MIAMI—Could we soon see another wave of litigation in thecommercial real estate industry? If so, what typesof lawsuits might arise and how is it different than the lastcycle?

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GlobeSt.com caught up with Jason Kellogg is apartner at Levine Kellogg Lehman Schneider +Grossman, to get some insights in part one of thisexclusive interview. Kellogg represents clients in commercialcontract and business torts disputes, class actions, owners andcontractors in construction litigation, and securitieslitigation.

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GlobeSt.com: The current real estate cycle remainsstrong but what indications are there that litigation may be on thehorizon?

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Kellogg: The biggest flashing red light, in mymind, is simply the fact that a significant amount of newconstruction involves condominiums. Historically, condominiumconstruction just breeds litigation. Nearly 100 new condo buildingsare either under construction or proposed in the greater Miami areaalone.

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GlobeSt.com: What types of lawsuits do youanticipate, and how does this differ from the major disputes thatcharacterized the last cycle?

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Kellogg: The sheer amount of condominiumconstruction, coupled with reports of a shortage of skilled workersworking on those condominiums, suggests another boom in condominiumdefects litigation. There has also been speculation of a growingcondo bubble.

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If that bubble bursts, then we will see another round of theattendant litigation: buyers trying to get out of their contracts,lenders foreclosing on developers, and developers seekingbankruptcy protection. Everything would look pretty similar to whathappened last time. Hopefully, however, the lenders have engaged inbetter underwriting this time around, and the condo bubble is afear that never materializes.

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GlobeSt.com:Subcontractors got burned very badly last cycle. Havethey changed the way they do business as a result of lessonslearned?

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Kellogg: Before the last cycle, subcontractorswere sometimes afraid to lien a project or, if they did file alien, they would hesitate to foreclose. They did not want to rockthe boat, alienate the developers and potentially get left out ofthe next project.

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This next time around, I doubt they will hesitate to lien andforeclose. Everyone now understands that things go southquickly, and subcontractors will be looking out for number one.

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GlobeSt.com: How might this impact the negotiationtable for developers and contractors?

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Kellogg: Ultimately, developers and contractorswill likely build even bigger legal war chests into the price ofconstruction. They must now treat post-construction litigationalmost as a given.

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