AIA FORM REVIEW – CLIENT AND OWNER AGREEMENTS PART 1 OF 2

As a construction lawyer experienced in reviewing and drafting construction contracts, I would offer my support of the AIA’s recommendation that architect adopt use of the AIA form of agreement. Having practiced law in this area for over 30 years, I would agree with comments made by the American Institute of Architects that the AIA contract documents represent the product of a consensus building process aimed at balancing the interests of all parties in the construction project.
A number of attorneys representing owners have written that the AIA documents favor the architect’s interest too much. However, based on a more careful review of the legal authorities supporting claims against architects in general, although the language in the owner-architect agreement does closely represent the preferences of architects when they approach the practice of architecture, the contracts essentially correspond to an architect’s basic standard of care and practice.
By way of general comment, whereas the 1997 owner-architect agreement had two parts, splitting the basic services into part 1 and the additional services into part 2, the 2007 AIA agreement is a one-part agreement. In addition, the numbering has changed from B141 Parts 1 and 2 in the 1997 edition, to B101. Next, the 2007 edition returns the agreement to the traditional division of services to the basic and then additional services.
The basic services in the 2007 edition are broken down into the five traditional phases as follows:
Schematic Design Design Development Construction Documents Bidding or Negotiation Construction UNDERSTANDING COST ESTIMATES The next general comment is that the 2007 newly-renumbered B101 assumes that the architect will provide cost estimates and will design the project to meet the owner’s budget for the cost of the work. As before, the 2007 edition of the B101 is intended to be used in conjunction with the AIA document A201 or the general conditions agreement between the general contractor and the owner.
Based on the foregoing, it does appear that the 2007 edition is possibly more user friendly to architect and prospective client, since all of the provisions between the architect and owner are in one part, rather than two.
THE ARCHITECT’S ROLE DURING CONSTRUCTION One last general comment also goes to presenting the agreement to make it easier overall to understand. The 1997 B141 separate agreement that was called “Part 2,” which describes the architect’s role during construction when the architect is hired to perform contract administration, has now been renumbered as B201, and replaces the Part 2 of the 1997 edition. The re-numbering helps the parties keep the “family” of AIA agreements organized and understood, since the “B201” or architect “during construction” services, corresponds to the owner-contractor “A201” general conditions document as well. To illustrate this point further, the B201 from 2007 is not a stand-alone document, and to become effective, it must be incorporated into the owner architect general agreement. Therefore, it can be used with other architect owner agreements other than the basic form. The 2007 B201 is therefore intended to be used in conjunction with AIA document A201 or the general conditions document between the contractor and owner.
COMING NEXT In the next edition of this series on the AIA architect contracts, I will list the more important detail changes in the main agreement, and the third of my series will identify the changes between the two editions when the owner hires an architect to perform construction administration services.

WHAT REALLY CONSTITUTES A CONSTRUCTION DEFECT?

There is no single definition for construction defects. However, statutory authority and case law provide useful guidance in identifying and categorizing different types of defects.
In general, there are three types of construction defects:
A manufacturing defect that results in a product that differs from the intended result. A design defect that makes a product unsuitable or even dangerous for its intended use. A warning or instructional defect, which concerns a product’s failure to adequately apprise a consumer or end-user of the product’s risks or proper and safe use. Statutory law refines these categories, defining construction defects to include the failure of contractors or owners to meet certain “functionality” standards. For instance, the “right to repair law” contained in California Civil Code §§896-945.5 specifies such functionality standards for original residential construction built after 2003. Notably, the California right to repair law applies only to residential construction and exempts conversions. (A conversion is loosely defined as the repurposing of a building, such as from commercial use to residential use.)
In addition, under the California right to repair law, a function or component of a structure, even if not expressly addressed by the functionality standards, is considered a defect if it “causes damage.”
Case law also addresses the definition of defects. For instance, under California case law, any “as-built” condition that significantly deviates from an approved set of drawings, an applicable building code, or trade standard, reflects an as-built defective condition. An “as-built” condition is defined in the trade as the condition of a building as finally constructed. An example of a defective as-built condition defect would be a door or window that is built in a location or opens in a direction contrary to the original drawings (the “as-planned” condition), and that such deviation from the drawings has not been signed off by the client representative. An example of a non-defective as-built condition would be where during construction the builder slightly deviates from the approved drawings and relocates the walls and doors to account for a customer request or wiring or piping that needs to be routed. In the usual course of construction, this, in itself, would normally not be considered a construction defect.
As reflected here, there are a number of construction conditions that could be considered “defects.” One way for an owner or builder to avoid the costly expense of construction defects is to ensure that even minor deviations from the approved drawings are approved by the customer prior to the work being started.

BAY AREA HOMEOWNERS: BUY, SELL, OR HOLD?

I offer observations below concerning a number of trends in Bay Area real estate prices. Given market changes that have occurred just since early spring, my comments below would appear to apply to those markets that have not seen a surge in buyer interest, such as San Francisco, and markets surrounding Silicon Valley.
Spring and summer are prime home buying seasons in the Bay Area. Yet a fast-paced market and other economic conditions are adding tremendous challenges to the process, except for some hot markets such as those surrounding Silicon Valley. Average buyers now face competitive investors and other prospective buyers paying cash. Factor in a shortage of homes for sale, bidding wars that drive prices up, less dependency on appraisals, and the result: a uniquely frustrating situation for many hopeful homeowners. Offerings that would appeal to average buyers in a normal market like lower-priced homes, and condos are going to cash-paying absentee owners and investors, according to the real estate information company DataQuick. Plus, appraisals are often waived these days when cash buyers are scooping up fixer-uppers and distressed properties.
Average buyers are also facing stricter financing requirements, particularly self-employed and commission-paid workers. As the economy continues its recovery, many owners in certain markets hit hardest by foreclosures can still only sell their homes at a loss or minimal gain.
Bay Area rents have shot up too, shutting out many would-be residents. For property owners who want to sell in this market but can’t,or from a financial perspective shouldn’t, options include renovating, leasing, or waiting until a more favorable market is re-established.