Construction Law: Setting Clear Expectations Is Crucial

Strategies Every Architect Needs for Ensuring Payment

by Ryan Markham, Cotney Attorneys & Consultants

(Editor’s Note:  Ryan Markham is an attorney at Cotney Attorneys and Consultants, focusing his practice in the area of construction law.  Markham has extensive experience in delay claims, mechanic’s and materialman’s liens, bond claims, defects, bid protests, contract review, contract negotiations, and OSHA defense.  For more information, go to www.cotneycl.com.)

Sometimes, architects can come out of a project drastically underpaid, or not paid at all.  If you find yourself in that situation, your livelihood could be in jeopardy.  So, it is critical to understand the payment process and what steps you can take to ensure you are compensated fairly.

         In many cases, architects may earn 10% of a construction project’s costs, but after overhead, that fee may be relatively modest.  Usually, there are several phases of work for each project.  In many instances, architects are paid at the completion of each phase, but that system can be faulty.  Examples of phases are outlined below.

•       Initial design: In this phase, the architect creates the schematic design, which involves general forms and spaces, as well as how the building will sit on the site.

•       Design expansion and development: During this phase, the architect finalizes the sizes, creates building systems, checks code compliance, and selects building materials.

•       Document creation: At this point, the architect draws up detailed documents, which instruct the contractor regarding all aspects of building the structure.

•       Proposal and negotiation: In this phase, the architect and the owner review bids and proposals from prospective contractors and determine a final price.

•       Construction oversight: Throughout this phase, the architect is responsible for ensuring that the contractor follows all design drawings and specifications.

Problems with Payments

         Although your contract should clearly state a payment schedule based on the phases outlined above, there are times when your clients do not pay you as they should.  There can be many reasons for that lapse.  For instance, some of your customers may be running small operations without set processes in place.  If that is the case, they may lose track of the payment schedule and fail to pay you on time.  You may also run into issues if you are too friendly with the owners, making it difficult to enforce the payment obligations.  If money is tight, the owner may pay the contractor first, thinking that is the priority for the project. 

Top On-Time Payment Strategies

         Before you take on any new project, do some research about your potential owner.  Find out what architects this owner has worked with before, contact them, and get their feedback.  In addition, ask to see the owner’s financial statements.  If you choose to work with an owner, request a deposit before the first phase of work begins.  Explain that this deposit is necessary for upfront costs and covers the time needed for the preliminary design.  Do not hesitate to request reimbursement for mileage, copying, postage, and other expenses, as there is no reason for you to absorb these costs. 

         It is essential that before you sign a contract, you take the time to include all the pertinent information related to payments.  If a payment is late, charge a late fee.  You may also wish to hold up the next phase until it is received.  Otherwise, the owner may keep letting your payments slide, and you will find yourself with a cash-flow problem.  If these actions do not result in timely payment, you may need to be more aggressive.  For instance, you can call the person who writes the checks at the owner’s company.  Refer to your contract and the payment due date, and let this person know you are expecting compensation.  

         Hopefully, these strategies will assist you in receiving the payments you are due.  However, if too much time passes and your situation becomes dire, you can file a notice that you plan to file a lien on the property.  Contractors have been known to take this route, and in many states, architects have this right as well.  Filing such a notice should get your owner’s attention.  If it does not, you may have to actually file the lien, but that is the last resort.

            Make sure your reputation is one of a talented designer, as well as a no-nonsense business person.  Make it clear that you produce an excellent service and expect to be compensated promptly.  If you find yourself in a problematic nonpayment situation, do not hesitate to engage legal counsel. 

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