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The AIA document doesn’t properly express that the contractor must comply with all applicable provisions of federal, state and local laws in the performance of its obligations under the contract.
Generally, there is nothing wrong if the contractor asks you as a tenant or landlord for a deposit for the work to be performed in your space. Somewhere in the arena of 10% to 20% of the overall construction price is a reasonable number.
Lien waivers that are given for progress payments are commonly called partial lien waivers. A partial lien waiver should include language that the contractor or subcontractor acknowledges and represents that to date, they have received payments totaling whatever dollar amount you as the landlord or tenant have given them for labor, equipment and materials through that particular date.
Retainage is the portion of each progress payment that the landlord or tenant holds back from each progress payment to the contractor. The general but steadfast rule is the amount that must be held back is 10%. However, many savvy contractors will request that the 10% retainage be reduced to 5% at such time as the project is roughly 50% to 60% complete.
Language needs to be inserted within the construction contract that in order to take the job from being substantially completed to fully completed (and as such in order for the contractor to receive the final payment due under the contract and all of the held back retainage), the definition of full completion should include delivery to landlord or tenant of such items as (i) the final certificate of payment, (ii) all lien waivers from both the contractors and subcontractors, (iii) a certificate of occupancy for the space or a certificate of completion, (iv) close out binders, (v) operational and maintenance manuals, (vi) warranties required under the contract, and (vii), sign-offs from the landlord that the job has in fact been completed including all punch list items.
Leftover materials from a construction project are commonly referred to as “final stock.”
Examples of insurance policies that often need to be provided during the construction process will include commercial liability insurance, property damage coverage, independent contractor coverage, completed operations and contractual liability coverage along with workers compensation insurance and where applicable, automobile liability insurance.
From a landlord or tenant’s perspective, the construction contract should provide that the contractor can terminate the contract either for cause or without cause, and the landlord or tenant can only terminate the contract for cause.
Tenants should hire on their behalf and for their protection a construction manager or some other kind of landlord representative to deal directly with construction issues and the contractor during the construction project.
Landlords and tenants should consider negotiating that the agreed upon fee for construction is contingent on completion of their project by a certain date, and if not completed by such date, thereafter the fee shall be reduced by a specified amount per day.
Landlords and tenants should be aware that in order to secure penalty language for non-completion of the construction project by a certain date, a contractor may require language to be inserted in the construction contract which states that if they complete the project at a certain established date in advance prior to the estimated completion date specified in the contract, their fee increase by a similar amount for every day that they completed the project prior to the estimated completion date.
A construction contract should include a definition that “substantial completion” shall be deemed to occur when the improvements contracted for have been completed except for minor items and defects that can be completed or remedied by the contractor within a reasonable period of time thereafter not to exceed thirty (30) days.
If you are a tenant, you should know well in advance of negotiating a lease for a building whether or not the work needs to be performed by union workers, a combination of union and non-union workers or solely by non-union workers, if so desired.
When it comes to doors, the landlord and the tenant generally differ in perspective in the sense that most tenants prefer welded hollow metal door frames, whereas most landlords prefer to install solid wood doors with solid wood molding for the frame.
If the ceiling is going to be exposed (as opposed to a dropped ceiling), as a tenant, you want to make sure that the landlord will be patching and repairing and thereafter smoothing out the ceiling prior to its painting.
If the space does not have sprinklers and it’s required by law to have such, the tenant is always responsible for paying for all costs associated with the installation.
Tenants should negotiate for the right to install its telecommunications wiring, cabling and other conduit roughly 10 to 15 days prior to the substantial completion of the landlord’s work.
In order for a landlord to be able to have its architect prepare construction documents (such as architectural and electrical, mechanical, plumbing, structural and fire protection plans), landlords should establish a date certain as to when the tenant must (using the previously agreed schematic design or test fit plan as the basis for same) provide specific details and finishes as to exactly what work tenant wants performed by the landlord’s contractor to its space.
To protect against a tenant delay, the landlord should provide in the lease that any such delay which causes landlord to not substantially complete the premises in a timely fashion shall require that the lease commencement date be accelerated by one day for each day of such tenant delay.
The tenant should request language that if the premises are not substantially completed by the landlord by a date certain, then in such event tenant shall be entitled to an additional day of free rent for each and every day that the premises are not completed beyond that outside date.
In many construction projects, it is common that at some point between the commencement of the work and the ultimate completion of that work, a change order is requested by a tenant for a myriad of factors. Reasons for change orders can include, but not be limited to, conditions discovered in the field during construction that a landlord or tenant has to deviate from the original construction plan, or it can simply be a case of the tenant changing its mind and deciding it now wants a piece of work to be performed to the space that it otherwise did not contemplate at the time it approved of the construction documents.
If a change order or extra work is requested of landlord over and above that which the landlord has agreed to provide to the tenant, the additional cost associated with either of the foregoing items will be subject to both overhead and profit components for the landlord.
Landlords should insert language stating that the tenant will promptly, and in no event later than five (5) business days after the date on which tenant receives landlord’s substantial completion notice, inspect the premises to see if the space is substantially completed.
Once the premises are accepted by tenant as being substantially completed, the tenant along with landlord should execute what is commonly referred to as either a certificate of acceptance or memorandum confirming term, wherein the tenant acknowledges and accepts among other things, that the premises have in fact been substantially completed.