Even before the COVID-19 global pandemic, the construction industry has been “going global” using available technology and Cloud-based data storage and file sharing on all phases of projects. For example, an owner might hire a London-based architect to design a transportation hub in the United States. The London architect might delegate its Building Information Modeling (BIM) work to a company in New Zealand. Cloud and internet-based platforms make all this possible, enabling the General Contractor or Construction Manager to offer as part of its services one-stop paperless project management, stored on the Cloud and password protected.
Referring to the disruptions brought on by the COVID-19 crisis as the “new normal” has quickly become part of our everyday lexicon. Rising above a crisis, however, is more about adapting to change and innovating than it is about preserving the status quo. While we look at the pandemic as only the “current normal”, we are pushing our way through,focused on being stronger than we were beforehand.
As the country starts its slow crawl towards reopening, I sat down with respected colleague and Construction Law attorney, Joy Spillis Lundeen, to talk about changes brought on by the crisis and how the construction industry will move forward post-pandemic.
Recently, in our P3 Focus Blog, we pointed out that now is the perfect time for a federal infrastructure bill. Such a bill would jump-start the economy, begin to close the infrastructure gap that currently exists, and do it all at a time where these projects could be expedited because of low usage rates due to the pandemic.
Miami-Dade County is the prime example of where new infrastructure dollars could make a big impact. The County’s Strategic Miami Area Rapid Transit Plan contemplates federal funding for a number of its corridors. This funding would specifically benefit construction of rapid transit for the North Corridor, which would link Miami International Airport to the northern part of the County, near Hard Rock Stadium. Metrorail, as opposed to bus rapid transit, will likely only be an option for that corridor if the federal government provides funding. There are many other projects in the pipeline that would benefit from a federal infrastructure stimulus. For example, the County is currently evaluating proposals for the Miami International Airport Capital Improvement Program, which is a multi-billion dollar program that will modernize the airport and greatly increase its capacity. The County could also put this funding towards the overhaul of its water and sewer system, which is in need of several billion dollars of critical repairs and upgrades.
Clearly, the County has billions of dollars worth of projects in the pipeline that will only be improved and completed more efficiently with the passage of a federal infrastructure bill. Some would argue that the effect of the ongoing pandemic alone necessitates the economic stimulus that would result from a federal infrastructure bill. However, taken out of the current economic context, now is the time for the federal government to provide the long-promised infusion of federal infrastructure funding for the simple fact that places like the County have recognized that the time for improving and investing in infrastructure is past due, and are taking action to fix it.
This information is intended to inform our clients and other friends about legal developments, including recent decisions of various municipalities, legislative, and administrative bodies. Because of the rapidly changing landscape related to COVID-19, we intend to send out regular updates. The information we provide is not intended as legal advice and viewers/readers should not rely on information contained in these materials to make business or legal decisions. Before making any legal decisions, consult your lawyer. Please do not hesitate to contact us should you need assistance responding to the many issues which have arisen, and will continue to arise, out of this situation.
Over the last few years, certain nontraditional lenders and a few banks have asked for a pledge of the ownership interest in borrowers as additional security to their mortgage on the property. The typical reason provided is that this allows the lender to avoid a long and costly foreclosure if the borrower fails to make its mortgage payments.
While the above is true, it also allows the lender to substitute a nonjudicial proceeding for a judicial proceeding. A foreclosure is a judicial action and an equitable proceeding. This means that it is unlikely that a judge in a foreclosure action will allow a property to be forfeited for anything other than a serious default which materially impairs the lender’s security. So a failure to provide income statements or the borrower’s or guarantor’s financial statements is unlikely to allow a lender to acquire the borrower’s equity in the property through a foreclosure.
In addition, in the event of a dispute with the lender over the administration of the loan, the time period required to complete a contested foreclosure, typically about a year, allows for the possibility of refinancing and taking an existing difficult lender off the property.
Enforcement of a pledge does not involve any court or judge to monitor the fairness of the proceeding. In many cases, the entire proceeding can be completed in 30-60 days. Any failure to comply with the terms of the loan documents typically allows the lender to accelerate the debt after a 10-day notice and schedule a sale of the ownership interest. The speed of such proceedings, while favorable to a lender, makes it impossible to refinance a difficult or unsavory lender off the property and may even impair a well-capitalized borrower’s ability to repay the debt by truncating the period to acquire the necessary liquidity.
In today’s lending environment, where loan to value ratios are typically in the 50-60% range, a borrower’s equity interest in its property is substantial, and borrowers should be wary of providing an ownership pledge in addition to a mortgage. Any such pledge may involve a potential forfeiture of their investment if they fail or are unable to perform all of the covenants in the loan documents.
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As news of the novel coronavirus spread, “flattening the curve” became the rallying cry for social distancing efforts. The ‘curve’ in question refers to the rate of infection which can be slowed by social distancing, ultimately aiming to avoid overwhelming the healthcare industry. Countries that were unprepared for the virus, like Italy, had an enormous number of people infected all at once, without a health care structure prepared to support them. As communities across the world saw these reports, efforts to social distance became more serious, and governments have started to plan to assist with hospital capacity.
During this current COVID-19 crisis, a great deal has been written on what government is not doing (or not allowing others to do). But the same attention is often not given to what government is doing. The reality is that governments are continuing to conduct public business, in many cases at a rapid pace, despite the significant impediments of which we are all now familiar. These efforts have been made possible by a remarkable level of innovation in both the public and private sectors, including the rapid-fire development of new technologies and novel repurposing of old ones.
Government agencies have been attempting to move forward with normal operations despite the shift in focus caused by COVID-19. In addition to emergency contracting measures that governments are utilizing for COVID-19-related goods and services, local governments are attempting to continue procurement processes for contracts that were in the pipeline prior to the outbreak. Because all of the services that local governments provide are essential, these governments are continuing regular business in order to avoid further crises down the road. As long as procurement processes are continued, the government will inevitably need a plan to deal with bid protests.
As discussed in our previous posts on emergency contracting procedures in Miami-Dade County and the State of Florida, the spread of COVID-19 has added many new goods and services to government procurement lists. Not only are supplies needed for testing sites, but also masks and other protective gear have become necessary for transit workers and other government employees. In hopes of flattening the curve and to best serve residents, codified emergency procurement guidelines must be used. Below, we briefly summarize emergency procurement procedures in other significant South Florida jurisdictions.
We recently wrote about the CARES Act and the new, separate infrastructure bill going through the legislative process. The Act created $500 billion in aid for state and local governments, and these funds could directly impact major projects on the horizon in Miami-Dade County.
COVID-19 has posed new challenges for community living. Condominiums, HOAs, and Cooperatives are confronting how to prevent the spread of the virus within their communities. When faced with residents who had tested positive for this disease, two high-rise condominiums in Miami, the Marinablue and the Brickell Bay Club, shut down use of common facilities and limited access to their buildings to prevent transmission of the disease. Actions like these raised questions within condominium communities and other communities relying on a statutory framework for operation regarding the associations’ authority to take such measures to prevent or reduce the spread of COVID-19. The current statutory framework appeared to limit the associations’ authority to restrict or prohibit access to common facilities only in the case of physical damage to the improvements in the community.