September 22, 2008
The housing industry was hurting last spring before the most recent economic difficulties. Housing starts were already at a fifty year low. Commercial construct enjoyed a better fate but it appears that the home loan crisis has served to dry up money for commercial projects.
The recent collapse of Lehman Brothers and Merrill Lynch will make it even more difficult for borrowers to refinance commercial real estate loans.
According to UBS AG, the world’s largest manager of private wealth assets, eight of the top 10 investment banks accounted for about half of the loans packed into commercial mortgage-backed securities in 2006 and 2007. As of today, the eight are now either merging with other companies, no longer in business, or significantly reducing their real estate holdings.
By the end of 2012, UBS analysts anticipate a competitive market and estimate that almost $151 billion in commercial mortgage loans that were underwritten by investment banks and securitized will be due.
January 19, 2008
Washington’s construction statute of repose gives immunity to responsible people for damages that do not accrue until 6 years after the project — whether a bridge, a highrise, earthquake retrofitting or anything other than a condominium, which is 4 years — is put into the stream of commerce. This puts the burden of catastrophes on the victims.
Statutes of repose have been attacked constitutionally in a number of states. The result has usually been that the state legislature — at the behest of the building and insurance lobbies — passes a new law meeting, or appearing to meet, the unconstitutional aspects of the overturned law. Over the last several years the use of the statute of repose to avoid liability has increased. Increasingly we are hearing outcries about the injustice of its application.
In Minnesota a bridge failed killing many people. The local government had paid for a one hundred year bridge but when it failed after fewer than 20 years because of a design defect, the responsible people were render immune from suit by that state’s 10 year statute of repose. Only this summer — after the disaster — did legal professionals express outrage at the injustice of being unable to enforce warranties and representations that were a material part of the purchase price of the bridge.
In New Jersey the Supreme Court is considering a case in which a condominium developer made express representations to consumers knowing that they would rely on them. When these representation turned out to be false, the developer hid behind the statute of repose.
It is terribly hard to find a reasonable justification for Washington’s 6 year statute of repose, particularly when a new building is usually given a useful life of around forty years. Projections, pricing and even tax depreciation are based on the useful life of the building, bridge or other improvement. Despite all this we give immunity to everyone in the construction industry after 4 or 6 years.
The excuse — and it is a transparent excuse — for the law is that it would be too hard to determine the cause of a catastrophe after 4 years in the case of a condomium and 6 years with all other construction. The 4 year condominium law was passed however only because the responsible parties could be identified with certainty and there is absolutely no engineering difficulty determining causation that occurs after 6 years. Furthermore, the burden is on the plaintiff to prove causation so if it can’t be proven the suit fails. It is said sometimes that there might be intervening causes but this too is something that the system is supposed to address anyway before a judgment can be entered.