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Manhattan Construction Law Blog

When Negotiating an Architect's Agreement, Ensuring that an Owner is Protected in the Event of an Early Termination is Imperative

On some projects, conflicts arise between an owner and its various design professionals, including its architect. Should an owner opt to terminate its architect, the parties' rights will be dictated by their agreement. Therefore, an owner should be mindful of the following when negotiating such an agreement.

UPDATE: LIABILITY OF INDIVIDUAL PRINCIPALS OF CONDOMINIUM SPONSORS TO UNIT OWNERS FOR BREACH OF CONTRACT CLAIMS BASED ON THE PRINCIPALS' CERTIFICATIONS IN THE OFFERING PLAN

As previously discussed in a prior blog, pursuant to the Martin Act regulations, both the Architect for the condominium and the individual principals of the Sponsor are required to provide specific certifications in the Offering Plan. The regulations provide the exact wording of the certifications for both the Architect and the principals of the Sponsor. The purchase agreements between the Sponsor (usually a sole purpose entity such as an LLC) and the Unit Owners customarily provide that the terms of the Offering Plan are incorporated by reference into the purchase agreements.

Insurance Concerns Under Precon Agreements

Posted by: Evan Wagowski

During the preconstruction phase of larger construction projects, a construction manager (CM) almost always is retained by an Owner to act "as agent" under a Preconstruction Services Agreement (Precon). In addition to off-site preconstruction phase services, the GTH Precon also contemplates the possibility of the CM's oversight of certain early phase construction trade work, such as demolition, excavation, and foundation work. This Precon form enables the Project to commence while a formal CM Agreement (with full fee, general conditions, insurance and bonding details) is negotiated and executed.

A REVIEW OF COMMON CONSTRUCTION CONTRACTING ARRANGEMENTS

Posted by: Aliza Ganz

We are frequently approached by clients seeking our expertise in the drafting and negotiation of construction contracts. One of our first threshold issues essential to our preparation of the contract is resolving how the general contractor or construction manager ("CM") will be compensated for its work. The following is a brief review of two of the most frequently utilized construction compensation structures known as: (1) lump sum (also known as fixed price or stipulated sum) and (2) cost-plus.

Project Owner Permitted to proceed Upon direct Claim against subcontractor despite lack of privity

Posted by: Kalvin Kamien

Although, as a general rule, a project owner is precluded from proceeding upon a direct claim against a subcontractor due to a lack of privity (See Owssom Builders, LLC v. J & F Refrigeration Air Conditioning and Heating, Inc., 28 Misc. 3d 1218(A), 957 N.Y.S.2d 637 (Sup.Ct., Kings Co. 2010)), the Supreme Court, New York County recently carved out exceptions to this rule.

The Potentially Non-Delegable Duties of the Americans with Disabilities Act (ADA) and the Fair Housing Act (FHA)

In recent years there has been a trend in the U.S. Courts that despite common law and/or contractual indemnities, a developer/owner of property cannot seek indemnification and/or contribution from its architect if the building, as designed and built, is not compliant with the ADA or the FHA. This is a troubling development as owners rely on their professionals to design a building that is compliant with law. To suddenly tell an owner, that even despite a contractual indemnity from its architect, the owner will remain liable without recourse against others for such violations, is causing much debate and concern.

Seller Beware - Individual Principals of Condominium Sponsors Held Liable to Unit Owners for Breach of Contract Claims Based on the Principals' Certifications in the Offering Plan

Recent Supreme Court case law in certain jurisdictions (most notably Kings County) specifically holds that a Unit Owner may seek damages for breach of the purchase agreement against the individual principals of the Sponsor based upon their certification in the Offering Plan and the incorporation of the terms of the Offering Plan into the purchase agreement, even though those principals were not parties to the purchase agreement. In other words, courts are holding that the required Martin Act certifications in the Offering Plan automatically establish privity of contract between the principals of the Sponsor and the Unit Owners under the purchase agreements notwithstanding that the purchase agreements themselves are only between the Sponsor entity and the Unit Owner.

Imposing Third-Party Requirements on Construction Managers and Contractors

With a few exceptions, on each project on which we represent a developer, the developer enters into agreements with a lender, a landlord, or both. While the developer may be able to fulfill the obligations imposed on it pursuant to the terms of such agreements, problems may arise when those agreements impose obligations on third-parties, including construction managers and contractors. Based on the foregoing, we are available to work with our clients in negotiating construction-related provisions in loan agreements and leases.

Horizontal Exhaustion: Continuing Efforts to Protect an Owner/Developer

Prudent Owner/Developers should continually review their approach to risk management. In particular, changes to the always-evolving construction insurance coverage forms require Owner/Developers to rely more than ever on their insurance brokers to obtain the broadest form of coverage available in the marketplace. One construction insurance coverage issue that often falls through the cracks is commonly referred to as "horizontal exhaustion." Horizontal exhaustion, which has been endorsed by New York courts, requires that in the event of a claim, primary liability coverage available to each impacted trade contractor(s), construction manager, and perhaps, the Owner's primary layer of general liability coverage, be exhausted before any excess or umbrella liability policy held by the impacted trade contractor(s) be subject to exposure.

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