Architect Contract

I am looking to sign a contract with an architectural firm for construction documents, bidding and construction administration, etc.
This is a standard AIA document B101 -2007.

I have increased the liability to their insurance maximum. Is there anything else that I need to watch out for or include? Do these need to be reviewed by the attorney?

 

You should absolutely have them reviewed by an attorney. The baseline AIA B101 document is pretty architect-friendly. A few issues that always come up:

  1. Ownership of docs, as Link says. They should be yours. Otherwise, if architect goes out of business, you get into a dispute on payment or other issues, that's a problem.
  2. Liability. Architect's insurance maximums suck...the biggest shops don't carry limits over $5M. You may want language in there requiring them to carry additional Errors and Omissions (E&O) coverage.
  3. Payment. How long do you have to reimburse invoices? What's the interest factor on overdue bills? Markups they can charge on subconsultants (10% on anyone outside MEPS is standard)?
  4. Schedule. Ramifications for being late? Timing of various deliverables (SD/DD/CD/bid)?
 

I second everything here except point 1. Ownership of docs is pretty much the only leverage point an architect has and I find it incredibly hard to fathom an architect would give it up without some kind of substantial compensation, i.e. royalties for a mass produced design. The best way to put it is to think of video games, movies, or software. The creator of the thing you want to use (in your case architect drawings) owns the thing and their copyright and is licensing it to you with their permission to use it for a specific purpose. Theoretically, by photocopying drawings you're infringing the copyright (but I mean realistically it's kind of necessary to make copies of drawings to get anything built).

Here is a blog post by an attorney that explains it very clearly and thoroughly.

If it's not already in the AIA contract, make sure that you have a clause for "substantial noncompliance" with the contract if the architect can't finish his work for whatever reason. In this clause I'd make sure your lawyer includes some kind of wording giving you permission to use the drawings (which still are the property of the architect) for the purpose of finishing your project either with an other architect or, if you're far enough ahead, with your builders.

It's common courtesy among architects to transfer drawings of one of their old projects to an other architect being retained for a later project but it's always best to have everything spelled out clearly in a contract for if things become less friendly.

 

Can't comment on specifics of liability insurance as that depends on a ton of factors - your building's size, the complexity of the project and your architect's experience. Also though I am licensed I am pretty new and most of my experience is in production of the drawings. I'd say BeaconStreet below has elaborated on this quite well. What I'd recommend is to talk to some (I stress more than one) architects and fellow developers in your area and see what they typically do for a job like yours and see how that stacks up with what you're thinking of negotiating. A good place to see could be networking event for architects like those AIA has all the time, as well as ULI, they usually have some 1-hr courses on stuff like that in addition to the usual networking happy hours.

 
Most Helpful

I’m a licensed architect and have done work for developers under my own stamp. Some comments:

Ah, AIA documents. The bane of a developers existence. Watch out for who owns the documents and fees if you terminate the contract.

They do tend to favor the architects, but I think they hurt the GC more than the owner, for what it’s worth. The good thing about AIA docs is that there’s a lot of case law behind them, which should make things more straightforward in the event of a dispute. If you want a custom document that will favor you and hold up in court, be prepared to pay a good lawyer some money.

Ownership of docs, as Link says. They should be yours. Otherwise, if architect goes out of business, you get into a dispute on payment or other issues, that's a problem.

Good luck with that. I’ve never seen a firm just sign over ownership of the documents to the developer, and I’ve never done it myself either. Retaining ownership gives me leverage to get paid my full fee, and protects me against liability. (I don’t want to get squeezed out of a project early so the developer can save a few bucks, and then nailed with a lawsuit for a construction defect that I could have caught if I were still involved.) You might be able to negotiate some clause like the one CadMonkey suggests, though.

Liability. Architect's insurance maximums suck...the biggest shops don't carry limits over $5M. You may want language in there requiring them to carry additional Errors and Omissions (E&O) coverage.

They do tend to be low (I carry significantly less than $5M). If a good client wanted me to carry more, I’d do it but would add the premium increase to my fee. Keep in mind that the subconsultant engineers will have their own policies, and some of them would probably get pulled into a dispute along with the architect, depending on what it is. That would increase the pool of money available.

I now add a clause to my contracts stating that my total liability is limited to the sum paid to me under the contract. I’ve seen other firms and engineers cap their liability this way, or with a small lump sum like $50k. This is obviously unfavorable to the owner, so I wouldn’t agree to it if I were you. Sounds like you’re already on top of that though.

Schedule. Ramifications for being late? Timing of various deliverables (SD/DD/CD/bid)?

No real comment here, except to say that in my experience the developer delays things more than the design team. Maybe things are different for developers with really deep pockets, but a lot of them are stretching to get financing.

I’ll make one overall comment. You can say this is self-serving if you want, but it’s definitely true in my experience: don’t select the design team on the basis of fees (within reason). Instead, look at experience (of the SPECIFIC people who will work on the project- don’t let them show you slick photos of projects done by someone who left the firm five years ago.) And do the same for the engineering team they propose to use. Pick firms that have specific and recent experience in the project type you’re doing. Ask for references, and consider visiting some of their other projects.

I’ve found that developers, especially cash-strapped ones, often want to cheap out on design fees since they have to cough up a lot of the money early on, before their equity partners or lenders are on board. Unless you're doing a very simple and generic building, that’s a mistake. The checks you write get way bigger when construction starts, and some avoidable change orders will quickly wipe out the fee delta between a mediocre design team and a good one.

 
BeaconStreet:

I’ll make one overall comment. You can say this is self-serving if you want, but it’s definitely true in my experience: don’t select the design team on the basis of fees (within reason). Instead, look at experience (of the SPECIFIC people who will work on the project- don’t let them show you slick photos of projects done by someone who left the firm five years ago.) And do the same for the engineering team they propose to use. Pick firms that have specific and recent experience in the project type you’re doing. Ask for references, and consider visiting some of their other projects.

I’ve found that developers, especially cash-strapped ones, often want to cheap out on design fees since they have to cough up a lot of the money early on, before their equity partners or lenders are on board. Unless you're doing a very simple and generic building, that’s a mistake. The checks you write get way bigger when construction starts, and some avoidable change orders will quickly wipe out the fee delta between a mediocre design team and a good one.

This!! Please don't use cheap designing or engineering teams, common mistake on the developer side, which usually leads to higher construction costs, spending a little bit more on a good architect, on a good structural engineer, but specially a good MEP engineering firm, will save you way more money than cheaper design teams.

 

Great points, and very valuable for anyone unfamiliar. I would point out to OP - the AIA boiler plate doesn't really provide a good scope of what the architect is providing. I typically attach various exhibits with any and all 'scope' I am asking the architect or GC to provide so it becomes more transparent. If you want the architect to not only design, but also run the bid and CM process, you should know exactly what you expect from them and know what you are getting. There can be loose ends regarding holes here. oh and make sure you understand what 'reimbursable's' are.

 
BeaconStreet:
No real comment here, except to say that in my experience the developer delays things more than the design team. Maybe things are different for developers with really deep pockets, but a lot of them are stretching to get financing.

Ha unsurprising that a developer and an architect will have differing thoughts on this.

I would say that most delays are a combination of both the developer and the architect (which makes sense). In my experience, thin development shops don't have the in-house expertise to vet everything an architect is showing on the drawings, which means there are usually substantial amendments to the CDs as they progress. If you have a developer that knows their shit, most of the places developers can slow down the process are dealt with early on, and the big issues turn into delays in shop drawing submittals during the construction phase itself.

 

I find it pretty interesting that @BeaconStreet" and Cadmonkey117 do not relinquish ownership of documents. Do you guys successfully retain ownership of docs with bigger institutional developers? Do they give up on this point pretty easily? Genuinely curious and would like to hear your thoughts. I've worked on 10ish development deals and have always required ownership of docs as the client.

 

I literally got licensed last month, and don't plan on stamping anything for a long time, so I'm speaking from what I learned from the licensing courses / working under other architects. That being said yes you could theoretically sell your drawings to someone, just like you can sell a copyright to an original idea (except with architecture you can get sued over said idea if the roof leaks), I would just find it highly surprising.

Don't work with Related or anyone that huge but we have projects all over my state and selling our documents would be unheard of at my office, and I can't think of a colleague I've met who has done it. edit I once did a side job for a client specifically for schematic design and design development that I decided I couldn't finish. Very minor stuff that the client would then continue with someone licensed. I had no qualms about releasing the design at that stage because it wasn't for construction and because my client (also an architect) directed the design without giving me much choice for input...

https://media0.giphy.com/media/G5X63GrrLjjVK/giphy-downsized.gif" alt="shrug" />

 

Finally a topic I might be helpful with ... Let the architect pick his engineers, you want them to have a very good working relationship. Be very clear in the scope of work and deliverables, and timeline. If you have specific dates that need to be met, set the deadline for a few days before, just to be safe. Extra E&O ins. is nice, you might try to add language about specific types or amounts of errors, but these may not be insurable (ie worthless). I'm not sure why some are asking for ownership of the documents.... You can request cad or revit files, and should be able to get that after a minor fight, but ownership of the copyright doesn't get you a whole lot, you'll still need an architect if you want to do anything with them. Even so, your architect will put up a stink and may walk over this, esp if it's a fairly repeatable project.

 

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