Additional cost due to oversight made by city and possibly architect. Who pays?

Question

I am working with a great architect on my first new development project (who I found on Bigger Pockets). We met with the city twice for 'preliminary plan check' and are now going through the formal plan check process. During the formal plan check process, the city noticed that we were not interpreting the encroachment plane properly, which means we had to redesign the attic. This required changes to the structural engineering, which the structural engineer is charging me for. Who should pay for these changes: the architect or me? All parties involved missed this mistake (the city during preliminary plan check, the architect, and myself). The architect pointed out that I should pay, given that we screened our design twice with the city during the preliminary plan checks. I get that perspective. However, I also see the perspective that the architect is expected to know about the main setback/encroachment requirements, with the encroachment plane being one of those requirements.

Is it reasonable for me to pay 100% of the charges? Should we split them? Or something else?

If this matters, my current contract w/ the architect is a fixed price for them to get the project through plan check.

Also, it is likely that my architect sees this post (I found them on Bigger Pockets). In this case, please know that no offense is meant. I am trying to be thorough with my due diligence, especially since this is my first project and I am hoping to build up my knowledge base and set myself up for success for future ground-up development projects with you. :-)

Is it reasonable for me to pay 100% of the charges? Should we split them? Or something else?

If this matters, my current contract w/ the architect is a fixed price for them to get the project through plan check.

Also, it is likely that my architect sees this post (I found them on Bigger Pockets). In this case, please know that no offense is meant. I am trying to be thorough with my due diligence, especially since this is my first project and I am hoping to build up my knowledge base and set myself up for success for future ground-up development projects with you. :-)

Russell Brazil · Answer

You

Kristi Kandel · Answer

The AHJs will never take responsibility for their misses. I've worked in land development for over 17 years. It's up to the developer to have the right team, ask the right questions, and ultimately be responsible for all aspects of the project.

In this case, rather than completely unwind every step you can take this as a learning experience and know to specifically add these questions into your due diligence and ask the city during the planning process PRIOR to spending money on the MEP, Structural, etc.

I like to take extreme ownership and parlay that into future decisions and projects to mitigate those risks in the future.

You'll never ask all of the right questions but you'll learn to ask the big ones that can kill a deal later. Building contingency into projects for the soft costs like this one is crucial to making sure something small doesn't kill a deal.

Matt Devincenzo · Answer

Site civil here, at the end of the day you pay. Unfortunately code interpretations aren't always clear cut and while designers try to get it right, sometimes there's rework required and you end up paying for it.

That said I think my first question would be is the current interpretation correct? I just last month 'won' on a driveway width discussion with the City...a week later the same staff gave me the same incorrect comment again on another project. Point is just because they say it doesn't mean they're right...is it worth a 2nd opinion from a more senior reviewer?

David M. · Answer

@Chris Morris

At the end of the day, the owner pays for it all --- everyday.  Some people, not necessarily you, think just because they hold Title or are the "boss," its everybody else's fault and/or everybody should have to foot the bill.  Well, price of being the "owner" is that the buck literally does stop at you.

Of course, you can always try to negotiate or litigate your way through this...

Good luck.

Sebastian Marroquin · Answer

Sorry to say that David is correct.

Now, this is a learning lesson for you, as it is your first project. You have to negotiate these things before they happen not after or during (and I know you didn't know what you didn't know... and that  should have been the architects duty, to coach you through the fact that the city always (always) finds things to correct in that process. This is a blessing actually, luckily they found it now and not later when you will be in the process of building. That would be much more annoying and expensive and it happens all the time.

Always know and negotiate corrections: some architects put it in their numbers to do 2 to 3 corrections within the same price point. Think about it, the engineer gets consulted on projects and they already spent hours doing their calculations based on information given to them at the time, now they have to do it again with new info... not fair.

It also depends on how much you paid the architect from the start. If they are doing a full build and are charging you less than $10k, then they are not making a whole lot of money with you, but if they are charging you more than $30k then maybe you can negotiate a discounted correction or even free. (just for chuckles: how much is he charging you and for what? :) I'll tell you if it is a good price or not) ;)

We have had to do new calculations and new details on foundations once onsite and during construction, also roof lines or framing. New interior framing bc of AC ducts etc

Get ready bc this is just the beginning. You will find more things to adapt to once you are building

You have to be ready mentally for these events. Reach out if you want some pointers on anything.

David M. · Answer

@Chris Morris

like having a GC, have the architect hire everybody so that the extra charges are his problem.  He called out the structural engineer and your mechanical, electrical, plumbing "guy."

But, you actually hired the engineer separately?  Honestly, the extra charges usually float up to the owner anyway...

FYI:  people think doing development or major fix and flips are great ways to make huge profits.  Sure -- risk and reward.  There is greater risk, and many things to go wrong.  Everybody is just doing a job, so they generally get paid.  You are the equity holder, so you only get "rewarded" if all goes well, which is a matter of how well you can manage the effort / project.  It doesn't have to be micromanaged...

Good luck.

Chris Morris · Answer

Thanks Kristi.

Chris Morris · Answer

Thanks Jay.

Jay Chang · Answer

The accountability for covering additional expenditures incurred as a result of the city's and/or the architect's oversight or errors might vary based on specific circumstances, contractual agreements, and local rules. Here are some general thoughts:

• Contractual Agreements. Conditions of the owner's (or project developer's) contract with the architect, as well as any contracts with the construction team, are crucial. The contract may specify who is responsible for design flaws, omissions, or oversight. In some scenarios, the architect will reduce their fees or give a refund to the Owner. Unfortunately, most of the time, the Owner has to absorb the additional costs.
• Professional Liability Insurance, (also known as errors and omissions insurance) is frequently carried by architects to cover costs resulting from design faults. If the architect is at blame, their insurance may reimburse some or all of the extra costs.
• Municipal Liability, If the city or local municipality is responsible for permission or inspection errors or oversights, they may be held liable for some of the increased expenses. Pursuing legal action against a government organization, on the other hand, can be complicated and may require special procedures and constraints. Very rarely do people sue the City, so this is a very unlikely case.
• Change Orders, If errors or omissions are discovered during construction, the parties may negotiate contract modification orders to compensate for the increased costs. This could entail the owner, architect, and construction staff all collaborating to develop a solution.
• Mediation and Legal Action, Disputes about who should cover the additional costs may lead to mediation or legal action in some situations. The facts, contractual agreements, and applicable legislation will all influence the conclusion.
• Owner’s Responsibility, The project owner is responsible for ensuring that the project is finished according to their standards. If the overlook or error does not obviously rest on the architect or the city, the owner may be responsible for the additional expenditures.

To reduce the risk of errors and to provide a process for addressing and resolving concerns that may arise, all parties involved (the owner, architect, contractors, and local authorities) must maintain clear communication and documentation throughout the project. Legal counsel and insurance specialists may also be called to assist in determining culpability and resolving any issues. These challenges are frequently resolved through discussion and may vary from case to case. Legal and contractual details serve a key influence in determining who eventually compensates for additional costs incurred as a result of oversights.

Chris Morris · Answer

Thanks Chris, what does 'put these trades under the architect' mean?

Additional cost due to oversight made by city and possibly architect. Who pays?

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