Preventing legal problems on retail projects

If you are thinking of renovating or having a new store designed, it is crucial to have the right consultants advising you to ensure that the store is completed on time for your scheduling needs, within your budget and without litigation. This means having an architect, engineers, designers, marketing consultants, and a contractor, just to name a few. A store owner will also need legal advice from someone who knows the industry, in order to avoid problems.

The contract is a blueprint for how the project will be run. Negotiating this document will pinpoint potential problems before you even get started. This should be encouraged, since the design professional may have a different idea from the owner about issues such as how many sets of designs will be provided and how many changes will be part of the fee.

If I see a draft contract in which the designer or contractor is asking for most of his fee before the halfway point, I know that there is the potential for a fee dispute and I can work to negotiate a fee schedule that is more closely tied to the amount of work completed. The negotiation process can straighten this out and everything agreed to can be included in one signed contract.

An owner may sign a form contract provided by an architect or designer and wind up being required to arbitrate disputes in another state where the architect or designer resides, rather than where the project is located. Any arbitration should be in the state where the project is located. A well-drafted contract will make this clear.

Store owners often have relatively little experience with the construction process and do not know how the process works. This can result in a lot of extra time being spent by a design professional, which is not necessarily compensated. The parties should have a signed contract before any work is started. In other words, proposals and verbal agreements are not enough. This will go a long way towards avoiding payment disputes.

On a recent project, an architect visited the client's other store in a nearby state. When contract negotiations became difficult, the architect said he would have to be paid for that visit if the deal fell through. The client felt it was part of the overall contract price and was done to try and land the job. This eventually was resolved, but it showed that there was not a "meeting of the minds."

Sometimes an owner's representative may be needed to advise the owner, in addition to the architect. In any event, an owner should be required in the contract to designate a representative with knowledge and authority who can give direction to the design professional.

One big area which leads to disputes is determining what was included in the base contract price and what should be billed as an extra. There should always be a set a drawings or detailed specifications welch can be reviewed to determine what was meant to be included in the contractor's bid or contract price and what is a change order. When this information is not available, clients may feel that they have been taken advantage of and a lawsuit may follow.

A store owner may hire a designer thinking that he or she is a licensed architect. When he finds out that the individual is not licensed and that the services of an architect will also be needed, there may be litigation. An architect will need to be retained and this will delay the project. Any attorney knowledgeable in this area can stop a potential problem like that and resolve it before there are any problems.

It is tempting to proceed with extra work when a client requests it, without any written confirmation, but this too can result in misunderstandings and litigation. The contract should require written change orders before work is done, and this requirement should be adhered to. At a minimum, the contractor or design professional should send a letter confirming the client's request for additional work, rather than waiting until the end of a project and presenting one large bill for additional services.

Contractors must purchase and maintain the requisite amounts of insurance to protect them and their clients against personal injury and property damage lawsuits. Owners should be sure that the proper insureds and additional insureds are named and the policy has the correct effective date.

Contractors must manage their payments so that sub-contractors are paid and they do not file mechanic's liens. Prudent owners will obtain partial waivers of lien each time they pay the contractor and he pays the subcontractors. This eliminates the possibility of mechanic's liens when you have paid the general contractor. All of this should be included in the contract with the contractor.

Store projects do not have to end acrimoniously. If the parties spend some time negotiating the terms of their agreement with a knowledgeable attorney, they can avoid many potential legal problems.

(C. Jaye Berger is an attorney in New York who specializes in building construction, real estate, environmental law, bankruptcy and litigation. The firm represents a number of owners, contractors, architects and interior designers.)

COPYRIGHT 1995 Hagedorn Publication
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