Question: A sole proprietor developer has contracted with a general contractor to build a $40 million condominium complex. The developer has never constructed a project before
A sole proprietor developer has contracted with a general contractor to build a $40 million condominium complex. The developer has never constructed a project before and does not have relationships with either the contractor or the architect. The architect's services were terminated after receipt of the building permit. The developer acts as his own owner's representative. The contractor was employed through the competitive bid procurement method. There are numerous document discrepancies and differing site conditions. The contractor provides notice to the owner and proceeds with the most likely corrections. The owner is always pushing the contractor to speed up the project under advice from his realtor that the market is hot, and he needs to get the condominiums on the market. The changes are not estimated before the corrections are made, but the contractor tracks their costs on a time and material basis. The contractor does provide the owner with written notices that they are proceeding with each extra work item and will provide actual costs when they are completely realized. Upon completion of the project, the condominium market has dropped off. The developer is unable to sell 50% of the individual units and ends up unloading the entire project to a large real estate trust at below cost. The remaining condominiums will now be rented as apartments. The contractor has submitted a claim for $1,500,000 for extra work, as described above. All of the extras are legitimate and the pricing is substantiated with T&M backup. The GC has not inflated or falsified any of its costs. Due to the expedited schedule, the project was difficult for the GC. If they collect this claim, they will just break even on their costs. The first developer denies the extras under the basis that: (a) he did not receive proper notification; and (b) he has lost money on the deal as it is, and there is not anything left to share with the contractor. All parties in this case made numerous errors. What were they, and what should they have done to correct this situation before it happened? Does the developer have any claim against his realtor or the architect? Does the developer have a claim against the contractor? Can the GC recover from, or lien, the new owner?
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