Small Project Design

This message has been cross posted to the following Discussion Forums: Small Project Practitioners and Practice Management Member Conversations .
-------------------------------------------
Has anybody out there had previous experience with this?

We have nearly completed Construction Docs for an office building to be leased to the US Government by our Client, who was the "successful offeror", having responded to a USFS SFO (governmentese for RFP).

The Client has been negotiating with his Lender to secure construction funding.  Unexpectedly, the Lender just sent us a "standard" form, called "Assignment of Architect's Contracts", for our signature. 

I have not had to sign on to one of these before.  The Lender assures us that this Assignment merely allows them to complete the construction project if the Borrower (our Client) defaults on the loan.  They also assured us that they "always get one" in situations like this.

Under the "Acknowledgment of Assignment" paragraphs, they include these statements:
    Architect agrees that :
        (A) Lender may enforce the obligations of the Architect's Contract pursuant to the above assignment with the same force and effect as if enforced by Assignor (Client), and 

        (B) Lender may, but shall not be required to, perform the obligations of Assingor, and Architect will accept such performance in lieu of performance by Assignor in satisfaction of Assignor's obligations under the Architect's Contract.

    Architect further agrees that any alteration or amendment of the Architect's Contract will not be effective unless and until approved in writing by Lender.

The project is in a State which requires a written agreement with a Client before performing work; this almost sounds like the Lender is being substituted for the Client, and makes me wonder if the State would actually require a new Owner-Architect Agreement, or some modification of the existing one.

We think they are basically saying, if we want to get paid any further on the project, we need to sign the form.

So, what's the downside if we don't sign?  Do other Architects refuse to sign, and get paid successfully?

Any input would be very much appreciated.

-------------------------------------------
Brian Hawkins AIA
Principal
Brian J. Hawkins, Architect
Medford OR
-------------------------------------------

I have signed these in the past. But before you do, have your insurance provider review and verify that your E&O will still cover the project. The A and B paragraphs are a little one sided. The Lender should also accept all the contract requirements of the original owner. Good luck.

-------------------------------------------
Ronald Peters AIA
President
HistoricStreetscapes PLLC
Mesa AZ
-------------------------------------------

I have received similar letters from lending agencies relative to low income housing projects.  You can expect more to follow, including "certifying" the project.  I always edited the most onerous provisions out, and was successful in doing so.  But always first reviewing with my client, explaining why I was objecting to certain provisions.  I think you have room to negotiate, and there is nothing to lose in trying.  Part B in your question is definitely in need of editing as it would put you in a very weak postion.

-------------------------------------------
William Foster AIA
William E. Foster Architecture
Pacific Grove CA
-------------------------------------------






Original Message:
Sent: 09-27-2010 14:19
From: Ronald Peters
Subject: Assignment of Architect's Contracts to Lender


I have signed these in the past. But before you do, have your insurance provider review and verify that your E&O will still cover the project. The A and B paragraphs are a little one sided. The Lender should also accept all the contract requirements of the original owner. Good luck.

-------------------------------------------
Ronald Peters AIA
President
HistoricStreetscapes PLLC
Mesa AZ
-------------------------------------------

-------------------------------------------
Rex Peterson AIA
Architect
Rex Peterson Architect
Gordon NE
-------------------------------------------
AIA contracts have a clause about applying to "heirs and assigns".  That  clause is the main reason I stopped working for myself and joined a firm large enough to have other architects pick up the pieces if I were sick or dead. 

The proposed clause actually weakens' the Owner's responsibilities, although I think you would have a client from hell if the bank didn't want to finish the project and you claimed they had to pick up all the Owner's responsibilities.  You might check with your lawyer on what the Acknowledgement of Assignment would do to your lien rights in the event the project went bellyup.