In my last blog I presented an overview on why condo projects are one of the—if not the —riskiest of all project types when it comes to claims against design professionals. This follow up blog post provides some practical risk management tips that architects and engineer (A&E) firms can use to address and mitigate their risk on condo projects.
Managing Condo Risk
The first piece of risk management advice I like to offer design professionals is that you should never design a condo with a common meeting space, so folks can’t get together to discuss suing you.
Failing this, I would recommend the A&E first and foremost recognize that condo projects are in fact high-risk projects, and they need to hold their ground when negotiating their contracts—and take extra precautions when managing this risk.
I believe the key to managing condo risk begins with having well-thought-out “go/no-go” procedures in place when evaluating:
- prospective clients
- the contract(s)
- the firm’s team capabilities.
5 Tips for Managing Condo Project Risks
The following are some risk management tips I would encourage all design firms to consider when taking on a condo project:
Try to select a developer client who will be around after the completion of the project. Be wary of the single-purpose LLC, and do everything you can to ensure the developer itself, and not a shell entity, is partnering with you for the long-term.
Be diligent in qualifying your prospective client. Find out how the developer plans on marketing the project. Will the promotion be realistic and will your firm name be included?
Urban sites, where we find most growth in condo projects, can often be the most challenging with heightened exposure factors ranging from environmental to drainage to code and permitting. Have you considered these factors that are unique to your specific project and site?
This is one project type you should strive to most—if not all—your “deal makers” and “deal breaker” contractual provisions adequately addressed. You want an agreement that is fully insurable and, ideally, includes a waiver of consequential damages and limitation of liability clause.
Work with legal counsel on your contact and include a “condo rider” that would address the owner and homeowners’ association (HOA) obligations specific to maintenance.
Develop a maintenance manual – and have it incorporated into the HOA’s bylaws binding the HOA and individual purchasers.
Construction Methods & Materials
Most condo claims involve water infiltration issues. Developers and contractors may be focusing on profit over quality, and corners are often cut with inferior materials and practices. The A&E needs to hold his or her ground when it comes to proper details quality and materials and methods. Going the extra mile with constructability and peer review during design phase and particular emphasis on structural and ADA can go a long way to mitigating future problems and complaints.
In addition, A&E should insist on providing full-service construction observation and administration.
Far too often the HOA is under-funded and/or poorly managed, resulting in poor maintenance of the building. It’s extremely important that the A&E include in the contract a specific provision to address this risk. The design professional should clearly state in the agreement that he/she is not responsible for the inspection or maintenance of the property after completion – and require that these responsibilities be fully transferred to the HOA and unit owners.
In addition the A&E should require the developer to have each purchaser inspect the unit and common areas for defects and sign a certificate of satisfaction prior to closing.
While the above steps may not be all-encompassing or assure the design professional a claim-free condo project, they should greatly mitigate their exposures to costly claims and disputes.
By incorporating these steps into a design firm’s project evaluation and “Go/No Go” assessment practices, the A&E will make significant strides toward assuming and controlling their risk on condo projects.