Even if contract language isn't always enforceable, there are aspects to this business that architects can control, such as being selective about who they work with and specifying high-quality materials. On its insurer's advice, Fletcher Farr Ayotte stays away from developers who are contractors, a setup that gives them inherent power to make changes during construction. Another red flag is the developer who wants to reduce the construction administration fee. “When they want to do that, they're generally going to take shortcuts,” Strassmaier says. When assessing the risks of working with new developers, the firm looks at who they're using for a contractor, how much money they're budgeting for the project, and whether they're willing to spend extra to hire an acoustical engineer or waterproofing consultant. Luxury high-rises are especially prone to noise problems. Surround-sound systems often co-exist unhappily with exposed steel ceilings, concrete floors, and glass walls—contemporary design features that conduct sound between units. And mixed-use projects present another set of challenges. “If there's a restaurant on the ground floor, you have the potential for odors, or the sounds of nightlife going on until midnight,” Strassmaier says. “Mixed-use is a difficult proposition; you have to protect yourself.”
Torti Gallas, whose condo work runs to middle and upper markets, steers clear of the build/bid approach, knowing that a contentious relationship between the owner and contractor signals a rocky road. “If the owner is holding back money from the contractor because he's not happy with something, the contractor can have a big impact on the attitude of buyers when the time comes to fix things here and there,” Gallas says. “If you provide a quality assurance mentality all the way through the team, the attitude of the condo association tends to be more sympathetic.”
In a project type with a discontinuous sense of ownership, quality is a huge issue. Gallas says that, compared with rental apartments maintained by a single owner, condos require a higher level of windows, better sound control, and epoxy steel framing, which creates a more solid bond than regular framing. “I think most condo developers are very good at putting in the merchandizing aspect of a condo—the upgraded kitchen cabinets or appliances, the things buyers can see,” Gallas says. “But the bigger risk lies in things they can't see.”
If condos are so scary, why take the gamble? “With the right client, they can be very nice projects, and it's a lucrative market right now,” says Steven Santucci, AIA, associate principal at Perkins+Will, Chicago. Among 16 offices from Seattle to Miami, the firm's condo projects represent roughly 1 percent of its revenues. “We happened to stumble onto some upscale luxury stuff that allows us to really have some control over what's being built,” he says. “From a purely selfish architectural standpoint, we made a decision we don't want to do the high-volume work that's not going to add to our portfolio.” Communication and a solid knowledge of the risks are keys to limiting liability, Santucci says. In monthly conference calls, architects in five or six of its offices discuss legal, design, technical, and management issues that have come up in current projects. “Our understanding is that it's hard to control third parties no matter what you put in contracts,” Santucci says, “so we're trying to get things right from the start of a project.”
New York City architect Louise Braverman, AIA, agrees. “I am extremely strict on how I read city code, and I do everything exactly to the letter of the law,” she says, adding that she's conscious of maintaining integrity not just in structural and mechanical systems but in details such as sliding door hardware, which people touch every day. “Being rigorous goes a long way, but it's not foolproof,” Braverman says. “This is America—anybody can sue.”trade tricks
Architects who want to do urban design, while avoiding the perils of condos, have devised ways to play it safe. One California architecture firm (whose principal wishes to remain anonymous) formed a separate corporation for condo design that operates without liability insurance. Its underwriters have said that if condo work represents more than 10 percent of its portfolio, few agencies will even consider it for liability insurance. “We don't have to report condo work to our underwriters, because we don't carry insurance for that corporation,” the architect says. “We don't want to jeopardize our institutional work, and it keeps condos off the books.” Often, the firm further limits its exposure by designing condos for developers who hire a production architect to sign drawings and oversee construction.
Other firms position themselves to work with developers and homeowners to simply finish off raw space or upgrade the basic package. Ruhl Walker Architects, a small Boston firm, is talking to developers about offering different levels of finish to potential buyers while the building is under construction. In most cases, however, the firm customizes units for homeowners after the certificate of occupancy is issued, working with the original architects to make sure the changes jibe with surrounding systems such as plumbing stacks. “It's not that we're opposed to working on whole buildings,” says principal Will Ruhl, AIA. “Partly, it hasn't come up, and we're cautious about who we work with.”
San Diego architect Kevin DeFreitas, AIA, usually rejects condos out of hand, but he's throwing caution to the wind to design a four-unit building on an infill site, believing it's too small to attract litigation attorneys. “My insurer will allow me to do condos as long as they're not more than 10 percent of my gross billings,” DeFreitas says, “but there's no fee that's worth assuming that kind of liability for 10 years.” Instead, he's pursuing products that look attached but have inches of airspace between thick concrete walls, qualifying them for single-family status. For his current project of 15 such homes, $1 million worth of insurance is costing $540,000, compared with the $720,000 he would have shelled out for condo coverage. “It's a deal killer, because if I pay $720,000 today, 10 years from now that $1 million coverage will be worth only $500,000,” he says. “We'd be paying more than what we received in services if there was a maximum claim against the policy.”
By contrast, large firms such as Torti Gallas proceed with caution, viewing condo design as an inevitable part of residential work. “Not doing a condo would be minimizing the amount of work that we can do for our clients,” Gallas says. “It's one of the bevy of approaches we can take to practice residential design.”
Cheryl Weber is a contributing writer in Severna Park, Md.
Judy Mendoza, senior risk management consultant at the insurance firm Victor O. Schinnerer & Co., recommends that architects take the following precautions to limit their exposure on condo projects:
- Select clients and projects carefully. Look for developers with a solid track record and projects that have a realistic budget and time frame.
- Insist on providing contract administration services. Be wary of limited agreements that may keep you from observing critical construction phases.
- Ask to review the qualifications of consultants the developer hires. The fact that your client isn't the end user and wants to maximize profits can be a conflict of interest.
- Specify materials and systems with cost and maintenance in mind. Homeowner associations may not be well-organized or have much money set aside for repairs, so design buildings that are as simple as possible to maintain.
- Offer to prepare a maintenance manual as part of your services. It's a great defense on lawsuits, which often stem from deferred maintenance.
- Ask the client to protect himself by retaining a water penetration specialist. Many condo claims arise from water problems; hiring a specialist will result in a better project.
- Urge the developer to establish a 10-year contingency fund for testing, repairs, and maintenance. It's a way for the developer to show that he's serious about quality, and that money is set aside if things go wrong. Homeowners who are kept happy are less likely to sue.
- Offer your professional services to the condo association, and charge for them. If there's a problem, you'll be the first person contacted, and the homeowners will be more likely to stay involved in upkeep.
- Ask the developer to include a mandatory mediation clause and a list of maintenance requirements in the condo bylaws.
- Agree to contracts that fairly allocate risk. Whether it's an adequate fee and time to do design and construction, or avoiding responsibility for warranties, make sure there are no clauses that hold you accountable for the impossible.
- Document, document, document. If a developer makes a change to the specs, or tries to cut corners and you've tried to stop it, put it on record.
- Work for legislative changes that benefit architects. Shorter statutes of repose-three to four years, versus 10—would reduce the number of lawsuits. Joint and several liability, which applies in some states, should also be abolished. Under that law, if you're found only 5 percent responsible for damages but the project's other players no longer legally exist, you could be held liable for all the damages.