When I first saw the draft title of this month’s article entitled, “Is there any risk working on a condominium design?,” my immediate reaction was: You’ve got to be kidding! I thought that the article would somehow promote the idea of working on condominium designs, but upon reading it, I realized that it was right on target. I strongly urge all of our readers to read it carefully and perhaps keep a copy on hand for future reference.
In my former life as president and CEO of Thornton Tomasetti, I dealt with the risks associated with all project types. Condominiums were in a category all their own.
As stated in the article, many condo developers are looking for the lowest fee they can get. In such cases, if you think you can compete by convincing the developer that you will provide a better quality project to justify a reasonable fee, you should probably put your time to better use. These projects will often be awarded to structural engineers who will work for ridiculously low fees out of desperation and will try to cut corners and/or do not have the proper design expertise. You may recall a condo project in Florida some years ago that was designed by unemployed aerospace engineers. It collapsed during construction.
Condo developers usually set up a limited liability corporation for each project. The LLC typically has minimal assets and is usually dissolved in three to five years. Most problems with condos seem to develop after this five-year period, so the developer is usually off the hook.
In many cases, problems with condos are the result of a lack of proper maintenance. In some cases, the homeowners association will hire an engineer to evaluate the problems and develop remedial measures. In other cases, the homeowners association will decide to avoid the cost of hiring an engineer and fixing the problems, and instead sue the designers. As pointed out in the article, this is sometimes facilitated by attorneys who solicit homeowners associations. I have seen several examples of attorneys going from condo to condo, meeting with the homeowners associations and offering to bring in their “forensic engineer,” who will undoubtedly find something wrong with the original design and provide a basis for a lawsuit. I have even seen this happen in situations where the condo exhibited no evidence of any problem whatsoever!
As mentioned in the article, checking on the experience and litigation history of the condo developer is important. It is also important to have your contract contain the protective clauses listed at the end of the article. Note the last clause stipulating that the bylaws of the condominium contain a requirement that maintenance and inspections be performed in accordance with a maintenance manual, including a waiver and indemnity in favor of the designers if this is not done. This is important because it will still provide protection after the developer disappears. Indemnification clauses are sometimes readily agreed to by the developer, since he knows that he’ll be out of the picture in a few years.
One last point to emphasize is that, if your client is an architect, you might have to educate him on these issues, and it is imperative that you do so before the architect signs his contract with the developer. If the architect signs a contract that contains none of these protections, you should be prepared to walk away from the project.
Of course, there are some high-end condo projects with reputable and knowledgeable developers who appreciate quality work and are willing to pay reasonable fees and provide the appropriate liability protections. Unfortunately, these are few and far between.
Daniel A. Cuoco, P.E., F.ASCE,
dcuoco@zweigwhite.com