This is a summary guide to some aspects of construction law in New Mexico that are important for out-of-state individuals or corporations to keep in mind when doing business in New Mexico. As in any case, you should obtain detailed legal advice before commencing a project in a new venue.
New Mexico requires contractors to maintain proper licensure through the state and to furnish and maintain evidence of financial responsibility. NMSA 1978, § 60-13-1, et seq. Contractors are defined by the Construction Industries Licensing Act to include any individual who purports to have the ability to undertake, by himself or through others, to construct, alter, repair, install, or demolish structures, including subcontractors, specialty contractors, and construction managers. NMSA 1978, § 60-13-3. Contractors that are not licensed in New Mexico may not file a claim of lien or maintain suit for payment for unlicensed work. See NMSA 1978, § 60-13-30; Reule Sun Corp. v. Valles, et al., 226 P.3d 611 (N.M. 2009).
Building Codes, Permitting, and Rules
New Mexico has several statutory provisions and chapters of the administrative code regarding building codes and standards. Relevant statutes can be found in the Construction Industries Licensing Act, NMSA 1978, § 60-13-1, et seq., the Manufactured Housing Act, NMSA 1978, § 60-14-1, et seq., and the Liquefied and Compressed Gasses Act, NMSA 1978, § 70-5-1, et seq. Each of these Acts allows relevant licensing and supervising agencies to promulgate rules for the proper administration on their statutory authority. Those rules can be found in the New Mexico Administrative Code. For rules governing manufactures housing, look to the New Mexico Manufactures Housing Rules, NMAC 220.127.116.11, et seq. For rules governing construction standards applicable to oil and gas construction, look to the New Mexico Liquified Petroleum Gas Standard, NMAC 18.104.22.168, et seq. The general provisions for construction industries are located in NMAC 22.214.171.124, et seq. Rules governing licensing are located at NMAC 126.96.36.199, et seq. Rules governing building codes, both general and specific by trade, are located in NMAC 188.8.131.52, et seq., through NMAC 184.108.40.206, et seq. The rules governing permitting, building codes, and construction standards are located within these statutory and administrative code provisions.
New Mexico courts treat construction contracts the same as any other contract between parties. The courts interpret contracts to give force and effect to the intent of the parties. Shaeffer v. Kelton, 619 P.2d 1226, 1229 (N.M. 1980). The courts examine the contract as a whole. Id. Construction contracts may be orally modified, even if the contract terms explicitly prohibit oral modification. Wendell v. Foley, 594 P.2d 750, 753 (N.M. Ct. App. 1979). Oral construction contracts are enforceable in New Mexico. Tarin’s, Inc. v. Tinley, 3 P.3d 680, 687 (N.M. Ct. App. 2000). In the residential construction context, a homeowner is not generally a third-party beneficiary of a contract between the general contractor and a subcontractor, but depending on the intent of the parties, that general rule may not always be true. Id. at 686.
Insurance and Indemnification
There are a variety of insurance options for contractors, subcontractors, and project owners in New Mexico, including but not limited to builder’s risk insurance, general liability insurance, errors and omissions coverage, and workers’ compensation insurance. Additionally, it is common for construction contracts to require performance and payment bonds. Many construction contracts contain indemnity provisions requiring one party to indemnify the other. New Mexico’s Construction Anti-Indemnity Statute, NMSA 1978, § 56-7-1, prohibits indemnification clauses in construction contracts that require one party to indemnify, insure, or defend another party who is negligent. An indemnification clause is void and unenforceable if it requires one party to defend another who is comparatively at fault. Safeway Inc. v. Rooter 2000 Plumbing & Drain SSS, 368 P.3d 389 (N.M. 2016). Indemnification clauses must be narrowly tailored to account for the doctrine of comparative fault. One who is at fault for an injury cannot contract away negligence.
Mechanics’ and Materialmen’s Liens
New Mexico allows those who have provided materials or performed labor in construction projects to place mechanics’ and materialmen’s liens on projects to secure payment for their work. The statutory authority for liens on private commercial construction projects in New Mexico which establishes the rights and liabilities of owners, contractors, subcontractors, and suppliers is NMSA 1978, § 48-2-1, et seq. Additionally, for projects with four dwelling units or less, the New Mexico Stop Notice Act applies. NMSA 1978, § 48-2A-1, et seq. Contractors or suppliers who do not have direct contractual privity with the owner of the project must file a claim of lien within 90 days after completion of the building. NMSA 1978, § 48-2-6. “Completion” under the statute is interpreted to mean substantial completion, which is a question of fact, but New Mexico has found that a certificate of occupancy is prima facie evidence of substantial completion. Damon v. Vista Del Norte Dev. LLC, 381 P.3d 679 (N.M. Ct. App. 2016). Contractors in direct privity with the owner of the project must file their claim of lien within 120 days of completion of the project. NMSA 1978, § 48-2-6. A lien must contain certain information identified in NMSA 1978, § 14-2-6. New Mexico allows a lien claimant to substantially comply with the requirements of Section 14-2-6, but a claim of lien must be verified by oath or it is invalid. Sonida, LLC v. Spoverlook, LLC, 367 P.3d 854 (N.M. Ct. App. 2016). It is important to note once more that only licensed contractors have remedies under the Mechanics’ and Materialmen’s Liens Act for work requiring a license. See NMSA 1978, § 60-13-30; Reule Sun Corp. v. Valles, et al., 226 P.3d 611 (N.M. 2009).
This article was reprinted with permission from TerraLex