We explained previously what design-build delivery method is and why it is not allowed on residential projects in NYS. We talked about how Owners are misled by the false impression of being provided "all-included services" to complete a renovation project, including architectural design professional services.

Contractors or any other entity cannot provide or broker architectural services! The "design" in "design-build" does not refer to "interior design" services, it stands for "professional design" including architectural or engineering services.

Irregularities Associated With Owners Signing a Contract with a Contractor Prematurely

A common mistake an Owner can make before even starting an apartment renovation project is prematurely signing a contract with a general contracting firm under the impression that an architect is being "coordinated" by said entities while unaware of the false "design-build" advertisement.

An Architect has a critical role to advise an Owner on the form of agreement between Owner and contractor. Architects are design professionals familiar with construction laws, regulations and standard protocols that safeguard the Owners' interests.

When an Owner signs a contract with a builder without an Architect's assistance, a high-risk decision is made as an opportunity to implement standard industry protocols are most likely lost.

Signing a contract for construction with a builder without an Architect's consultancy would perhaps cause the following omissions to the contract for construction:

• Communication protocols not identified;
• Start and completion dates not indicated;
• Liquidated damages clause not included;
• Change orders review protocols not included;
• Front-loaded payments and lack of Architect's review of contractor's applications for payments;
• Construction administration protocols and builder's responsibilities not defined;

Premature Owner/contractor Agreement Pitfalls

Owners being misled by builder's false advertisement tend to enter a contract with a builder prior retaining an Architect, thinking architectural services would be provided by the contractor advertising architectural design-build services.

Read more on why design-build is false advertisement. Contractors are not authorized to offer or render architectural services.

We will elaborate on each pitfall typically seen in contracts signed between Owner and a general contractor when an Architect is not advising on this agreement. Those contracts are most times one-sided and in favor of a builder, not accounting for basic industry standards and obligations.

Communication Protocols Not Identified

For any project it is important that communication protocols are identified. Apartment renovations in NYC require parties involved to understand their roles and how they shall communicate throughout a project.

A common misunderstanding in NYC is that an Owner shall discuss their renovation project with a builder directly, most times driven by curiosity about how much their renovation will cost. The false advertising of design-build is not helping correct this widely spread misconception, presenting builders as one and only point of contact needed.

The industry standards have identified communication protocols and roles as:

• Owners discuss programming and budget with their Architect;
• Architects design within the estimated budget;
• Architects issue developed drawings and specifications to contractors for bidding;
• Architects review builders' cost estimates against drawings and specifications;
• Architects discuss with Owners on bid award to a selected builder;
• Architects advise Owners on agreement form with selected builder;
• Architects assist with co-op/condo, DOB and LPC approvals;
• Architects oversee construction phase and provide reports;
• Architects inform Owners of construction progress;
• Architects and inspectors sign off DOB NOW inspections;
• Architects request Letter of Completion from DOB.

When industry standard communication protocol sequencing is not followed, Owners are put in an unfavorable position. As you can see, an Architect's role is to advise an Owner at large. Signing a contract with a builder and not having an Architect by your side is high risk. We will explain next on what the consequences typically are.

Start and Completion Dates Not Indicated

Not including start and completion date for construction in your contract is allowing a builder to delay the construction at your expense. For Owners this may translate into:

• Suspense on when construction would end;
• High levels of stress and mental strain;
• Unanticipated cost for temporary housing;
• Unanticipated inconveniences related to various personal affairs planning;
• No clear path on how to reimburse unanticipated incurred expenses.

At the time of signing a contract for construction with a builder it is very important to include start and completion dates per construction schedule provided by the builder and after an Architect reviews and approves it. This way the builder is expected to finish the project within a defined period. Verbal estimates and promises shall not be considered.

Example: A Small Co-Op Gut Apartment Renovation in Kips Bay Delayed Months!

We had a role of an Architect of Record on a 725-sf gut apartment renovation. A client signed a contract with a contractor prior being in touch with our office. The contract did not indicate a start or completion date, only vague verbal estimates were provided by the builder, we learned.

The construction was delayed for more than two months due to builder's fault. The client had no easily available means to request compensation for losses caused by such severe delays. The delay negatively impacted the life of the family that had canceled their previous apartment and planned to move with their furniture into their new space based on what the builder initially promised regarding the completion date. We felt first-hand how stressed the Owners were and what disturbance this perpetual uncertainty has caused them in the middle of the winter months. The Owners both had full-time jobs and a child trying to manage their life in these completely unanticipated times. I recall them saying: "We have no apartment to live in."

Our office requested a construction schedule indicating delays to be provided by the builder. This request was made on the account that the construction schedule is considered a submittal; an Architect has the right to request it. However, our request was not fulfilled by the builder. Owner/contractor agreement was incredibly weak towards Owners disabling the ability to address delays in an effective manner.

Had their agreement with a contractor indicated a start and completion date at bare minimum, our office would have been able to assist the Owners in a more effective way and advise on how the Owners could request compensation for expenses relative to unforeseen accommodation while waiting for their apartment renovation to be ready for a move-in. We all know how expensive short-term apartment rentals are in NYC, the Owners could have been reimbursed for the cost of an apartment of equal quality in the neighborhood of their unit under the construction.

Liquidated Damages Clause Not Included

Contracts for construction not including the liquidated damages clause are leaving Owners at the mercy of builders, with Owners unable to be easily compensated for delays by a builder.

A liquidated damages clause identifies the dollar amount a builder shall pay the Owner per day for each calendar day past completion date, if the delay is due to contractor's fault. This is an excellent way to keep a builder accountable for their construction schedule estimates.

Most Owners that sign a contract with a builder prior engaging an Architect are not aware of a liquidated damages clause while excited about their apartment renovation and focused on visual design aspects.

To put this in perspective, there was no contract that our clients signed with a builder on their own that contained liquidated damages clause, despite it being the industry standard.

Change Orders Review Protocols Not Included

If a contract between a general contractor and an Owner doesn't clarify that change orders proposing an increase in construction cost and/or an extension in completion date that are due to builders' omissions would not be granted, it would be difficult to argue with a contractor.

It shall also be stated in contracts that it is contractors' responsibility to:

• Provide cost estimates based on architectural drawings and specifications;
• Failure to account for information provided in architectural drawings and specifications would be the builder's responsibility to cover the cost and change orders would not be granted;
• Change order requests by builders would be granted for additional cost and/or time related to addressing concealed conditions or omissions in architectural drawing sets;
• It is a contractor's responsibility to study existing conditions and drawing sets and to notify an Architect of any discrepancy. Change order requests by builders for additional cost and/or time related to situations that could have been identified from studying existing conditions and drawing sets would not be granted.

The above are simplified statements that readers shall not use verbatim in their contracts with builders; our explanation is more an insight in how important it is to have an Architect advise on a contract for construction. If you would like a more in depth review, schedule a consultation with our team.

The American Institute of Architects (AIA) developed a standard document G701, Change Order. The Architect's role is to prepare the form and verify that the cost and schedule impacts proposed by the contractor are fair and reasonable.

When a contractor issues a proposed change order that doesn't automatically mean that an Owner shall pay a builder additional funds. Proposed change orders are reviewed and approved or denied by an Architect and against the drawing set and specifications, and contract documents.

Change orders may not always be an increase in cost or an extension of time. In case the scope of work is decreased a builder shall submit a change order showing decrease in contract sum and/or time.

The idea of an Owner signing a contract with a general contractor without architectural drawings available or an Architect involved is rather misguided. A contractor shall provide estimates only after the study of architectural drawing sets and not based on their interpretations of the scope of work. Builders are not qualified to provide architectural design services.

Example: New Powder Room in an Upper West Side Co-Op, Additional Cost Surfacing

Our firm was retained for an Architect of Record role for a co-op apartment renovation in Manhattan's Upper West Side. The scope of work was for an additional powder room. The location of the proposed powder above electrical meter room triggered "wet area over dry area" requirements. The builder had provided a construction cost estimate to the Owner prior our firm's engagement and not based on our drawings and specifications, which is against industry standard protocols.

The design for wet over dry area floor assembly for the new powder room was carefully considered by our team and depicted a 2-part waterproofing membrane in our drawings and specifications. The co-op had approved the design.

The issue had arisen when a builder calculated that a change order of approximately $11,000 would cover for material and labor shown in our waterproofing design. Our office was not advising the Owner on their contract with a builder, unfortunately, as we were engaged on the project too late.

My question was: "What did the builder base their cost estimate on when presenting a contract to sign with the Owner if there were no drawings and specifications available yet?"

In this case the builder did not account in their initial pricing for waterproofing system needed, having the fact that the new powder room was located above electrical meter room. Builders are not authorized to provide architectural design services and shall not assume what the drawings and specifications may show, but provide their estimates only based on architectural drawing sets. Each building in NYC is different and comes with its own intricacies and co-op/condo specific requirements, generalizing and simplifying the science while falsely advertising is not good practice and puts Owners in jarring situations. Owners deserve to know the true construction cost prior entering a contract with a builder, as opposed to being pulled into a contract under the guise of "design-build", "one-stop shop" and similar false offers. Owners need to know whom they contract with, and when contractors mislead the public by falsely advertising architectural design services, they may be prosecuted as felony class E in NYS.

An increase of 11K prior starting a construction phase on a small renovation project was a shock for the family that planned their apartment renovation on a tight budget. The Owners already had paid the deposit to the contractor when they learned that the construction cost that their contract with a builder was based on wasn't true cost. It made no sense to terminate such contract due to losing the funds paid, which created a "hostage-like" atmosphere.

Lenka Ilic, Principal Architect

Conclusion: Owners shall be wary of signing a contract with a builder prior engaging an Architect. Cost estimates when not based on architectural drawings and specifications are not true cost estimates.

It is a scary thing to think that Owners sign contracts for construction in the amounts of hundreds of thousands of dollars for their apartment renovations on their own.

Front-Loaded Payments and Lack of Architect's Review of Contractor's Applications for Payments

Contracts handed by builders to Owners when there is no Architect involved are typically requesting payments prior any portion of work commencing. This dynamic puts Owners at risk of not being able to leverage a builder's progress with payments.

Payments to general contractors are an incredibly sensitive matter to both parties, Owners and contractors. It is the industry standard that an Architect reviews applications for payments submitted by a builder based on construction progress on site, contrary to what happens in reality when Owners sign contracts on their own. As we mentioned many times in our articles, Owners are not expected to be familiar with the construction matter, so therefore an Architect shall discuss directly with builders on Owners' behalf.

Practically speaking, an Architect shall review the work performed and determine the percentage of completion. The percentage determined shall be proportionate to a builder's request for a payment. Time to time, Architects disapprove and request a revision on a builder's request for payments due to inadequate completion of portions of work installed on site.

It is critical for a healthy construction phase that an Architect reviews builder's applications for payments. It is good practice to clarify that Owners shall not pay contractors solely on builders payment request, instead make sure that the contractual language reflects industry standards that protect Owners.

The American Institute of Architects (AIA) Standards

The American Institute of Architects (AIA) developed standardized contractor's application for payment document comprising of G702 and G703 forms.

G702, The Application and Certificate for Payment, summarizes the entire contract status, including the original contract sum, approved change orders, work completed, stored materials, retainage, and the current payment amount due.

G703, Continuation Sheet for Payment Application, provides a line-by-line breakdown of the work completed, corresponding directly to the agreed-upon Schedule of Values.

Construction Administration Protocols and Builder's Responsibilities Not Defined

After all, protocols are what keeps a renovation project structured. Failing to identify roles and responsibilities of a general contractor during construction phase in a contract for construction is bad practice.

NYC apartment renovations, even small projects such as bathroom or kitchen remodels require DOB NOW progress and special inspections passed, submittals approved by an Architect, and a builder familiar with communication protocols so that work installed is exposed for our review and any questions and situations properly addressed.

Read more on what construction administration entails and what good practices are.

Contracts that Owners sign with builders on their own typically do not address any of the above. Contact us to avoid irregularities of "design-build" false advertisement!