A project of mine was stopped by the Owner's lender. The Lender sold the note to a developer, who then foreclosed on my client. I am assuming that the new developer will now complete the project, although I haven't heard from them yet. The new developers have a very bad reputation in terms of how they do business and how they treat their consultants, and I would not chose to do business with them if I have the choice.
I have consulted a lawyer, who says that in general, service contracts would go along with the project and I don't have much choice unless I have a non transferrable clause in my contract. My contract is an AIA B-151, article 9 covers asignment (or not), but it seems fuzzy to me. My attorney is reviewing the contract, but I'd love to hear from anyone here who has had this situation come up, or any other insights.
Given the times we're in, I have to believe this isn't the first time...
I honestly know absolutely nothing about this, but wouldn't your contract include the NAME of the Owner, and THAT entity is with whom you have the contract? Them being foreclosed on should mean THEY are in breach of contract, so the contract is no longer active, right? or something like that?
Honestly it's embarrassing that I am a business owner yet know so little. But I don't see how your contract is with the PROJECT; it seems like your contract is with the OWNER.
Naturally the winner in it all is going to be your lawyer. :-/
The current version of AIA's "Owner / Architect" agreement (B-101 2007) contains this standard language:
"The Owner and Architect, respectively, bind themselves, their agents, successors, assigns and legal representatives to this Agreement. Neither the Owner nor the Architect shall assign this Agreement without the written consent of the other, except that the Owner may assign this Agreement to a lender providing financing for the Project if the lender agrees to assume the Owner’s rights and obligations under this Agreement."
I seem to recall that B-151 1997 (which is no longer one of the standard AIA contracts) contained a similar, but not necessarily identical, provision.
What's interesting about your situation is that the Lender sold the loan to a developer ... that may mean the developer has stepped into the shoes of the lender, which may mean - per the attached language - that your agreement can be assigned unilaterally to the new lender/developer, without your consent. However, if that happens, the lender/developer entity must respect the existing terms of your existing contract.
This is identical language to 1997, BTW. What throws me is the "Owner may assign". The "Owner" (with whom I have the contract) doesn't want to assign the contract. The question arrises as to whether 1) the Bank can compell the Owner to assign the contract to them, and then 2) can the Bank assign the Contract to the new Owner (who is not "an Institutional Lender"). If the lender assumes the "Owner's rights and obligations", he is obliged therefore to obey the "non-assigment " provision...?
Does the bank become the new "Owner"? Is this provision included to allow lenders to directly issue funds against invoices, or is to protect the value of an asset in cases, like this, where the value of an asset includes design and instruments of service?
Seems to be some sloppy language.
I am using my best 20/20 hindsight to see if I could ever have anticipated this situation back in those heady days of '07, but these are strange times indeed...
I think you will find that the definition of "owner" and "lender" will be defined by the law -- not by your perceptions.
Just because you signed the contract with one particular person or company doesn't mean that under certain circumstances another person or entity can't step into the original owner's shoes, with the original owner's rights and obligations. Similarly, the original "lender" can be replaced by another.
I'm no lawyer, but I suspect the new developer will become both the "owner" and the "lender" -- not a happy circumstance for you.
No contract is (or can be) perfect and no contract can anticipate every possible eventuality - any more than you can. I don't personally feel this language is "sloppy" as you phrase it. However, you may have been dealt a bad hand by your original client and the economy -- now you, and your attorney, will have to find a way to manage the situation in a reasonable manner.
So distant, even if the new developer becomes both the Owner and lender, this new entity has to abide by the original contract terms, or breach the contract if they want to get out of it, right? So aldorossi should be able to finish the project on the original terms, with the checks just coming from a different source?
Yes ... I think that's will be the case. That doesn't mean it will be an easy, or pleasant, journey. But I believe the law would be available to enforce the original contract terms.
Jan 7, 10 6:13 pm ·
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A question for our times...
A project of mine was stopped by the Owner's lender. The Lender sold the note to a developer, who then foreclosed on my client. I am assuming that the new developer will now complete the project, although I haven't heard from them yet. The new developers have a very bad reputation in terms of how they do business and how they treat their consultants, and I would not chose to do business with them if I have the choice.
I have consulted a lawyer, who says that in general, service contracts would go along with the project and I don't have much choice unless I have a non transferrable clause in my contract. My contract is an AIA B-151, article 9 covers asignment (or not), but it seems fuzzy to me. My attorney is reviewing the contract, but I'd love to hear from anyone here who has had this situation come up, or any other insights.
Given the times we're in, I have to believe this isn't the first time...
I honestly know absolutely nothing about this, but wouldn't your contract include the NAME of the Owner, and THAT entity is with whom you have the contract? Them being foreclosed on should mean THEY are in breach of contract, so the contract is no longer active, right? or something like that?
Honestly it's embarrassing that I am a business owner yet know so little. But I don't see how your contract is with the PROJECT; it seems like your contract is with the OWNER.
Naturally the winner in it all is going to be your lawyer. :-/
The current version of AIA's "Owner / Architect" agreement (B-101 2007) contains this standard language:
"The Owner and Architect, respectively, bind themselves, their agents, successors, assigns and legal representatives to this Agreement. Neither the Owner nor the Architect shall assign this Agreement without the written consent of the other, except that the Owner may assign this Agreement to a lender providing financing for the Project if the lender agrees to assume the Owner’s rights and obligations under this Agreement."
I seem to recall that B-151 1997 (which is no longer one of the standard AIA contracts) contained a similar, but not necessarily identical, provision.
What's interesting about your situation is that the Lender sold the loan to a developer ... that may mean the developer has stepped into the shoes of the lender, which may mean - per the attached language - that your agreement can be assigned unilaterally to the new lender/developer, without your consent. However, if that happens, the lender/developer entity must respect the existing terms of your existing contract.
Hope this works out for you ... good luck.
This is identical language to 1997, BTW. What throws me is the "Owner may assign". The "Owner" (with whom I have the contract) doesn't want to assign the contract. The question arrises as to whether 1) the Bank can compell the Owner to assign the contract to them, and then 2) can the Bank assign the Contract to the new Owner (who is not "an Institutional Lender"). If the lender assumes the "Owner's rights and obligations", he is obliged therefore to obey the "non-assigment " provision...?
Does the bank become the new "Owner"? Is this provision included to allow lenders to directly issue funds against invoices, or is to protect the value of an asset in cases, like this, where the value of an asset includes design and instruments of service?
Seems to be some sloppy language.
I am using my best 20/20 hindsight to see if I could ever have anticipated this situation back in those heady days of '07, but these are strange times indeed...
I think you will find that the definition of "owner" and "lender" will be defined by the law -- not by your perceptions.
Just because you signed the contract with one particular person or company doesn't mean that under certain circumstances another person or entity can't step into the original owner's shoes, with the original owner's rights and obligations. Similarly, the original "lender" can be replaced by another.
I'm no lawyer, but I suspect the new developer will become both the "owner" and the "lender" -- not a happy circumstance for you.
No contract is (or can be) perfect and no contract can anticipate every possible eventuality - any more than you can. I don't personally feel this language is "sloppy" as you phrase it. However, you may have been dealt a bad hand by your original client and the economy -- now you, and your attorney, will have to find a way to manage the situation in a reasonable manner.
Good luck ... I don't envy you your situation.
So distant, even if the new developer becomes both the Owner and lender, this new entity has to abide by the original contract terms, or breach the contract if they want to get out of it, right? So aldorossi should be able to finish the project on the original terms, with the checks just coming from a different source?
Yes ... I think that's will be the case. That doesn't mean it will be an easy, or pleasant, journey. But I believe the law would be available to enforce the original contract terms.
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