ever get the weird feeling that your client may not actually exist? i did today. i've searched for them via as many internet tools as i can find and ... nothing.
we've been working for them for...oh...7 months and never been paid for the two invoices we've sent, though they just this week promised payment. we've stopped working on their job until we see something. but the project is about to enter construction documents.
if they don't exist, we're not the only ones snowed. they've got people in city gov't and some other big organizations wrapped into this thing.
are we helping this charity foundation build a front by showing a building for which they're raising money? how do i know if they're legit? i've contacted the bbb to see what they know.
I've worked with a few developers who start a new corporation for each new project - so usually the corporation is pretty unsearchable, since it has no history when we come on board. But, those guys always provide a pretty good retainer, and so far they've always paid their bills.
The BBB probably won't be able to tell you anything unless there have already been complaints filed. If they're brand new or imaginary then the BBB probably won't have any record of them at all - which doesn't really prove anything one way or another.
Certainly if they haven't paid in seven months you are right to stop work - whether or not they're legit. Be sure to send them a statement in writing that you have stopped work until paid in full to date.
7 months is way to long to work without getting paid on any project. i can't imagine even letting a small time residential project get that far, much less a commercial project.
wow. in our firm, that's 7 invoices they passed over, and if you are already almost done w/ CD's it's either a small project or you've been hauling ass on a large, and there is a lot of overtime.
we're about to start cds, not almost finished, holz. that 7 mos really only represents the work of a couple of us so far and no o.t. starting cds, however, would mean ramping up to about 120 people-hours a week, so...
and the contract with this client is set up to invoice at agreed landmarks in the project delivery, not monthly - thus the two invoices. one was for schematics, one for renderings for the capital campaign. our next will be for wrapping up dd.
we did find them listed yesterday as a non-profit in good standing with the secretary of state's office. but that just really means that they've paid their $4 and submit annual reports - not too much of a hurdle to be listed there.
we're just worried. not acting on that worry yet. but we have decided to halt before launching full-bore into cds.
As Bloopox mentioned, it's pretty common for developers to set up a separate legal entity for each project. This allows them to "compartmentalize" their exposure so that running into trouble on one project won't affect their other projects.
It's also, in my experience, pretty common for a developer not to pay until the disadvantages of not paying (i.e. stopping work) outweigh the benefits (i.e. getting to hold onto their money for longer). You should consider telling your client that you've completed DD, but can't issue the drawings until payment is made current. Blame it on accounting.
do a state search for the corporation's license. you should be able to see when they filed for their corp. and a majority of the developers are new corps/llc's/lp's
developers usually have private funds or loans that are set up to allow draws for expenses. once the draws begin to pay for fees, the interest rate expense begins which cuts into their profits. developers try to suck the marrow out of others to deter the interest expense. definitely stop the project until you are paid...
This is a significant issue for larger architectural firms pursuing larger speculative real estate development projects with developers. Many developers, particularly those doing larger projects, expect their selected architectural firm to do work "on spec" until: 1) project receives its regulatory approvals; and 2) project receives its construction financing and makes its first draw funding. Full payment is never certain. Even partial payments may be difficult to collect at times. Some developer projects end abruptly and the architect is left uncompensated or under-compensated, or developer's project schedule moves forward so slowly for any number of issues and architect is still expected to provide its services without immediate compensation.
Certain architectural firms are willing to work "on spec" for these developers, with knowledge that firm may not be paid, or not paid in full, for its expenses incurred. Preliminary schematic design phase services are sometimes "freebies" for this client-base. Overhead and labor costs are not always reimbursed by these clients when project stops. Sometimes the schematic design study "freebies" are given to developers with the anticipation that a future project will eventually be awarded to the firm.
Only recourse (other than writing off loss in fee collections as a "good will gesture" to the perceived client-base) is to lien the developer's property when it appears the fees will remain forever unpaid. And that can occur IF the client even actually owned the property where the proposed project was to be situated.
Here in Chicago there have been several notorious "dead" high-rise projects were a large architectural firm fronted millions in architectural fees for a spec developer, only to have project stop and developer-client "vanish" without payment.
Developers don't seem to be remorseful about these practices when their architect winds up "short" on fee payments.
Dec 10, 07 2:58 pm ·
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sinking feeling
ever get the weird feeling that your client may not actually exist? i did today. i've searched for them via as many internet tools as i can find and ... nothing.
we've been working for them for...oh...7 months and never been paid for the two invoices we've sent, though they just this week promised payment. we've stopped working on their job until we see something. but the project is about to enter construction documents.
if they don't exist, we're not the only ones snowed. they've got people in city gov't and some other big organizations wrapped into this thing.
are we helping this charity foundation build a front by showing a building for which they're raising money? how do i know if they're legit? i've contacted the bbb to see what they know.
guess i'll wait and see...
whats amazing is I know some guys who will beat your price to work for them!
I've worked with a few developers who start a new corporation for each new project - so usually the corporation is pretty unsearchable, since it has no history when we come on board. But, those guys always provide a pretty good retainer, and so far they've always paid their bills.
The BBB probably won't be able to tell you anything unless there have already been complaints filed. If they're brand new or imaginary then the BBB probably won't have any record of them at all - which doesn't really prove anything one way or another.
Certainly if they haven't paid in seven months you are right to stop work - whether or not they're legit. Be sure to send them a statement in writing that you have stopped work until paid in full to date.
7 months is way to long to work without getting paid on any project. i can't imagine even letting a small time residential project get that far, much less a commercial project.
wow. in our firm, that's 7 invoices they passed over, and if you are already almost done w/ CD's it's either a small project or you've been hauling ass on a large, and there is a lot of overtime.
we're about to start cds, not almost finished, holz. that 7 mos really only represents the work of a couple of us so far and no o.t. starting cds, however, would mean ramping up to about 120 people-hours a week, so...
and the contract with this client is set up to invoice at agreed landmarks in the project delivery, not monthly - thus the two invoices. one was for schematics, one for renderings for the capital campaign. our next will be for wrapping up dd.
we did find them listed yesterday as a non-profit in good standing with the secretary of state's office. but that just really means that they've paid their $4 and submit annual reports - not too much of a hurdle to be listed there.
we're just worried. not acting on that worry yet. but we have decided to halt before launching full-bore into cds.
As Bloopox mentioned, it's pretty common for developers to set up a separate legal entity for each project. This allows them to "compartmentalize" their exposure so that running into trouble on one project won't affect their other projects.
It's also, in my experience, pretty common for a developer not to pay until the disadvantages of not paying (i.e. stopping work) outweigh the benefits (i.e. getting to hold onto their money for longer). You should consider telling your client that you've completed DD, but can't issue the drawings until payment is made current. Blame it on accounting.
do a state search for the corporation's license. you should be able to see when they filed for their corp. and a majority of the developers are new corps/llc's/lp's
developers usually have private funds or loans that are set up to allow draws for expenses. once the draws begin to pay for fees, the interest rate expense begins which cuts into their profits. developers try to suck the marrow out of others to deter the interest expense. definitely stop the project until you are paid...
i thought this was a thread about 3dh + quicksand
This is a significant issue for larger architectural firms pursuing larger speculative real estate development projects with developers. Many developers, particularly those doing larger projects, expect their selected architectural firm to do work "on spec" until: 1) project receives its regulatory approvals; and 2) project receives its construction financing and makes its first draw funding. Full payment is never certain. Even partial payments may be difficult to collect at times. Some developer projects end abruptly and the architect is left uncompensated or under-compensated, or developer's project schedule moves forward so slowly for any number of issues and architect is still expected to provide its services without immediate compensation.
Certain architectural firms are willing to work "on spec" for these developers, with knowledge that firm may not be paid, or not paid in full, for its expenses incurred. Preliminary schematic design phase services are sometimes "freebies" for this client-base. Overhead and labor costs are not always reimbursed by these clients when project stops. Sometimes the schematic design study "freebies" are given to developers with the anticipation that a future project will eventually be awarded to the firm.
Only recourse (other than writing off loss in fee collections as a "good will gesture" to the perceived client-base) is to lien the developer's property when it appears the fees will remain forever unpaid. And that can occur IF the client even actually owned the property where the proposed project was to be situated.
Here in Chicago there have been several notorious "dead" high-rise projects were a large architectural firm fronted millions in architectural fees for a spec developer, only to have project stop and developer-client "vanish" without payment.
Developers don't seem to be remorseful about these practices when their architect winds up "short" on fee payments.
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