Can an Owner of a Building with Construction Defects Recover Lost Profits and Diminution in Value?

Kegler Brown Construction Newsletter

Since the AIA inserted in its contract document a mutual waiver of consequential damages (such as lost revenue or profits) owners can have difficulty recovering lost profits or revenue when a building is put out of commission due to construction defects. While there are colorable arguments as to why the AIA mutual waiver may not apply to this circumstance, owners are better served by carving out an express exception to the mutual waiver for construction defects in the AIA documents.

Owners who endure construction defects often believe that there is some lasting diminution in the value of their property due to the stigma of construction defects. In a recent Ohio case the federal court found that a real estate expert’s opinion as to the diminution of value from known construction defects was admissible, but that the opinion as to unknown construction defects was not. Younglove Construction, LLC v. PSD Development, LLC, 2011 WL 1043364 (N.D. Ohio March 18, 2011).