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Construction Concepts Tip #6: Architects

A recent report from McGraw-Hill Construction’s research and analytics unit reported that the total volume of construction contracts in the South Florida area has reached $3.7 billion for 2013, a 24% increase over the same period last year.  This report is one of many indicators of the continued explosion of new construction in the South Florida real estate market.

In light of this construction boom, we have provided tips in our previous postings about construction change orders, construction bonds, liquidated damages, substantial completion in construction contracts, and most recently, developer protection against tenant-improvements.  We are now going to take on another concept that is essential to a successful construction project: the hiring of an architect.

Architect Should Match Specific and Unique Job Requirements

In a construction project, an architect will often perform construction administration functions and can therefore be an owner’s eyes and ears on the ground.  An architect can handle a number of jobs, activities, and problems.  It is important to note, however, that not every architect has the same skill or ability.  When looking for an architect for a particular job, you will want to make sure that a potential architect matches the specific and unique requirements of your job.

A Written Agreement with Your Architect Is Imperative

It is also important that you have a signed, written agreement with the architect.  The architect agreement should outline your relationship with the architect and what you can expect from it.  The architect’s agreement is the perfect opportunity to safeguard that both you and the architect foresee the same project, requirements, and expectations.  All too often, owners seek advice of legal counsel when entering into a construction contract, but fail to do the same when entering into an architect’s agreement.  Given the intertwining nature of the construction contract and the architect’s agreement, it is important that an owner seek advice of legal counsel for both documents in order to ensure that the owner is protected and that the documents are in sync and coordinated.

With that in mind, we have highlighted a few concepts that are often overlooked when entering into an architect agreement.  While the following concepts are not an exhaustive list of what should be in an architect’s agreement by any means, they are important factors to consider.

  1. Cost of Work: An owner may want its agreement to provide that the architect will furnish an estimate of the cost of the work and provide updates as the project’s construction documents are further developed.  This does not include the compensation to the architect.  Rather, it is an estimate of the total cost to the owner to construct all the elements of the project.  It is important to try to ensure that the owner has the means to be able to afford the construction of whatever is being designed.  Especially during the design phase, should the estimate cost of the project near or start to go above the budget, a contract should require the architect to advise the owner of such so that the parties can value engineer the project.
  2. Architect’s Scope of Services: The agreement should define exactly what will be the scope of the architect’s basic services and what will cost extra.  An architect’s basic services provide that for a set price, the architect is responsible for certain duties such as, but not limited to, preparing the design documents and performing certain construction administration duties (such as issuing certificates for payments based upon work completed and reviewing the project’s progress at various stages of construction).  Additional services are services which are not included in the basic services, but may be required for the project.  These services should be specifically listed in the agreement along with the hourly rate for same. The agreement should also provide that the architect must provide notice to and seek written approval by the owner prior to providing such service.
  3. Copyrights and Licenses:  Typically, an architect’s agreement provides a nonexclusive license to the owner to use the architect’s drawings and materials to complete the project, provided that the owner substantially performs its obligations under the architect’s agreement.  However, a keen owner may want to take the agreement further and provide that, upon final payment to the architect, the owner becomes the exclusive and absolute owner of all project-related documents developed by, through or under the architect or its consultants, and that the architect assigns to the owner all proprietary rights that the architect may have in the documentation.
  4. Insurance:  At a minimum, an owner should ensure that the agreement requires the architect to be responsible for obtaining, maintaining, and paying for automobile liability insurance, workers’ compensation, professional liability insurance (malpractice insurance), comprehensive commercial general liability insurance, and employers’ liability insurance; all of which name the owner as an additional insured.
  5. Termination of Architect Agreement: A typical agreement usually contemplates that if the architect or owner fails to substantially perform the agreement, the other party may terminate the agreement upon written notice. It is important to note that a savvy owner will also want to provide that:
    • the owner may terminate the agreement for its convenience and without cause, for any reason or no reason;
    • the owner will pay the architect for approved services and expenses properly, satisfactorily, and timely performed prior to termination of the agreement; and
    • the architect will deliver to the owner all materials prepared or furnished by consultants or others to the architect.  Additionally, an owner will want to provide that any monies owed to the architect upon termination for cause will be reduced by the expenses and costs incurred by the owner.
  6. Miscellaneous clauses to consider inserting in an architect’s agreement that are not otherwise typically found in such agreements include:
    • Attorneys’ fees: It is a good idea to include an attorneys’ fee provision which provides that with any dispute or litigation arising out of or related to the agreement, the prevailing party is entitled to recover all of its attorneys’ fees and costs.
    • Dispute Resolution: A typical architect agreement provides that any dispute not resolved between the owner and the architect be resolved in arbitration.  Although the advantages and disadvantages of arbitration versus litigation are beyond the scope of this blog post, suffice it to say that an owner may want to consider litigation as opposed to simply agreeing to the default provision of arbitration as a venue for resolving disputes.

By hiring an architect that fits your requirements and adheres to your contract provisions, you will be able to navigate through a construction project with more ease and certainty that the finished product will align to your project’s concept.