Construction Projects Require Special Contracts in Nevada

Nevada law can be an interesting undertaking for those not experienced with the unique laws of the state. This can be especially true for those attempting to move forward with a construction project in Nevada due to the many distinctive state laws that apply to construction contracts. There is currently a great deal of construction work coming to Nevada from companies around the country and the world that do not have experience building in Nevada, making this issue more important than ever.

When beginning a construction project in Nevada, it should be clear that standard form construction contracts, or even custom contracts developed and used in other states, simply will not comply with Nevada law. Therefore, those contracts will need to be modified to be in compliance with Nevada law.

It is particularly important to note several key areas of Nevada law before preparing any construction contract for work in the State. Failure to comply with these statutes can create unnecessary delays and costs for a construction contract from the start as well as other problems. These key areas of law include:

NRS Chapter 40 (Residential Constructional Defects) — The “Chapter 40” constructional defect statutes apply only to residential construction, including condominiums and apartments, as well as single family homes. Under Nevada law, there is a limited definition of a construction defect, which includes only work that poses an unreasonable risk of injury to a person or property. The definition does not include violations of city codes or ordinances unless those violations result in physical damages to the property.

Limitations on Indemnification Provisions: In Nevada, there are limitations on the types of indemnification provisions that can be included in a contract relating to residential construction. Specifically, any provision in a contract that requires a subcontractor to indemnify, defend or otherwise hold harmless another party from any liability that is caused by the negligence, whether active or passive, or intentional act or omission of the other party is void and unenforceable. In other words, indemnification must be limited to the indemnitors own actions.

Owner Controlled Insurance Policies (“wraps” or “OCIPs”): In Nevada, many developers of residential subdivisions are obtaining wrap insurance policies to cover all of the contractors and subcontractors on the project. Nevada law permits the use of those types of policies. However, Chapter 40 includes specific provisions that apply to wrap policies. Most of those provisions relate to certain disclosures that are required to be made to covered parties. There are also limitations on amounts that can be charged to covered parties under the wrap policy.

Mandatory Mediation: Chapter 40 residential constructional defect statutes mandate various procedures for constructional defect claims. In addition to specified notice requirements, those procedures include mandatory mediation before the parties can proceed to arbitration or litigation.

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Law360, New York

March 23, 2017

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