Contracting through An Architect

There are some other posts in this forum that people recommend what they do to avoid this situation. I think primarily your first defense is in the contract terms that you agreed upon with the Architect. You probably would need to consult a lawyer regarding the lein on the owner's property.

This post is the one I'm thinking of off the top of my head. [link POST][/url]

Check your local lien legislation. If within the time period, you can lien the project. Your deal is with the Architect and unless the contract stipulates that you don't get paid, unless he does... he's on the hook.

Rather than think climate change and the corona virus as science, think of it as the wrath of God. Do you feel any better?

-Dik

Yeah - unless your company was foolish enough to sign a paid-if-paid contract (there are lots of professional and legal articles about how horrible this is), they still owe you the money. Here's the sticky part - how much are you losing, and how much is future work from this architect worth? To get it you may have to sue them for breach of contract, which will breach your relationship and you won't be working with them again. SO if they owe you a $200k fee but don't make up a significant part of the company's work (maybe it was a one off or an out of character project?), go after it. If it's a $4k fee for a house renovation and they give you $200k a year in work, maybe cut them some slack - but make it clear that this is not okay and you expect to recoup the losses from them over time.

As I said in the thread driftLimiter linked to - I'll go along with paid-when-paid within a certain time period. But when time's up, time's up - I'll start pestering for payment.

As far as liens go, it's a local subject for a local lawyer. Where I practice, you have declare your intention you use liens at the start of the project. If you don't (or within 30 days of the start, I think it is), you're out of luck.

Not my experience... in many juristictions you cannot contract out of 'filing a lien'; the legislation is written in stone to prevent this.

Rather than think climate change and the corona virus as science, think of it as the wrath of God. Do you feel any better?

-Dik

dik - ever design in Virginia? I'm not familiar with all of the inner workings, but my understanding is that it's a two step process here. An upfront notice that states the probable value of a claim if made, and then a follow up notice when the lien is filed. There may be other options available if the first notice is not sent, but I haven't explored them.

phamENG: not sure about anything state side but in Canada dik has it right. One of the courses I teach is construction law and I always review with my students how they cannot contract out of the construction act / lien / holdback provisions. We have a handy guide that walks through it in plain language too. Very interesting that it's much different where you are. Seems a bit odd that you have to "opt in" at the beginning of a project since you don't know if you'll want to lien or not until things get rolling.

Enable - no doubt dik's right. Just pointing out that the laws vary by locality. I'd love to be wrong in this. Maybe I'll spend a could hundred bucks for an in depth discussion with my attorney.

One problem for me - the projects that don't pay are usually the ones that don't get built. How do you tie that to an improvement?

phamENG: that's a good point and unless it is explicitly codified in the legislation will depend on local jurisprudence. Generally I have found case law in the various provinces to find that an improvement must be related to something physical done on-site (so you are right if you not paid for something where a shovel is never even put in the ground you are probably out of luck). For example, in British Columbia I believe the highest court ruling right now is Chaston heard by the BC Court of Appeal. Basically they said that some construction activity needed to occur on-site for a designer to have lien rights. However, that activity need not be related to the final build and could be completely preparatory (though needs to be more than using a hammer to sound concrete).

I usually teach this in context of contractors, not engineers. But this is a good thing to add to my lecture slides. Thanks for the discussion!

Enable: Thanks for the info... the strength of the lien is that it's on the property...

So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates

-Dik

In Australia there is specific security of payment legislation that renders all paid-if-paid contract clauses void in respect of contracts for construction works. Do you have anything similar in the States?

Good legislation... Retro...

So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates

-Dik

By the number of subcontractors and general contractors going bust in Australia, all the legislation doesn't seem to help much.

Two different issues... security of payment is good. One less thing to worry about going broke over.

So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates

-Dik

I hate this subject. The vast majority of my clients insist on the pay-when-paid scenario. I've tried to change this during contract development a couple of times and got nowhere.

This gets a little tricky for me because I've always eventually gotten paid. (Sooner or later I'll probably get stuck holding the bag.) The objectionable part is my big firm client will sit on a $5-10k invoice for months before paying. They're big and the cashflow would mean nothing to them. $5-10k is nontrivial for me, and yet I had to front the work, travel, etc. for the team. It's not just architects. EORs and contractors are as bad. Because I will get paid, this is more of a matter of principle, or ego thing. A higher principle is I'd rather have less money later than faster money once and then never hear from them again, so I shut up.

That has affected my policies, though. I use subs quite a bit. When I can write a check without bottoming-out our cash reserves, I write a check. I only go with pay-when-paid when payment will come soon and I don't have the cash. In rare cases, when I knew it would be a while until the client paid, I've gone to the bank and borrowed the cash to pay the subs. If anybody gets left holding the bag for nonpayment upstream, it'll be me, not a colleague downstream.