LAW".............................................. 1
chapter 2 ............................................................................................... 4
BUSINESS ENTITY TYPES...................................................................... 4
2.1 SOLE PROPRIETORSHIP............................................................. 4
2.1.1 Governing Law....................................................................... 5
2.1.2 Ownership.............................................................................. 5
2.1.3 Ownership Liabiity/Management Liability.............................. 6
2.1.4 Management of Business........................................................ 6
2.1.5 Taxation................................................................................. 6
2.1.6 Distribution of Profits and Losses........................................... 6
2.2 GENERAL PARTNERSHIP & JOINT VENTURE......................... 6
2.2.1 Governing Law....................................................................... 6
2.2.2 Ownership.............................................................................. 6
2.2.3 Owner liability........................................................................ 7
2.2.4 Management of Business........................................................ 7
2.2.5 Management Liability............................................................. 7
2.2.6 Taxation................................................................................. 7
2.2.7 Division of Profits and Losses................................................ 7
2.2.7.1 Division of Profits................................................................. 7
2.2.7.2 Division of Losses................................................................. 7
2.3 LIMITED PARTNERSHIP............................................................. 8
2.3.1 Governing Law....................................................................... 8
2.3.2 Ownership.............................................................................. 8
2.3.3 Owner liability........................................................................ 8
2.3.4 Management of Business........................................................ 9
2.3.5 Management Liability............................................................. 9
2.3.6 Taxation................................................................................. 9
2.3.7 Division of Profits and Losses................................................ 9
2.3.7.1 Division of Profits................................................................. 9
2.3.7.2 Division of Losses................................................................. 9
2.4 CORPORATION.......................................................................... 9
2.4.1 Governing Law.. 9
2.4.2 Ownership. 10
2.4.3 Owner Liability. 10
2.4.4 Management of Business. 10
2.4.5 Management Liability. 11
2.4.6 Taxation. 11
2.4.7 Division of Profits and Losses. 12
2.4.7.1 Division of Profits. 12
2.4.7.2 Division of Losses. 12
2.5 LIMITED LIABILITY COMPANY....................................... 12
2.5.1 Governing Law.. 12
2.5.2 Ownership. 12
2.5.3 Owner Liability. 12
2.5.4 Management of Business. 12
2.5.5 Management Liability. 13
2.5.6 Taxation. 13
2.5.7 Distribution of Profits and Losses. 13
2.5.7.1 Distribution of Profits. 13
2.5.7.2 Distribution of Losses. 13
CHAPTER 3 17
Construction Lending. 17
3.1 Construction lending Industry. 17
3.1.1 Representation of the Construction Lender 18
3.2 The Construction Loan Agreement: terms and conditions........... 19
3.2.1 Conformance with the Construction Loan and Take-Out Commitments........................................ 19
3.2.2 Factual Background to the Project 19
3.2.2.1 Underwriting the Construction Loan. 19
3.2.2.2 Construction Loan Agreement & Documents. 19
3.2.3 Loan Amount and Repayment 20
3.2.4 Interest Rate. 21
3.2.5 Recourse Lending. 21
3.2.6 Lien Priority Over Prior Encumbrances. 21
3.2.7 Lien Priority Vis-à-Vis Mechanic’s Lien Claims. 22
3.2.7.1 The “Obligatory” Versus the “Optional” Advance Rule. 22
3.2.7.1.1 The Southern Trust Rule. 22
3.2.7.1.2 Subsequent Defaults. 23
3.2.7.2 Nevada Revised Statute §§106.300, et seq. 23
3.2.7.3 Title Insurance Protection. 24
3.2.7.4 Labor and Material Bonds. 25
3.2.8 Approval of Subcontractors and Contracts. 25
3.2.9 Assurances of Completion. 26
3.2.9.1 Retainage. 26
3.2.9.2 Payment and Performance Bonds................................... 26
3.2.9.3 Construction Disbursement Controls. 27
3.2.9.4 Additional Assurances. 27
3.3 Closing The Construction Loan. 27
3.4 Construction Loan disbursements. 27
3.4.1 Application for Disbursement 28
3.4.2 Architect’s Certificate. 28
3.4.3 General Contractor’s Certificate. 28
3.4.4 Title Insurance. 29
3.4.5 Lender’s Inspections. 29
3.4.6 Construction Control Companies. 29
3.4.7 Methods of Loan Disbursement 30
3.4.7.1 Voucher Methods. 30
3.4.7.2 Direct Payment Methods. 30
3.4.7.3 Joint Checks. 31
3.4.7.4 The Construction Escrow.. 31
3.4.7.5 The Final Loan Advance. 31
3.5 Liability for Construction defects. 32
3.6 The defaulting developer 32
3.6.1 Workout Negotiations. 33
3.6.2 The Mortgagee-in-Possession. 33
3.6.3 The Deed in Lieu of Foreclosure. 33
3.6.4 The Foreclosure Sale. 34
3.6.5 The Receivership. 34
3.6.6 Bankruptcy Relief. 34
3.7 The final loan takeout 35
CHAPTER 4 39
LICENSING OF DESIGN PROFESSIONALS AND CONTRACTORS. 39
4.1 DEFINITIONS of professions. 39
4.1.1 Contractors. 39
4.1.2 Professional Engineer 40
4.1.3 Professional Land Surveyor 41
4.1.4 Architect 42
4.1.5 Interior Design. 43
4.1.6 Residential Design. 43
4.1.7 Landscape Architect 43
4.2 Nevada State CONTRACTORS BOARD.. 45
4.2.1 Licensed Contractor 45
4.3 Nevada state board of engineers and land surveyors. 46
4.3.1 Engineer 46
4.3.2 Land Surveyors. 46
4.4 Architecture, Interior design and Residential Design. 47
4.4.1 Architect 47
4.4.2 Interior Design. 48
4.4.3 Residential Design. 48
4.5 LANDSCAPE ARCHITECTURE. 48
chapter 5 53
5.1 Public vs. Private Projects. 53
5.1.1 Public Bid Process. 53
5.1.1.1 The Term “Public Work” is Defined in Nev. Rev. Stat. § 338.010(15) 53
5.1.1.2 Solicitation of Bids for Public Works Projects. 54
5.1.1.3 Required Contents of Bids. 54
5.1.1.3.1 Nev. Rev. Stat. § 338.144 Requirements. 54
5.1.1.3.2 Nev. Rev. Stat. § 408.337 Requirements. 54
5.1.1.3.3 Nev. Rev. Stat. § 338.1377 Requirements. 54
5.1.1.4 Award of Contract to Licensed Contractor 57
5.1.1.5 Lowest Responsible and Responsive Bidder 58
5.2 Private Bid Projects. 61
5.2.1 Value Engineering. 62
5.2.2 Open vs. Closed Bid. 62
5.3 BONDS. 62
5.3.1 Bond Types and Terms. 62
5.3.1.1 Performance Bonds. 63
5.3.1.2 Payment Bonds/Mechanics Lien Release Bond. 64
5.3.1.3 License Bond. 66
5.3.1.4 Bid Bonds. 67
5.3.2 Bid Bond Types and Terms. 67
5.3.2.1 Damage Bond. 67
5.3.2.2 Penal Bond (or Forfeiture Bond) 68
5.4 Handling Mistakes in the Bidding Process. 68
5.4.1 Mistakes in Judgment 68
5.4.2 Clerical or Mathematical Error 69
5.4.3 Suggestions –Bid Bonds and Bid Errors. 69
chapter 6 71
Construction Contract Law.. 71
6.1 Standard Form Contracts. 71
6.2 Implied Contract Clauses. 71
6.2.1 Covenant of Good Faith and Fair Dealing. 71
6.2.2 Warranty of Workmanship & Implied Contractual Indemnity. 71
6.2.3 Warranty of Adequacy of Plans and Specifications. 72
6.3 Differing Site Conditions Clause. 72
6.4 No Damage for Delay Cause. 72
6.5 Common Clauses to Include in Construction Contracts. 73
6.5.1 Integration Clause. 73
6.5.2 The Parol Evidence Rule. 73
6.5.2.1 Nev. Rev. Stat. § 104A.2202. 73
6.5.3 Amendment Clause. 73
6.5.4 Statute of Limitation Clause. 73
6.5.5 Choice of Law and Forum Clause. 73
6.5.6 Arbitration Clause. 74
6.5.7 Indemnification Clause. 74
6.5.8 Time is of the Essence Clause. 74
6.5.9 Waiver Clause. 74
6.5.10 Liquidated Damages Clause. 74
6.5.11 Severability Clause. 74
6.6 Considerations in Writing the Contract 75
6.6.1 Make the Contract Understandable. 75
6.6.2 Contract Documents. 75
6.6.3 Identify the Scope of Work to be Performed by Contractor or Subcontractor 75
6.6.4 Representations or Warranties. 75
6.6.5 Period of Performance. 75
6.6.6 Contract Price and Payment 75
6.7 No lien provisions in Nevada Construction Contracts. 76
6.8 Pay if Paid” or “Pay when Paid” Clauses. 76
chapter 7 79
Bonds 79
7.1 Bid bonds. 79
7.2 Performance and Payment bonds. 80
7.2.1 Introduction. 80
7.2.2 The Purpose of Both the Payment and the Performance .......... Bond is to Protect the Public Entity From a Default of the General Contractor 80
7.2.2.1 General Purpose and History of Suretyship. 80
7.2.2.2 Nevada Law Requires Performance and Payments Bonds For Public Construction. 80
7.2.2.3 The Bonds Must Generally be Construed in Favor of the Public Entity. 82
7.2.3 Because a Surety’s Liability is Co-Extensive With That of its .. Principal, the Surety is Often a Party to a Dispute About the Principal’s Obligations. 83
7.2.4 The Bond Claimant Must Properly Invoke the Bond To Avoid the Surety’s Possible Defenses. 84
7.2.5 The Surety Has Significant Leverage With Its Principal: The GIA.. 85
CHAPTER 8 89
NEVADA MECHANIC’S LIEN LAW... 89
8.1 WHAT IS A MECHANIC’S LIEN?. 89
8.2 WHO IS ENTITLED TO A MECHANIC’S LIEN?. 89
8.3 DOES NEVADA PROHIBIT CERTAIN TYPES OF CONTRACTUAL PROVISIONS?. 90
8.4 CAN AN EXISTING LIEN OR A “PROSPECTIVE LIEN RIGHT” BE “BONDED AROUND”?. 91
8.4.1. Posting the Bond. 91
8.4.2. Excepting to Sufficiency of Surety or Surety Bond. 92
8.4.3. Bringing An Action On the Lien Release Bond. 92
8.4.4. Enforcement of Liability of Principal and Surety. 96
8.5 CAN LIEN RIGHTS BE WAIVED IN EXCHANGE FOR PAYMENT?. 96
8.6 WHAT TYPES OF PRELIMINARY NOTICES ARE REQUIRED?. 110
8.6.1 Nev. Rev. Stat. § 108.245: Notice of Right to Lien a/k/a Pre-lien Notice. 110
8.6.2 Nev. Rev. Stat. § 108.226(6): Notice of Intent to Lien (Residential Only) 111
8.7 WHAT PROPERTY IS SUBJECT TO A MECHANIC’S LIEN?. 111
8.7.1 Nev. Rev. Stat. § 108.22172—The “Property”. 111
8.7.2 Nev. Rev. Stat. § 108.22218—The “Improvement”. 111
8.7.3 Nev. Rev. Stat. § 108.22188—The “Work of Improvement”. 112
8.7.4 Nev. Rev. Stat. § 108.231—“Multiple Buildings/Single Prime Contract”. 113
8.7.5 Nev. Rev. Stat. § 108.2403—“Lessee to Establish Construction Disbursement Account or Post Surety Bond”. 114
8.7.6 Nev. Rev. Stat. § 108.2407—“Lien Attaches to Funds in Construction Disbursement Account”. 114
8.7.7 Recording Notice of Non-Responsibility by Disinterested Owner 116
8.8 WHAT TYPES OF LABOR, MATERIALS AND SERVICES ARE LIENABLE?. 123
8.8.1 Labor 123
8.8.2 Personal Property and Trade Fixtures. 123
8.8.3 Fixtures. 123
8.9 HOW DO YOU PREPARE A MECHANIC’S LIEN?. 124
8.9.1 Determine the Owner and Property Description. 124
8.9.2 Nev. Rev. Stat. § 108.226—Time for Recording the Mechanic’s Lien. 125
8.9.3. Nev. Rev. Stat. § 108.227—Service of the Mechanic’s Lien. 125
8.9.4. Formal Requirements of the Mechanic’s Lien. 127
8.9.5 Nev. Rev. Stat. § 108.229—Amending the Lien. 130
8.10 HOW DO YOU ENFORCE YOUR LIEN?
