Click here to print:  "Best Practices for Contracts"

By Anna E. Eberlin

(Published by the Idaho Business Review) 

     We have all seen the mortgage crisis play out in the news over the past several years.  From mortgage companies foreclosing on the wrong property to lenders completely halting foreclosures due to paperwork issues, the problems run the gamut.  These lenders failed to focus on the details, and the details are coming back to haunt them now.  So what can contractors learn from the mortgage crisis?  Maintain control of your record-keeping and document everything.

     Although it may not be the first thing contractors think about when starting a new job, good record-keeping should be high on the priority list of construction contractors.  It is critical in setting up the scope of work and terms of the agreement, submitting applications for payment, getting proper lien waivers from subcontractors and/or suppliers, documenting delay issues or other problems on the job, verifying compliance with scopes of work and/or code requirements, and, ultimately, proving claims or defenses if litigation should arise.

     Every project should start with a written contract—no more handshakes in place of a contract and no more one-page invoices substituting as a contract.  In years past when business was booming, some projects moved forward without a written contract and construction went smoothly.  Even if there were a few issues, they were often ignored because the money was still flowing and everyone was getting paid.  

     Today, however, with every dollar and cent accounted for in both large and small projects, problems are inevitable without a detailed written contract in place.  What happens when there is a question about scope of work?  How are changes to be handled?  Is this a time-and-materials contract, a fixed price contract, or a cost plus contract?  How often and in what amount are payments to be made?  When will as-built drawings be provided, and what happens if they aren’t?  Is all the necessary insurance in place, and who is paying for it?  Who is responsible for defects or delays?  

     All of these questions can be answered with a written contract in place.  Laying out and clearly defining the duties, rights, and obligations of all the parties is critical.  Eliminating ambiguity between the owner and contractor and between the contractor and subcontractors will in turn eliminate future disputes. 

     Accurately documenting your work throughout a project is also important when it comes to protecting your right to place a lien on a property.  As a lien claimant you must be able to support the amount of your lien via the written contract, change orders, daily reports, pay applications, and any other documents to show the amount of the contract and when you started and stopped work. 

     The lien itself is also crucial, as it must comply with all the requirements of Idaho Code § 45-501 et seq. to be enforceable.  The claim of lien must state: 1) the amount of the claimant’s demand, after deducting all credits and offsets; 2) the name of the owner or reputed owner of the property, if known; 3) the name of the person who hired the claimant or to whom materials or equipment were furnished; 4) a sufficient description of the property; and 5) a verification by the oath of the claimant, his agent or attorney, to the effect that the affiant believes the same to be just.  With a written contract in place and good record-keeping throughout the project, most—if not all—of this information should be readily available. 

     Because disputes can arise even in the simplest of projects, record-keeping is a key component in the defense or pursuit of a claim.  Supporting your claims or defenses in litigation can be a nightmare without proper documentation, and you could end up losing a case because of your failure to keep thorough and timely records.  Mortgage companies and other lenders fell into the trap of keeping incomplete or non-existent records and they are paying the price for that.  Contractors should take note and use best practices: start with a written contract, uphold and enforce that written contract throughout the project, and accurately document your work.  Putting in a little time and money up front and throughout the project will save a lot of time and money later.

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Anna Eberlin is an attorney with the law firm Meuleman Mollerup LLP, practicing in the areas of construction law and real property acquisition, development, finance, and leasing.  Ms. Eberlin had five years of real estate management and investment experience prior to joining Meuleman Mollerup.  Ms. Eberlin can be reached at 208.342.6066 or by email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .  More information at www.lawidaho.com. 

(Published by the Idaho Business Review, March 2010)

 The current real estate market has set the stage for some remarkable deals.  However, before you decide to take the plunge to buy (or sell) real estate, make sure you have all your bases covered.  In 2009, the Idaho Supreme Court decided two cases which have significant ramifications for buyers, sellers and real estate professionals alike.  Each of the cases addressed legal descriptions in real estate agreements.  The first case, Ray v. Frasure, addressed legal descriptions in purchase and sale agreements, and the second case, Callies v. O'Neal, addressed legal descriptions in listing agreements.

 An agreement for the sale of real property is unique in the eyes of the law and thus the requirements to have an enforceable purchase and sale agreement for real property are significant.  Among other requirements, the statute of frauds requires an agreement to contain a legally enforceable description of the real property.    

 Agreements for the sale of real property that fail to comply with the statute of frauds are unenforceable.  The reason behind this rule of law is to prevent individuals or entities from fraudulently claiming they entered into a real estate sales contract.

 In Ray v. Frasure, the Idaho Supreme Court ruled that a physical address is not a legally enforceable legal description.  In other words, a physical street address does not adequately describe the property so that it is possible for someone to identify "exactly" what property the seller is conveying to the buyer.  The Idaho Supreme Court laid out two ways in which to identify "exactly" what property is the subject of the real estate purchase and sale agreement.

 First, a description will be sufficient so long as the "quantity, identity or boundaries of property can be determined from the face of the [purchase and sale agreement]."

 Second, the purchase and sale agreement may refer to an external record containing a sufficient property description, like an attachment which recites the correct legal description.  Keep in mind, however, that any attachment referenced in the purchase and sale agreement must actually be attached before the agreement is executed.

 Sophisticated sellers, buyers and real estate professionals must keep in mind that a street address is not legally sufficient under the statute of frauds.  In other words, if the parties choose to use only a street address to describe the subject real property, then the contract is legally unenforceable.

 If a real estate purchase which looked good on paper at one time later turns sour, the buyer may be able to use the insufficient property description to "get out" of the contract.  By the same token, a seller may use the insufficient property description to "get out" of a sales contract when he later receives a better offer.

 The second case addressing the sufficiency of legal descriptions decided by the Idaho Supreme Court in 2009 is Callies v. O'Neal.  The Court ruled in this case that the requirement for a legal description in a listing agreement is more lenient than the requirement for a legal description in a purchase and sales agreement.

In that case, the listing agreement described an entire development as having "32 zero lot line 4 plexes" and identified the property address and complete legal description simply by stating the county, city and zip code.  The agreement also stated that the legal description was attached as addendum #1, but no such addendum was actually attached.  A week after the listing agreements were executed the owner provided the broker with the master plat and legal description of the property.

 The Court held that for purposes of real estate listing agreements, a property description "is sufficient where it is shown that there is no misunderstanding between the property owner and the broker as to the property being offered for sale."  Because the owner had provided the broker with plats and legal descriptions, both parties understood what properties were to be sold.  The listing agreement was thus upheld as enforceable because the descriptions were sufficient to identify the properties between the broker and seller, and extrinsic evidence could have been admitted to cure the defective description.

 It is important for all players in real estate deals to keep in mind the legal description requirements for both a contract for the sale of real property and a listing agreement for real property.  It may seem like a nuisance to provide more than the street address, but it is well-worth the time to ensure that a legally enforceable description is always included in a purchase and sale agreement.  Although not required, to be on the safe side, always include a legal description in a listing agreement as well to prevent any misunderstanding between the owner and the broker.   

Anna Eberlin is an attorney with the law firm Meuleman Mollerup LLP, practicing in the areas of real property acquisition, development, finance, and leasing.  Ms. Eberlin had five years of real estate management and investment experience prior to joining Meuleman Mollerup.  Ms. Eberlin can be reached at 208.342.6066 or by email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .  More information at www.lawidaho.com.

(Published by the Idaho Business Review, June 2009)

           In the past, many members of the construction industry have also become real property owners.  Despite its perception in the current economy, real estate may still be a strong long-term investment.  In this market, with many foreclosing lenders and short sales, investors and other bargain hunters have numerous attractive opportunities to acquire distressed real estate.  Due diligence, however, is sometimes only hastily conducted before the purchase agreement is signed, with no opportunity for renegotiation of terms.  Buyers with cash are picking up properties quickly and sorting out the problems later, not realizing what they are really buying into.  

Although due diligence has always been important, comprehensive research and understanding is mandatory in down markets, especially where many investment opportunities are presented as bargains and sellers are in a rush to close deals because of underlying problems, whether financial problems, land use problems, environmental problems, or other distresses.  The goal of the due diligence process is to eliminate unknown risk.  Potential buyers need to ensure that their properties are suitable-legally and from a practical business perspective-for their intended use.  In-depth due diligence is necessary to determine what a property is really worth.   

Buyers must have an understanding of zoning and land use issues.  Upon identifying a property, the potential buyer should determine that a property's intended use is lawful under all applicable land-use laws, codes, and regulations, including zoning ordinances, subdivision requirements, and any local agency's future plans and policies regarding the property.  In addition, buyers should examine whether the property is located in a special financing zone or redevelopment area.  Although normally established to provide financing for revitalization and redevelopment projects, most implementing plans include land-use restrictions.  

The physical condition of the property is also significant.  A licensed engineer's inspection should confirm the property's repair and maintenance needs, both long term and near term, as well as estimates of these costs. There may be a substantial difference between a seller's assessment of these needs and costs are and an engineer's. 

Review of the title and survey of the potential property is vital.  The title commitment and survey may not be prepared for some weeks after the contract has been signed, so it is not unusual for the contract to have a contingency period relating to the review of these materials that is separate from the remaining due diligence period. Usually the purchaser will have some time after receipt of the title commitment, exception documents, and survey to object to matters shown in them; then the seller has a period of time to cure or have the title company insure over the matters.  A purchaser should take the time to determine if any matters adversely affect the value of the property.  There may be easements encumbering the property or easements benefiting the property; there may be a water or sewer pipe that runs across the adjoining owner's property for which an easement has not been obtained; there may be encroachments;  there may be liens; or there may be other covenants and restrictions.   

Another important area to complete due diligence is current contractual obligations.  If the identified property is in the middle of construction, the buyer should review all construction contracts relating to initial construction, determining the assignability of warranties, guarantees, indemnities, and any other rights.  The buyer should review private restrictions, such as reciprocal easement agreements and covenants, conditions, and restrictions.  These so-called CC&R's often include limitations and restrictions that can preclude a desired use or can include obligations for future maintenance costs which could result in substantial future expense to the buyer.  The buyer should also review any service contracts, including any property management agreements, maintenance agreements, and any other service agreements.  It is important to determine whether these agreements will transfer, or whether the buyer can procure new service-providers with (potentially) lower fees.

The current tenant or occupant status is also important.  The purchase of a single family residence, seemingly simple, may turn ugly if the current tenant refuses to vacate the premises.  Retail investments can be particularly risky if the entitlements associated with a specific development are conditioned upon the continued operation of key anchor tenants.  Accordingly, in addition to obtaining and reviewing a summary of the leases associated with the property, a potential buyer should also evaluate the financial status of individual tenants. 

Prospective buyers also must conduct comprehensive environmental due diligence to determine whether environmental liabilities exist, their potential scale, and how and when they may be triggered.  A buyer may want to hire an outside environmental consultant experienced in environmental analysis and engineering and potentially perform a Phase I inspection in order to reduce or completely eliminate certain potential liabilities. In addition, prospective buyers also should review applicable environmental regulations-particularly new regulations related to storm-water management and "green" building-as these regulations may limit future proposed uses or may result in substantial costs and potential liabilities for property owners. 

            To prevent buyer's remorse, be sure to include a specified due diligence period in the purchase agreement and the right to terminate the purchase agreement if the property is unsatisfactory for any reason.  Skipping over proper due diligence of a potential investment property in order to obtain a "good deal" is never a wise idea.  If a deal looks too good to be true, it probably is. 

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  Anna Eberlin is an associate with the law firm Meuleman Mollerup LLP, practicing in the areas of real property acquisition, development, finance, and leasing.  Ms. Eberlin had five years of real estate management and investment experience prior to joining Meuleman Mollerup.  Ms. Eberlin can be reached at 208.342.6066 or by email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .  More information at www.lawidaho.com.

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(as published in the Idaho Business Review, February 2008)

The purpose of the Idaho lien statutes, Idaho Code § 45-501 through § 45-525, is to protect the right of contractors, material suppliers, and others who perform work or enhance the value of the property of another.  It is usually held that a general enactment for the protection of laborers and materialmen will not extend to an architect who simply prepares plans and specifications. 
 
        The decisions throughout state courts are consistent on this point, except for those states whose statutes specifically identify architects as those with a lien right.  Thus, architects are considered under some state lien statutes as those who perform lienable work.  In Idaho, however, whether architects have a right to a claim of lien is an open question. 

  Idaho Code § 45-501 provides a lien right to certain persons who improve real property.  The first part of the statute states: “Every person performing labor upon, or furnishing materials to be used in the construction, alteration or repair of any . . . building. . . and every professional engineer or licensed surveyor under contract who prepares or furnishes designs, plans, plats  . . . has a lien upon the same for the work or labor done or professional services or material furnished.”   

Although professional engineers and licensed surveyors are mentioned as those who have a right to lien, architects are not explicitly included.   

The next clause in the statute, however, does mention architects.  It states “every contractor, subcontractor, architect, builder, or any person having charge of any mining claim, or of the construction, alteration or repair, either in whole or in part, of any building or other improvement, as aforesaid, shall be held to be the agent of the owner for the purpose of this chapter.”  I.C. § 45-501.   

Idaho courts have accepted the universally recognized rule of statutory construction that, where a statute specifies certain things, the designation of such things excludes all others.  Thus, it appears that the drafters of the statute intended that architects be included as those who may be “agents” of the owner, but not necessarily as those who have a right to lien.  
        Because the Idaho legislature did not include architects in the lien part of the statute, the argument can be made that the legislature intended to exclude architects as persons who are entitled to a materialman’s lien under the statute.  Furthermore, the next clause of the statute includes “architects” as those who are “held to be the agent of the owner.”  I.C. § 45-501.   

In addition, I.C. § 45-512, which declares the priority of lien claimants, does not mention architects.  The statutory language shows that the legislature indeed thought about architects, and it was not mere inadvertence to leave them out of the statute as those who have a lien right. 

Every issue has more than one side, so what is the argument if one is looking to establish lien rights for architects?  The counter position is that architects should have a right to lien because they are those who have arguably improved the property by providing architectural plans utilized in the ultimate improvement of the property.  The argument can be made that architects are providing professional services, just as a professional engineer or licensed surveyor.   

At this point the reader may be thinking, “Okay, this debate is all very interesting, but where does Idaho stand on this issue today?”  The Idaho Supreme Court has not decided the question of whether architects have a lien right in Idaho.  The only appellate case to mention the issue was Bastian v. Gafford in 1977.  There, the court stated that they were not deciding whether the lien statutes “should be construed to hold that performing labor upon, or furnishing materials to be used in the construction of a building includes the drafting of architectural plans.”  

In the end, it is unclear whether architects have a lien in Idaho.  Even though Idaho courts have recognized that the lien statutes are to be liberally construed in the favor of those who perform labor or furnish materials to be used in the construction, alteration, or repair of a building or structure, this rule still does not permit courts to recognize a lien where none exists or where none was intended by the legislature.   

            Post Note:  Additional articles on lien rights previously published in the Idaho Construction Review can be found on Meuleman Mollerup’s website, www.lawidaho.com:  Arnie Wagner’s “Mechanic’s Lien Placed on Your Project Cannot Be Ignored,” and Jon Bauer’s “Contractors, Be Aware of Other States’ Lien Rights.”
 

 

AREAS OF EXPERTISE

CONSTRUCTION LAW / LITIGATION

• Construction contract negotiations and litigation
• Mechanic's lien claims and surety bond claims

REAL ESTATE LAW

• Real property law including purchase and sale transactions, leases, and easements 

PROFESSIONAL EXPERIENCE

2007 - Present: Associate, Meuleman Mollerup LLP

Five years experience in real estate management and investment

BUSINESS & INDUSTRY ACTIVITIES

• Idaho State Bar: Young Lawyers Section, Litigation Section 
• American Bar Association, Sections on Real Estate and Probate & Trust Law
• Assistance League of Idaho, Advisory Board (2012)
• CREW (Commercial Real Estate Women) Idaho
• National Association of Women in Construction (NAWIC)
• Editorial Advisory Board (2011-2014), The Advocate, Idaho State Bar Magazine
• Idaho Women Lawyers, Board of Directors (2009)
• Editor, Fall 2006 Edition, Idaho Law Review

PUBLICATIONS

• Author:  Clearing the Smoke:  Wildland Firefighter Liability in the Wake of the Cramer Fire, 43 Idaho Law Review 275 (2006)
• Author:  Lawyers Serving as Third-Party Neutrals:  No Clear Ethical Guidelines, The Advocate, Idaho Bar Journal (September 2005)
• Contributing author:  The Design-Build Deskbook 4th Edition, ABA Publications, 2010.

EDUCATION

• University of Idaho College of Law, J.D., cum laude, 2007 
James E. Rogers Scholarship Recipient
Alumni Award for Excellence, 2006
• Albertson College of Idaho, B.A., cum laude, Music, Minor in Entrepreneurship, 2002

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