Hotel & Motel Management - December 10, 2007 - (Page 12)

12 On Finance IN THE details Minimize risks Hire a good attorney Beware of surety loopholes Know managers’ liability H&MM December 10, 2007 | HotelMotel.com www.HotelMotel.com/digital_edition Guard yourself against construction risks D By Jeff Wilder H&MM Columnist oing construction work, whether in your home or at your hotel, is fraught with risk and problems, not the least of which may involve unreliable, incompetent or dishonest contractors and/or other professionals, with you as the owner/developer often left holding the bag. That is the reason why surety bonds, mechan- ics lien waivers, detailed performance contracts, construction managers and, of course, an experienced attorney, all must be part of the project equation. But even with all these elements in place, situations invariably develop during the building or renovation process where you ﬁnd someone else’s hand continually attempting to ﬁnd its way into your pocket for extra payments. First, whether you’re doing a renovation or a groundup project, be certain to hire an attorney who is experienced in negotiating the various construction-related American Institute of Architects contracts and surety bonds. It’s useful to remember that the preprinted form contracts were actually Stop using your vacuum cleaner as CHANGES YOUR VACUUM FROM A BATTERING RAM a battering ram that dents furniture, scratches baseboards, bangs up doors and walls. And leads to bruising repair bills. Instead, tame the beast with a Soft Vac Protective Vacuum Cover. • Ends vacuum damage forever • Installs in seconds with Velcro tabs • Soft, durable cordoura fabric outside • High-density foam rubber inside • Eliminates costly repair bills • Extends vacuum cleaner life • Increases housekeeping productivity • There’s a Soft Vac model to fit any vacuum To learn more, contact your distributor, or call us at or visit INTO A GENTLE LAMB softvac.com. 800-866-7001, “written” by these folks and include protective language that ﬂows primarily in the direction of minimizing their responsibilities and risks, not yours. There is now a movement afoot to use alternatives to these AIA contracts, and your attorney ought to look into doing just that. Design/build ﬁrms that take umbrella in-house responsibility for getting a job done on time and on budget ought to be given special consideration in any job you consider letting. Second, just because you’ve required that your contractor be bonded by a surety doesn’t mean you can rely on timely collection in the event of a project default. Sureties have a (well-deserved) reputation for stringing out settlement and payment of obligations, forcing people to litigate against them and then settling on the courthouse steps. This reality should be foremost in your mind as your lawyer negotiates the surety bond. It’s certainly a good idea to arrange a “just in case” credit facility to cover bonded construction defaults. And remember, in most jurisdictions, you can’t collect legal fees, even if you win the case. Third, if you hire a construction manager, make sure his liability is not limited to the supervisory fee he receives for providing professional services to you. Construction management companies may assign anyone to oversee your project, and that person’s competence, or lack thereof, will have a major economic impact on your investment. Finally, remember that a construction default of any type might cause ﬁnancial damage to you that is economic and/or consequential. Further, you have to consider the interest cost associated with advancing or borrowing additional capital to fund cost over-runs and the legal cost involved in collecting on another’s defaulted promises. hmm@questex.com Jeff Wilder is president of Wilder Ventures LLP, a New York Citybased asset management company, and an adjunct professor at New York University. E-mail him at jswilder1@aol.com. CIRCLE NO. 132 © 2006 SOFT VAC CORPORATION http://www.hotelmotel.com/digital_edition http://www.hotelmotel.com http://www.softvac.com

Table of Contents Feed for the Digital Edition of Hotel & Motel Management - December 10, 2007

Table of Contents News Wildfires test hotels' emergency plans LIIC roundtable: Capital available for hotel projects Departments Perspective Letters to the Editor At Your Risk Family Business Matters Sales Clinic On Finance Satisfaction Trends HotelWorld Update Events Trends & Stats Special Report H&MM's "year in review" tackles the top seven in 2007 Transactions Consumer Insight Travelers rank free breakfast high on must-have items Hot Products IH/M&RS Editors' Choice Award winners Construction Spending up, costs steady in construction Design Window treatments Ad/Editorial Index Marketplace Classifieds Checking Out

Hotel & Motel Management - December 10, 2007

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