Is it normal for our property manager to handle all the contracts for our building, such as Local Law 11 work?
“Contracts where large sums of money are involved or that require repeated services or have some degree of complexity should in most instances involve legal counsel,” says Steve Wagner, an attorney with the Manhattan law firm, Wagner Berkow & Brandt.
It’s up to your condo or co-op board to decide whether a contract needs to be looked at by a lawyer. Simple contracts involving relatively small sums of money can usually be handled without negotiations or lawyers. For example, installing small wrought iron fences around sidewalk planting beds or purchasing holiday decorations generally require purchase orders or standard agreements rather than riders and legal counsel.
“However, there’s no guarantee that even with a small contract there won’t be an issue,” says Wagner who regularly builds additional protections into these types of contracts, including a schedule of payments.
“You want to make sure the terms are clearly set out, that there is insurance, and if work is being carried out at the premises, the contractor is licensed,” he says.
Payment terms and pricing
An experienced attorney can negotiate a payment schedule for a larger contract. You don’t want a scenario where a contractor has been paid in full but hasn’t yet delivered on all of the work.
“A 10 percent retainage on each payment is typical and only paid over to the contractor when ‘punch list’ items on the work have been completed and release of lien forms have been received,” says Wagner.
One of the biggest contracts for New York City buildings is for Local Law 11 façade work. This type of repair work to the front of a building, parapets, and terraces can often uncover additional construction issues, like damaged steel underneath the brickwork.
“Adding alternatives and unit pricing is another way an attorney can build protections into a contract,” says Wagner.
A clause covering alternative work allows a board to incorporate the unexpected into the original contract. Having a unit price for as-yet-unscheduled work also means the board is prepared for any eventuality. As Wagner points out: “You do not want to be negotiating these items in the middle of a construction job when the bargaining positions are not equal," and your contractor can hold your building hostage in scaffolding.
As well as preparing a watertight contract, an attorney with experience of building operations can also make suggestions to avoid unforeseen problems and get the job done properly.
“For façade projects, we insist there be plans and specifications prepared in advance and may also recommend additional testing,” says Wagner.
Local Law 11 work is usually based on observations made from a distance but in some circumstances, additional probes might be advisable to check the condition of the steel and get a better idea of the scope of the work.
Oversight and timing
Timing may be a key issue to nail down in the contract. If elevator work is being carried out, for example, you want it to be completed within a reasonable period of time and make sure there’s adequate workforce for the job. Wagner will often build damages into an agreement that will apply if the work is not completed within the time frame of the contract.
Oversight is also important. During a Local Law 11 project, for example, the building's architect providing contract administration for façade work will generally not be there on a day-to-day basis. “On a very large project it may be worthwhile having an owner’s representative, an inspector, or the managing agent provide additional services to make sure the work is being done properly,” he says.
Your building may also benefit from additional protections added into the contract—for example, requiring workers to wet down areas where there is dust or use hand tools rather than mechanical tools, use drop cloths, and clean up on a daily basis to minimize disturbance of the residents in the building. All these additional clauses shift the power to the board rather than leaving open issues to the discretion of the contractor or architect.
New York City real estate attorney Steven Wagner is a founding partner of Wagner, Berkow, & Brandt, with more than 30 years of experience representing co-ops, condos, as well as individual owners and shareholders. To submit a question for this column, click here. To arrange a free 15-minute telephone consultation, send Steve an email or call 646-780-7272.
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