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reimbursable expenses

Oct 15 '13 11 Last Comment
poop876
Oct 15, 13 10:16 am

We are a small firm and when somebody does not pay we feel it. 

We've learned from the past that fronting up money for permit fees is a bad idea....depending on the client of course. We've had past clients not pay the architectural fees and on top of that, permit fees we paid.

So now, in out contracts we say that we need to have the permit check delivered to us in the appropriate amount before submitting for building permit. In order to discourage a client from asking us to front up the money for permit fees, we list it as a reimbursable expense of 15%. Typically a client does not want to pay that and we would have a check delivered to us.

Today I had a client go off on me because of the "gold ink" we are using etc etc. to write the checks. I just let it go and didn't argue or explain our situation and experience. 

I was wondering how you guys handle situations like this?

 

bklyntotfc
Oct 15, 13 10:35 am

We don't write those checks, we have the clients write them themselves.  No markup to argue over, and no exposure for fronting money that never get's repaid.

We do the same for consultants.  We gather proposals on the owner's behalf, but the owners hire the consultants directly.  We also have language in our contract with the owner that states that while we may recommend a consultant based on their reputation or past performance, we make no promises as to their performance on the owner's project.

In addition to reducing risk, our insurance company loves this - they say we're much more insulated from risk if, for example, a project had a structural collapse.

We've also stopped charging for minor reimbursables - printing, travel, etc.  Those costs are now built into our fee.  We might lose a little $ if there's extra printing for a project, but that's outweighed by the time saved tracking and documenting everything.  The one exception to this is large format printing done out of house...that we do charge the client for.

proto
Oct 15, 13 12:06 pm

we've fronted money on permits up to about $8k...but not without considering who we're doing it for. it is a very real risk, and ideally, never done.

typically, we give the owner an estimate of the permit fee and ask for a blank check so that we can adjust it if necessary on submission. no markup/multiplier, just billing time to submit the docs to the AHJ

curtkram
Oct 15, 13 1:16 pm

contractors pay for permits in my narrow corner of the world, on almost every job.  typically, there is information needed to submit with the permit application, such as construction cost or names/licenses of contractors that we wouldn't have anyway.  the contractor can then coordinate with the owner who writes what where and what markup may or may not be involved.

vado retro
Oct 15, 13 1:21 pm

a201-2007 3.71

gwharton
Oct 15, 13 1:37 pm

curtkram,

He may be talking about zoning or other preliminary permits rather than building permits. Those are never paid by the contractor, since it would be extremely unusual to have a contractor involved in the project while it's still in preliminary design.

At any rate, fronting your clients permit fees of any kind, even as reimbursables, is a really bad idea. I did it once and learned the hard way. Never again. If they don't have the cash, they shouldn't be trying to permit the project.

geezertect
Oct 15, 13 1:43 pm

If they don't have the cash, they shouldn't be trying to permit the project

Not to mention if they can't afford the permit, how are you going to get paid?

Miles JaffeMiles Jaffe
Oct 15, 13 1:54 pm

^ Architects get paid?

Appleseed
Oct 15, 13 3:09 pm

Client provides check for plancheck deposit, prelim meetings w/ the City. Usually have the Contractor build into their bid the remaining plancheck fees. Still reimbursing at 1.15x for printing, shipping, and travel.

poop876
Oct 15, 13 3:12 pm

Not sure about all of you, but sometimes the client is not local and getting a check takes time. The reason they asked for me to pay was because it was taking 2 days to send the check from Florida and we wanted to submit today.

Many times, in order to expedite the process, we cover the permit cost but only if the client is a repeat client with no prior problems.

Fronting money for many of our clients is not a problem at all because of our relationship, but we've be burned in the past with some clients therefore we are hesitant. 

Appleseed
Oct 15, 13 7:31 pm

^Your PM's need to plan / schedule better. The only exception to what I laid out as our typ. is if intake was a scheduled event with the jurisdiction and the Owner's check hadn't arrived yet - I'd probably extend the option of fronting the amount + the standard reimburse rate.

gruen
Oct 18, 13 8:29 am

You might have considered talking to the building dept, ask them to accept the plans then the check 2 days later. I generally ask my clients to get their own permits, if they want help its add fee (lots of times they do need help). Get a check from the client for the permit cost. You also could have used Paypal or square to have the client send the fee to you, then you could have written the check.

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