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#57:  The New AIA A201 (2017): Not Much Is Different

6/10/2017

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Every ten years, the American Institute of Architects revises and updates its standard form Owner-Contractor A-series documents, including the popular A201 General Conditions. The latest version released in April 2017 has some updates, rearranges some sections and tweaks some language – but by and large, the changes are rather minor.  A comparison of the 2017 and 2007 versions may be found here.

Some of the salient changes:

Revised Section 1.1.8 makes express what was formerly implied: that the Initial Decision Maker (typically the Architect) must be impartial to both the owner and the contractor, and shall not be liable for decisions made in good faith.

Revised Section 2.2 obliges the owner to provide “reasonable evidence” that it can fulfill its financial obligations under the contract. If that evidence is not provided, the contractor need not start work. If there is a change in the work “materially altering” the contract sum, upon written request the owner must provide updated financial information, failing which the contractor may refuse to perform the portion of the work affected by the change.

New Section 3.5.2 requires that all “material, equipment, or other special warranties required by the Contract documents” be issued in the owner’s name.

Revised Section 3.12.10.1 formally adopts the Spearin doctrine, entitling the contractor “to rely upon the adequacy and accuracy of the performance and design criteria provided in the Contract Documents,” while deleting the prior language that “the Contractor shall not be responsible for the adequacy of the performance and design criteria specified in the Contract Documents.”

Revised Section 7.4 allows the contractor to object to a “minor change” proposed by the architect if the contractor disagrees the the change will have no effect on Contract Price or Contract Time, and refuse to perform it until the effect is determined. Failure to object and proceeding with the change, however, waives a later claim for adjustment.

Article 11's Insurance and Bond provisions have been scaled back in favor of moving many of the 2007 form provisions to a new Insurance and Bond Exhibit that allows the parties to negotiate check-the-box insurance coverage requirements. Remaining provisions include a few changes: Section 11.1.1 requires the owner, architect and architect’s consultants to be named as additional insureds under the contractor’s CGL policy; Section 11.1.3 requires the contractor to provide a copy of any bonds to potential beneficiaries (e.g., subcontractors and suppliers looking for payment bonds) upon request; Section 11.1.4 and 11.2.3 require each party to notify the other of any lapse of insurance coverage that the party was required to carry within three business days; and Section 11.2.2 waives claims by the owner for any loss that would have been covered by insurance that the owner was required to procure but didn't.

New Section 15.1 adds what amounts to a statute of repose, providing that all claims must be asserted within 10 years after substantial completion. (New Hampshire's statute already limits claims to 8 years after substantial completion.)

Revised Section 15.2.6.1 now states that if a demand for mediation is made within 30 days after receipt of a decision from the Initial Decision Maker (rather than the former 60 days) and the other party fails to participate within 30 days of receipt, both mediation and the ability to challenge the Initial Decision are waived.

As always, using the AIA form simply sets default rules; the parties are free to modify them as they see fit. (Here's a bold prediction: the most deleted provision of the new 2017 A201 will be Section 1.7, which calls for the use of AIA Document E203 – 2013, Building Information Modeling (BIM) and Digital Data Exhibit. Going digital is a great idea – but for smaller projects, we're just not there yet.)

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#56:  Mechanic's Liens on Condominium Common Area

6/6/2017

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Condominium ownership has been on the rise since the 1970s, and there are now over 800 condominium developments in New Hampshire ranging in size from two units to several hundred units. Condo owners own not only their units, but a proportionate share of the grounds, facilities and the like – so-called “common area.” Decisions on common area maintenance and improvements are typically made by a homeowners' association; see RSA 356-B:41,I (“Except to the extent otherwise provided by the condominium instruments, all powers and responsibilities with regard to maintenance, repair, renovation, restoration, and replacement of the condominium shall belong (a) to the unit owners' association in the case of the common areas . . .”). If an association contracts for common area improvements but doesn't pay for them, how does the contractor go about getting a mechanic's lien? The answer may surprise you.

RSA 356-B:8,II provides: “Labor performed or materials furnished for the common areas, if duly authorized by the association of unit owners or board of directors in accordance with this chapter, the declaration or bylaws, shall be deemed to be performed or furnished with the express consent of each unit owner and shall be the basis for the filing of a lien pursuant to the lien law against each of the units . . .” The apparent effect of this statute is to require an attachment of each of the unit owners' proportionate interests in the common area. Whether or not suing the condo association that hired you (rather than suing each unit owner separately) is an allowable way to seek a money judgment, liening the association's interest in common area will not work – for the simple reason that the condo association has no such interest. Only the unit owners do.

When there are numerous unit owners in the condominium, this can get cumbersome. A contractor, subcontractor or supplier who wishes to perfect a mechanic's lien will often be obliged to name and serve dozens of parties. A subcontractor or supplier who wishes to give notice of intent to lien will often be obliged to send dozens of notices. Writs of attachments must be recorded against dozens of names. And so on. As one court has noted, “the cost and delay inherent in identifying, pleading against, and serving a multitude of owners (and then substituting a new owner for a predecessor during the pendancy of the case as units are sold or otherwise transferred) would be substantial.” Trintec Const., Inc. v. Countryside Village Condominium Association, Inc., 992 So.2d 277, 280 (Fla. App. 2008).

Fortunately for contractors, condo associations are required by statute to raise the money to pay for common area improvements; see RSA 356-B:45,III (mandating that all common expenses “shall be assessed against the condominium units”). Unfortunately, “such assessments shall be made by the unit owners' association annually, or more often if the condominium instruments so provide” – and they rarely do so provide, so a contractor expense not budgeted for at the previous annual meeting may have to wait to be paid. Fortunately, such unbudgeted contractor expenses almost always result from casualties or accidents that are required to be insured against “to the full replacement value of the structures within the condominium, or of such structures that in whole or in part comprise portions of the common areas,” RSA 356-B:43,I(a). Unfortunately, “structures” likely do not embrace sitework (e.g., washouts or tree damage from severe storms), which is therefore not required to be insured against.

If a mechanic's lien is recorded, unit owners may “remove their unit and the percentage of undivided interest in the common areas appurtenant to such unit from the lien by payment of the fractional or proportional amounts attributable to each of the units affected,” RSA 356-B:8,II. But don't get too excited, contractors; this will typically happen only when there is a sale or a refinance afoot. Frankly, that scenario is the only way a mechanic's lien will ever provide leverage to a lienor – at least until someone figures out how to attract a buyer for an undivided proportionate common area interest at a sheriff's sale!

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    Frank Spinella

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