What Owners Want: A Lawyer's Perspective

Most owners don't have much experience with construction projects so it is important for contractors to solidify details of a project in a contract.

By C. Jaye Berger, Esq.

Every contractor knows that the top item on any contractor's wish list with clients is to get paid, in full and on time. However, to arrive at that end goal, it can be helpful to understand what owners want and expect from contractors.

Most owners, whether they are engaged in commercial or residential projects, do not have that much experience with construction projects. Even companies that are setting up a new office or store may not have ever been involved in a major renovation. Few homeowners or co-op apartment owners have completely re-done their residences.

No matter how much money a client is planning to spend, most are anxious that the job will not go well and that cost overruns will eat them alive. Renovation work may be the largest expenditure any of them have made, other than buying the property that is being renovated or the space that is being rented. If a store owner or business cannot open whenever the owner anticipates opening, he will have money going out the door and none coming in.

The first thing owners want is high quality work. If it starts to peel, crack, or fall down during the project or shortly thereafter, the contractor will have an unhappy client who will not pay him and may actually sue.

The next thing the client wants is to pay a fair price for the work. Owners want to know exactly what they have gotten themselves into financially. An owner may be prepared to spend a certain amount of money, but then find that every day brings a new change order. Some of this may be justified by the work, but some of it is poor planning. A contractor needs to walk the job and know what needs to be done and what it will cost. Apart from hidden conditions, if change orders come up almost as soon as the job starts, it may be a sign of a problem.

The owner is asking for trouble if he allows a project to begin with incomplete drawings. The owner will expect a price within the ballpark of whatever was originally given and the contractor will want a big increase due to all the changes he sees.

The owner expects to see what he is paying for. In other words, he wants to see that the work is keeping up with the payments he has made. If that is not the case, it may be because the owner's interests are not being monitored by an architect or interior designer and they do not have a well-drafted contract. I recall one project I was consulted on after the contractor was terminated by the client, where the brownstone was gutted with holes cut in the floor at each level to throw debris down and the homeowner had paid the contractor 90 percent of the contract price. That is not a good place to be.

Owners want to be protected from liability in case anything goes wrong. A cigarette may start a fire. A workman may fall off a ladder. A leak may cause damage to another tenant. The owner wants to know that there will be insurance coverage in case of such occurrences. It is a bit more complicated on commercial projects because not only does the tenant need protection, but the building owner and property manager will also need to be named as additional insureds on the policies. Bear in mind that furnishing a certificate of insurance without appropriate contract language is not enough.

Owners want to get a "break." If there is an opportunity to purchase an item at a discount, they want to be able to do so. This can be difficult when a contractor is being paid on a percentage of completion basis. Is the discounted price used to determine the cost of construction or is a fair market value price used? Contractors must also consider client relations when they decide what to bill for and what to "throw in." Items that are thrown in to be nice should not later show up in an invoice if there is a falling out between the parties

Agreements should be confirmed in writing. Owners want to see it on paper. Commercial clients have complained when contractors said additional work needed to be done, but were vague about the total cost of the work. Owners can live with a price increase if they have an exact, all inclusive price.

The project must be complete when the contractor promises it will be complete. I have heard CEOs practically burst into tears telling me about a project that just wouldn't end.

It all comes back to the contract. Negotiating the contract with a knowledgeable attorney advising you, then writing it all up can mean the difference between being paid or being involved in a lawsuit.

C. Jaye Berger is the principal of Law Offices C. Jaye Berger in New York, N.Y.