There is now much wider acceptance of the benefits to be derived from selecting and involving the contractor at the earliest possible point in the design process. Alternative methods of building procurement will demand different procedures for appointing a contractor, and it is ultimately for the developer to recommend or decide how best to proceed, reconciling the two often countervailing factors of competitive cost and quality of work. A combination of tender and negotiation is, therefore, frequently the preferred approach. Speak to an experienced Sandy Utah real estate lawyer to know the legal issues involved in selecting a contractor for your real estate project.
An experienced Sandy Utah real estate lawyer can draft the construction contract for your real estate project. Because the contractor is responsible for the procedures, methods, and means of the construction process, the standard contract states that these operations must take place on authorized land and without “unreasonably encumbering” the site. What this provision does not do is articulate the on-site uses that may be detrimental to the owner. On renovation projects, the owner may not want the contractor’s employees using the lavatories of other units, making lunch in the kitchens, parking in the tenant spaces, or posting signs on the site without prior approval. These are just a few of the uses a prudent owner might object to. Careful consideration should be given to what an owner will allow on the site, to avoid unnecessary costs and problems.
An additional consideration, which ties into the indemnification clause that follows, is the liability that an owner might be exposed to, based on the contractor’s use of the site. The “safe place to work” statutes must be considered during the construction phase. The owner must protect itself through property insurance and the contractor’s insurance from any liability that occurs as a result of the site’s condition, for example, where a delivery truck driver is injured at the site while trying to avoid a new shipment of bricks stacked by the contractor.
The contract should require the contractor to indemnify and hold harmless the owner and its agents against any claims resulting from the performance of the contractor’s work. The legal and insurance aspects of this clause will vary from site to site. Prudent owners should take all necessary steps to limit their exposure to circumstances and conditions over which they have direct control. Shifting additional liability to the contractor by modification of this clause may be problematic because these standard provisions are widely accepted and understood.
The time finally comes when the job is complete and purportedly ready to be occupied. However, the hallways are strewn with rubbish, the units are littered with the debris of construction, and four spaces of the parking lot are occupied with a dumpster filled to overflowing with old appliances, mattresses, furniture, and debris. The contractor is gone, and the final payment due the contractor is not enough to pay the carting expenses.
This scenario is more common than might be imagined. There is little an owner can do in this situation, and it is best avoided. The contractor is responsible for keeping the premises “free from accumulation of waste materials or rubbish caused by the contractor’s operations.” This responsibility should be strictly enforced throughout the construction process. Failure by the contractor to maintain a clean project site can cause fires, accidents, and delays to the project schedule. The cleaning-up provision of the standard contract allows the owner to clean the site and charge the contractor. The prudent owner will not wait until the final contract payment to exercise this option.
The Role of the Construction Manager
As mentioned earlier, some construction projects require or could benefit from the services of a construction manager. The construction manager can play multiple and varied roles. A construction manager can be used to supplement the construction experience of the project architect during the design phase and to anticipate or avoid problems that may otherwise have been overlooked. Issues such as construction sequencing, materials selection and availability, and coordination of individual trade contractors and subcontractors all require more than a working knowledge of standard construction practice. The input of an experienced construction manager should result in time and cost savings that far exceed the construction manager’s fees.
In addition, the architect selected for the project may be unable or unwilling to take on the role of owner’s agent during the construction phase of the project, or the scale of the project may be too large for an architect’s field representatives to handle in a timely manner. The construction manager could step in and manage the construction process in place of the architect.
Finally, where a limited scope of rehabilitation is being proposed, the owner may act as its own general contractor and use a construction manager to supervise and coordinate the work of the subcontractors.
Just as the project’s start-up requires careful planning, so does the completion of the work. The anticipation of the finished project alone can accelerate the most experienced owner’s heart rate. Schedules are tight; things slip through the cracks; responsibilities are forgotten. Completing the construction process should begin several months in advance of the proposed completion date. The parties responsible for each item should be notified and reminded of their obligations and deadlines. Written responses to these notifications should be required by the owner to ensure that everyone is on notice and has been provided with an opportunity to resolve any conflicts. The following list summarizes the submissions that are due to the owner prior to completion of the project:
• As-built plans and specifications
• Guarantees from the contractor and subcontractors for work, materials, and equipment installed.
• Transfer documents for all certifications, releases, lien waivers, equipment manuals, and warranties.
• Final inspection reports and sign-offs.
• Transfer procedures for utilities, insurance, and letters of credit.
Condominium and Single-Family Homeownership Housing
“Permanent loan closing” for a owner of condominium or single-family fee simple homeownership projects will be quite different. In these forms of homeownership housing, unlike rental or cooperative housing, the owner receives the funds to pay off its short-term lenders from the proceeds of the sales of the homeownership units, not from the proceeds of new long-term debt that the owner is obligated to pay back. The homeownership units generally will be financed by long-term “permanent loans” obtained by the homeowners, carried by the homeowners (not the owner), and secured by the homeownership unit. The owner’s financial relationship to the property usually ends at the time when the acquisition and construction lenders are paid off and any warranty periods related to construction have expired.
Unlike rental or cooperative housing, unless all or substantially all of the units are sold by the owner at the same time, the owner will not receive all of the funds necessary to repay the acquisition and construction lenders at any one “permanent” closing. Generally, the owner will have to wait for closings to occur on the sale of most or all of the units before it can obtain sufficient proceeds to pay off all short-term lenders. For this reason, acquisition and construction lenders often require the owner to convince them that a firm market exists for these units or to “presell” the units prior to acquisition or construction closing.
The services of an experienced Sandy Utah real estate lawyer are unavoidable in the property development process, right from acquisition through the various stages of planning approval, contracts for construction, to eventual sale or leasing. How much legal work is involved in any particular project will naturally depend upon the complexity of the scheme and the number of parties concerned. It is also possible that specialist advice might have to be sought on certain matters. In simple terms, it has been said that the solicitor is well suited to undertake several roles: of advisor, especially in the complex area of planning law and construction contract law; negotiator, to explain, to persuade, to reach agreement and to discover for and between the various parties; advisor at meetings, representations of all kinds and inquiries; co-ordinator, between all parties to the project and all those who can regulate or otherwise have an influence upon it; and draftsman, of all the relevant formal documentation.
Generally, the tasks of an experienced Sandy Utah real estate lawyer will include:
• Establishing the legal existence of the owner, if a new organization.
• Negotiating all contracts between the organization and development team members.
• Negotiating and drafting the written agreement that will provide the organization with site control over the property.
• Representing the organization before government agencies and lenders.
• Reviewing all loan documents.
• Establishing the legal existence of the entity that will take title to the property, if different from the development organization itself.
• Ensuring that the organization complies fully with all local laws and regulations, if any, that regulate the operation or licensure of rental housing or homeownership entities.
• Negotiating, reviewing, and revising all construction-related contracts (architect, general contractor, construction manager).
• Establishing the legal existence of the cooperative or condominium structure, if the organization is developing homeownership opportunities.
• Drafting the disclosure documents—public offering statements, condominium declarations, and so on—required for the sale of homeownership opportunities.
You should consider retaining an experienced Sandy Utah real estate lawyer if the existing zoning or use classification of the property needs to be changed in order to create the type of housing intended by you. Land use changes sought by the owner may be minor, requiring only a variance, such as for allowing a basement to be converted into an accessory apartment, but they are often major, such as a change of zoning that allows dense, multifamily housing developments to be built on land formerly used solely for single-family homes. Whether the required use change is major or minor, if it is not secured, the owner will not be able to create the type of housing it set out to develop.
In selecting an attorney, you should select a Utah real estate attorney who has practiced land use law extensively in the jurisdiction where the property in question is located. An experienced Sandy Utah real estate lawyer is required because land use law is uniquely local. An experienced Sandy Utah real estate lawyer knows the law and all the local people who administer and interpret the laws and regulations.
The attorney also must be willing to provide the owner with legal opinions required by lenders or government agencies in order to secure financing. Inexperienced attorneys may balk at providing these opinions without an additional charge, if acting under a fee for service arrangement, because of counsel’s lack of understanding of the programs and inability to assess the risks to lawyer’s firm in providing the opinion. Owners must find out the answers to these questions before the problems arise.
Real estate lawyers with little or no real estate development experience, whether the services are offered pro bono or for a fee, will be of little assistance to the owner. The owner may have a false sense of security that all necessary legal issues are being addressed and learn of problems later in the development process as counsel realizes the extent of the complicated legal problems that arise in affordable housing development and the limited resources of its client.
The owner is the ultimate decision maker. Its responsibilities include the determination of whether the project should in fact go forward, the appropriate purchase price for homeownership units prior to sale, the extent of construction or rehabilitation, the hiring and firing of professionals, and the appropriate level of payment for all outstanding bills, taxes, and license fees. The development team members work on the project only as long as the owner desires their services. In contrast to the other development team members, who generally end their relationship to the project once they have received payment for their services, the owner generally invests its own funds—its “equity”—into the project on a long-term basis (if rental housing is being developed) or until the project can be sold out (if homeownership housing is being developed).
Sandy Utah Real Estate Lawyer
When you need legal help with a real estate matter in Sandy Utah, please call Ascent Law LLC (801) 676-5506 for your free consultation. We can help you with quiet title actions. Real Estate Contract Disputes. Real Estate Ligitation. Landlord Evictions. Boundary Disputes. Easements. And Much More. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506