It is not unusual in the private real estate development industry to have common or overlapping ownership of property developers and constructors. Regardless of whether this is disclosed or undisclosed, it can pose risks and pitfalls for third parties on a project. This includes subcontractors, sureties, lenders and insurers.
A recent decision of the Montana Supreme Court provides an example. A developer and a constructor, commonly owned, entered into a collusive settlement agreement designed to subject the constructor’s insurer to an inflated liability claim. The court considered this fraudulent.
The second case in this issue involves a federal agency’s default termination of a contract for late completion. The agency did not waive the completion deadline through its conduct. And, the agency was not required to evaluate the time it would take to complete the work.
A third case comes from the Maine Supreme Court. A residential contractor violated state statute by working without a written agreement. The contractor was allowed to retain the payment it received, but incurred owner attorney fees and loss of mechanic’s lien rights.