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Assignment of 'Plans & Specifications' to Lender

  • 1.  Assignment of 'Plans & Specifications' to Lender

    Posted 12-21-2020 03:18 PM

    A residential client's lender is requiring that we sign a document called "Assignment of Plans and Specifications with Joinder and Consent of Architect".  The document appears to be yet another form in that pile of a thousand that gets signed at loan closing.

    It has provisions that are odious (pre-emptive forfieture of lien rights), untrue (assert approval by code authorities before permit submission) and impractical (architect will not permit any change orders that increase cost).

    I'd be open to assigning the entire B105 owner/architect agreement to the Lender but am leary of just handing over "plans & specs".

    Anyone have any experience with this? 

    Anyone had any luck negotiating the terms of the assigment document to be less odious?



    ------------------------------
    Scott Rappe AIA, LEED AP
    Principal
    Kuklinski + Rappe Architects
    Chicago IL
    ------------------------------



  • 2.  RE: Assignment of 'Plans & Specifications' to Lender

    Posted 12-22-2020 05:34 PM
    You might also want to sign the rights to your first-born male offspring over!

    Seriously, just say no. Walk away.
    Totally ridiculous.


    Original Message


  • 3.  RE: Assignment of 'Plans & Specifications' to Lender

    Posted 12-22-2020 05:35 PM

    Scott:

    I am asked to sign a similar document for all the shopping center projects our firm designs.  The Lender makes the loan to my Client contingent upon my agreeing to the terms. I obviously want my Client's loan approved so he can pay my Invoices.  

    I have had success having my liability insurance broker's attorney review and mark up the document (this is a service that your premiums pay for) and have had it accepted by the Lender's attorney.  If you carry professional liability insurance you should always have these documents reviewed by your insurer.  If you agree to terms that commit you to provide service beyond the accepted standard of care it can void your coverage.

    I hope this is of some assistance.  Good luck.

    Don Sopranzi



    ------------------------------
    Donald Sopranzi AIA
    Donald F. Sopranzi, AIA, LEED-AP
    Dallas TX
    ------------------------------

    Original Message


  • 4.  RE: Assignment of 'Plans & Specifications' to Lender

    Posted 12-22-2020 07:28 PM

    Thanks Don,

    I actually posted in this forum because I had our liability carrier review it and was disappointed in their reply:

    "You should be prepared, these assignment agreements are becoming more the rule than the exception.   It should be understood that the loan to your client may be conditioned on the execution of this Assignment Agreement.  It is doubtful that many of your changes will be acceptable."

    I am hoping to at least get an indemnification if they use the drawings without our services during construction.



    ------------------------------
    Scott Rappe AIA, LEED AP
    Principal
    Kuklinski + Rappe Architects
    Chicago IL
    ------------------------------

    Original Message


  • 5.  RE: Assignment of 'Plans & Specifications' to Lender

    Posted 12-23-2020 05:33 PM

    This is not that uncommon anymore. Keep in mind that the owner and finance agents are not the only ones who can apply contingencies to contractual agreements.

     

    Understand that the lender wants to protect their investment and have the ability to complete a project if needed in case project conditions fall apart. They don't want a half finished project they cannot recover investment from if they don't have rights to the plans if unforeseen conditions occur.  That said, if they want to apply a contingency to the owner that they have rights to the plans, then counter with a contingency in the agreement that this transfer will occur once the lender has paid any outstanding funds due the architect prior to transfer of documents AND that the copyrights protecting the architect still apply, AND finally that the documents cannot be used in construction activities without retaining the architect to complete his role as the Supervising Professional.

     

    If they don't agree to your contingencies, back away. Keep in mind that if the funding agency does inherit the plans and does not retain the Architect to complete their work the Architect can withdraw as supervising professional. You may not recover any lost fees, but you will also not be held liable for work completed that you are not bound to as the Supervising Professional if you have gone through the proper channels to withdraw from the project.

     

    David E. Cameron, AIA, LEED BD+C, NCARB
    Partner / Senior Architect
    Architectural Design Consultants, Inc.
    d.cameron@adcidesign.com
    608.254.6181

    adcidesign.com

     


    ADCI's offices are open
    We have screening, social distancing and cleanliness measures in place to ensure the safety of our staff and clients. Our team has transitioned back to the workplace and would love the opportunity to discuss your project.



    Original Message


  • 6.  RE: Assignment of 'Plans & Specifications' to Lender

    Posted 12-22-2020 09:02 PM
    I had a similar circumstance where I dropped it back to the client and told them none of this was included in my scope of work, and did they wish me to increase my fee to cover these special bank requirements? They negotiated them out of the closing with the bank.


    John A. Feick, AIA, NCARB, LEED AP 
    224 East Water Street 
    Sandusky, Ohio 44870 
    419-625-2554 (w) 
    419-656-3017 (c)



    Original Message


  • 7.  RE: Assignment of 'Plans & Specifications' to Lender

    Posted 12-23-2020 05:34 PM

    Over the years we have had these assignment documents tossed at us in the last few days before the closing for the client's financing and pressured to sign the documents in order to keep from delaying the closing.  We have held firm every time and negotiated away all the ridiculously onerous clauses.  Most of the proposed clauses in these documents are meant to protect the lender from obligations of any kind if the client defaults.

    If your insurance agents cannot provide you with assistance, you need to go up their food chain until you get the assistance you need or switch providers.  Our agent always gives us detailed changes to the wording and is available to discuss the wording with the lender's lawyers.

    Good luck



    ------------------------------
    Christopher Kennedy AIA
    Principal
    MAKE Architects PC
    Hanover NH
    ------------------------------

    Original Message


  • 8.  RE: Assignment of 'Plans & Specifications' to Lender

    Posted 12-23-2020 01:38 PM

    I've been an architect for 44 years; you can't guarantee code acceptance.  Even after you secure a building permit you'll find you, and the construction official might have missed something in the code.  And the idea that you won't allow any c/o that increases costs?  What world are they living in?  There are lots of good clients out there who don't want to rip your skin off.  Walk away from this is my advice.



    ------------------------------
    Michael Bengis AIA
    Architect
    Michael Bengis Architect PA
    Hopatcong NJ
    ------------------------------

    Original Message


  • 9.  RE: Assignment of 'Plans & Specifications' to Lender

    Posted 01-05-2021 11:15 AM

    We have been successful in requiring the lender or any future owner fulfill our contract including CA services. Any revisions or value engineering will be invoiced at standard hourly rates / per contract.

    We have note been denied. Ralph 



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    Ralph Fey AIA
    Principal
    Ralph Curtis Fey AIA Architects
    Doylestown PA
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    Original Message


  • 10.  RE: Assignment of 'Plans & Specifications' to Lender

    Posted 01-05-2021 11:15 AM

    Bringing closure to this thread:

    I was able to make some some edits to the document, which the bank has accepted.  The most significant was to assign the entire B105 agreement to the Lender, rather than just the "Plans and Specifications" as had been the original wording.  This should keep all the provisions and protections of the agreement intact, if the agreement is assigned to the Lender.  I also replaced all the dangerous words our insurance companies don't like with old standbys, like "to the best of my knowledge, information and belief" and referenced the 'professional standard of care' in connection to our work.  Finally, in the Exhibit where the "Plans and Specifications" were supposed to be listed, I inserted a simple reference to Article I Contract Documents, in the A105 Owner Contractor Agreement.  

    Thanks everyone for responding, offering advice and sharing your experiences!



    ------------------------------
    Scott Rappe AIA, LEED AP
    Principal
    Kuklinski + Rappe Architects
    Chicago IL
    ------------------------------

    Original Message