ABA Banking Journal - June 2010 - (Page 16)
ABA Community BAnking | CRe CLeANUp When “plans” go awry You can’t just assume an architect’s plans come with the OREO. If you do, you just might get creamed. Here’s how to stay out of the middle By Mark edelstein ncomplete construction projects, common now, raise issues for property owners as well as construction lenders. But a critical issue receiving little attention is what happens to an architect’s claim for unpaid services in a borrower bankruptcy. The rights of property owner, lender, and even a potential buyer through bankruptcy sale to use the architectural plans to finish the project can make or break a solution. Questions arise, and the answer lies in the intersection of laws governing real estate finance, bankruptcy, and intellectual property. Who owns the blueprints? Architects and owner/developers 16 | ABA BANKING JOURNAL | june 2010 I typically enter into Form AIA, or similar agreements, that outline the scope of services to be provided, and the fees to be paid. Such agreements often provide the developer with a limited license and right to use the architect’s drawings, specifications, and related documents (referred to as the “plans”). However, the architect often retains ownership of the plans and the intrinsic designs reflected in them (called the “designs”). Typically, a lender requires the architect to sign what is commonly referred to as a “will-serve” letter. In that document the architect acknowledges the mortgage lien on the property and agrees that the lend-
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