The Property Manager's Role In Construction Projects
How Knowing Your Role May Protect You

The last thing anyone remodeling or building-out newly leased space wants is a construction related dispute. Such disputes sometimes arise, however, and proper planning and documentation before the project begins may reduce the damage, expense and overall heartache that can result from the conflict. This is particularly true for property managers who may find themselves in the middle of disputing owners and contractors looking for someone to blame for the problems. This article explores how a property managers' knowledge of, and to the extent possible, management of, the potential pitfalls of a construction project may help avoid litigation and facilitate resolution of construction-related disputes.

Know Your Role

When an owner or landlord agrees to remodel leased space to suit a new tenant's needs, property managers may find themselves filling the role of "Owner's Representative" on the project. This may be an informal position assumed because the property manager is the landlord's employee or it may be position a property manager assumes by contract. The property manager needs to know if he or she is assuming this role because being an "Owner's Representative" may bring with it specific duties and obligations. For example, under the American Institute of Architect's General Contract A-201, an "Owner's Representative" has "express authority to bind the Owner with respect to all matters requiring the Owner's approval or authorization." (Article 2) Thus, in the event there is a construction delay or defect claim, the owner may look to the property manager/"Owner's Representative" to explain decisions that created the situation, and to pay for any associated costs.

Property managers should take steps to define their role in the construction project, provided its not otherwise set by their employer or contract. On a small project, this may mean holding a meeting with the landlord, tenant, and contractor so the property manager's role can be discussed and its scope set. On a large-scale project, the property manager might consider negotiating a contract defining his role in the project with the owner, the tenant and the contractor. Such an agreement might describe the scope of authority vested in the property manager by the owner, reflect the property manager's experience, and limit the types of construction-related decisions he is permitted to make. Importantly, this written understanding should not conflict with the property manager's owner agreement.

Even if the property manager is not the "Owner's Representative" or an informal "project manager," he or she should become thoroughly familiar with all aspects of the project, including construction scheduling, code compliance requirements, inspection requirements, insurance coverage, contractor registration, and invoicing. Being familiar with these issues will allow the property manager to appropriately assess construction progress and contractor performance, which in turn, may help the property manager avoid construction-related disputes.

Further, the property manager should obtain copies of the construction plans and specifications, the general contract, subcontracts, the construction schedule, general contractor payment (draw) requests or invoices, and equipment manufacturer brochures and warranty information. The contract documents should define the owner's and contractor's obligations and responsibilities to one another. The contracts should also identify who will supervise the construction, who will be responsible for protecting parts of the property in which no construction will occur, how the parties will handle change-orders, how the contractor will present payment (draw) requests, and if the parties agreed to specialized dispute resolution procedures like binding arbitration. Other project-related documents should designate who must buy insurance for the project, indicate how much insurance they must buy and define each parties' indemnification obligation.

Having this information will allow the property manager to remain informed of who is working on the project, when the work is to be completed, and who to contact in case of problems. This information will also be essential in resolving any disputes that arise out of the construction.

Protect Yourself

Any independently contracted property manager taking on an active role in construction projects should check their "Errors and Omissions" insurance policy to ensure it covers claims arising from the project. This coverage can provide an immeasurable degree of security if the owner or tenant calls to report construction problems causing potentially huge economic losses.

Conclusion

Property managers who clarify their role in remodeling projects, educate themselves about the project generally, and obtain documents related to the construction can protect themselves from being a target of opportunity in the event of a construction dispute. By clarifying their role, property managers can ensure it is commensurate with their experience. By obtaining copies of the contract documents, property managers can learn the scope of the contractual relationships between the parties. And, becoming knowledgeable about the project can inform property managers of who to contact in the event of problems with the construction. Taking these steps before construction begins may prevent litigation and facilitate construction-related disputes.

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

BACK TO TOP | BACK TO ARTICLE INDEX | PRINTER-FRIENDLY PAGE