FAQ.14

Question:

Part-way through the construction, the client (a developer/builder) requested that we commence providing payment certifications as he had a new lender. We were doing reviews for architectural work but are not the prime consultant and have no knowledge of the details or values of the construction contracts. Twice we provided an opinion letter as to the approximate percentage completion of the project but would not do a Certificate for Payment.

Now the project is complete we are being asked to prepare and sign the Certificate of Substantial Performance. We indicated that without any knowledge of their contracts and as we do not consider ourselves the 'Certifier' for the project, that the owner and the contractor can sign the certificate to commence the Lien period and advertisement etc. They feel that we should be signing the certificate. We do not wish to become responsible for delays, but do not feel, given the circumstances, that we should sign as the Certifier in this case.

Short Answer:

You are correct, you have not been contracted as the prime consultant or to provide the services of certification for payment (i.e. the ‘payment certifier’) and thus should not sign an important form saying that you are. You are also correct that in the absence of a payment certifier the certificate (CLA Form 6 or CA Form 9) can be signed by the owner and the contractor and subsequently published.

Likely the lender is telling the owner that sign-off by an architect is a requirement for them to pay out the loan money to the owner to pay the contractor. Some financial institutions have in the past and some may do so now, engage an architect on their own for third party verification. The lender would prefer that the borrower pay for that and also take the risk instead of them. By issuing your letter to the lender you are now taking on that risk and becoming liable to both the owner and the lender.

If the client doesn’t want to retain an architect’s services during construction, it will be appreciated by the client if the architect recommends the client discuss the need for payment certification before the construction starts.

Expanded Answer:

This situation often arises as the question notes, “part-way through construction”:

• where the client is a developer/owner/builder,
• where the architect and other consultants are each engaged directly by the client with none designated as a prime or responsible for coordination of the work of all the consultants,
• when the client gets a lender part way through the project, or
• when the client doesn’t need to borrow money until part way through a project.

This points out one of the pitfalls of deviating from conventional contractual relationships. Often the roles of the various parties are not clearly or properly defined.

When the client/owner has a lender to loan funds for the construction, the lender wants to ensure that the collateral (the building) is being built ‘properly’, that there will be no code or zoning violations that would create problems if the lender had to take over and sell the building if there was a default on the loan. They want a responsible, professional to sign-off each month or each time a loan payment is made. The lender doesn't know if all is going properly or not. This is all understandable, but why should the owner’s (borrower’s) architect take on this ‘extra’ service and risk for a lender? Refer to Practice Tip PT.17 Lending Institutions – Architect’s Certificates

Wording such as the following may assist in making the architect’s position clearer to the client:

 “To client,

“The Construction Act defines a “payment certifier” as “an architect, engineer, or any other person upon whose certificate payments are made under a contract or subcontract”. As [name of Practice] have not been retained to do site reviews for the purpose of preparing Certificates for Payment on the project, we cannot be regarded as the payment certifier, nor can we make a determination if the financial requirements for substantial performance have been achieved.

References:

OAA Practice Tip PT.17 Lending Institutions – Architect’s Certificates

In accordance with the Construction Act [CA 32 (1) & (2)] ”…If there is no payment certifier, the owner and contractor shall make the determination jointly and both sign the certificate." It also is clear that the owner and contractor can make the determination of substantial performance, and jointly sign the certificate.”

This issue which should be considered at the beginning of the project, is addressed in part in. It is appropriate for architects to discuss this issue when negotiating the Client-Architect agreement. Inexperienced clients will appreciate the warning and everyone will appreciate avoiding the hassle part way through the project.

References:

See the OAA Website Knowledge Base: filters – construction phase, template; keywords – payment certification, owner, consultant, letter