Construction law in the U.S. has been getting more complex over the years, but 2025 has seen significant market movement from tariffs while the industry continues to battle labor shortages. Compounding issues include increasing instances of bankruptcy and funding distress, according to this year’s Colorado Super Lawyers.
Laurie Choi, a construction attorney and partner at Snell & Wilmer in Denver, said project viability is a real concern currently. “Construction professionals are concerned about viability of projects with anticipated increased project costs resulting from [tariffs],” Choi told Law Week. “For projects under construction, there seem to be higher numbers of lien foreclosure actions than in years past.”
Choi said lien foreclosures add to the financial burden for lenders, subcontractors and suppliers alike. The complex and lengthy process is an added expense that Choi says sometimes results in the filing of bankruptcy, which only complicates and lengthens the process for some of these construction projects.
Matthew Ninneman, a construction attorney and member at Hall & Evans, said the pandemic actually helped train construction professionals for the current market fluctuations.
“In addition to the ongoing labor shortage, cost escalation and supply chain disruptions, project owners and contractors are concerned about a potential recession and the uncertainty of tariffs,” Ninneman told Law Week. “Ironically, [COVID] educated many owners/developers and construction professionals on how to shift some of the risk in their contracts, allow for longer construction schedules, utilize contingency values appropriately and to be more nimble, all of which translates well for the continued labor and pricing impacts associated with a potential recession, tariffs and anticipated supply chain disruption when tariffs relax.”
Choi also noted the current or incoming dynamic of risk on costs is similar to one that occurred during the pandemic.
Contractors entering into stipulated-sum or guaranteed-maximum-price contracts are also concerned about the potential of increased costs due to tariffs, according to Tim Gordon, a partner at Holland & Hart.
But how contractors and developers should go about addressing this risk area is still up for debate.
“Developers and contractors are still figuring out the ‘industry standard’ when it comes to managing around the risks associated with tariffs,” Choi explained. “For example, [contractors] appear to be pushing the risk to [owners] as a starting point and it’s a mixed bag as to whether [owners] are accepting the risk.”
Choi added that even if an owner is amenable to accepting the risk on tariffs, construction lenders may not allow it as they don’t want the construction costs for a project to exceed the loan amounts by too wide a margin. She added that she’s seen more instances of owners and contractors agreeing to a contingency for tariffs instead.
Ninneman said he’s been anticipating contractual arguments he may expect in litigation concerning additional cost and delay claims. But the industry as a whole has adjusted to fit new norms before, even as it still expands and contracts in 2025.
“Both custom and form contracts are changing to accommodate for some of these impacts,” Ninneman said. “Force majeure clauses, for example, now routinely identify pandemics, certain market fluctuations, labor shortages and supply chain disruption as excusable delay. The scope of those inclusions widely vary as the parties attempt to negotiate a limit or threshold on when those impacts are excusable or were simply foreseeable in the current market.”
Gordon also noted risks and other concerns can be addressed contractually by borrowing a concept found in the Federal Acquisition Regulations. “Specifically, include a clause that allows for a price increase in the event a tariff imposed after the contract was entered into results in increased costs that were not contemplated in the price,” Gordon told Law Week. “Without such a clause, contractors may be prone to pad their numbers to protect against the uncertainty, which is not good for either party.”
Longer schedules could also help in this case but it may not solve ballooning costs that sometimes come with a significant schedule delay on projects.
“Whether there will be a wider market approach to allowing for more time in schedules for these impact events is unknown, but I expect parties will consider a longer schedule period, and work to allocate risk on how those impacts and related costs should be shared,” Ninneman said.
For what construction attorneys may want to keep an eye on for the remainder of the year, Choi said that the uncertainty associated with tariffs and other policies, along with a backlog of clients has given some reluctance in the real estate investment arena. Choi cautioned that care and attention to contract drafting can help reduce project finance and funding distress risks for clients.
Ninneman said attorneys should impress upon clients to have contracts reviewed and negotiated to mitigate exposure from market impacts. He added that, at a minimum, contracts should be reviewed and potential exposure issues should be identified. “Clients should not simply wait for litigation to arise before speaking with a construction attorney,” Ninneman cautioned. “Regular and routine risk analysis and contract negotiation before claims arise is a best practice.”
Ninneman added that owners and contractors should discuss possible schedule delays during the initial contract negotiation to account for broader market impacts later on, just like they might for significant weather impacts.
Larger trends in the construction space include an increasing call for data center development, according to Choi, but she noted there’s also been some fluctuation in the volume of commercial, industrial and multifamily residential development.
Ninneman said he’s looking to see how artificial intelligence may be used in the construction and design market.
“AI will be an integral part of the construction and design industry and companies are looking for ways to employ it in design review and drafting, construction schedule analysis, report generation and sequencing/coordinating the work,” Ninneman told Law Week. “We are also looking to see how robotics can play a broader role in construction, including pre-construction fabrication.”
Many companies are also building components of the project off-site and delivering them for installation, according to Ninneman.
“We are also seeing an upward trend in larger civil infrastructure projects, including municipal, state and federal projects, and projects focused on sustainable construction methods and products,” Ninneman added.
In general, the construction attorneys told Law Week that schedules may get longer, contracts may become more complex and market movement in this area may add to initial risk discussions for projects.