Improperly Licensed Architect Firm Not Liable On Licensing & Malpractice Claims

Posted by: Hilger Hammond On: 2nd February 2017 | no responses.

By Aileen Leipprandt

In Center Street Lofts Condominium Association v AZD Associates, Inc., et al (Mich. Ct. App. Dec. 2016), a condominium association sued an architectural firm, AZD Associates, claiming that AZD’s deficient design of the condominium project caused multiple units to leak. The Association also claimed that AZD was not properly licensed because less than 2/3 of AZD’s principals were licensed architects, contrary to the requirements of the Michigan Occupational Code (MOC).

The trial court dismissed the Association’s claims as to improper licensure, ruling that the Michigan Occupational Code does not give a private person the right to sue an architect to enforce the licensing requirements of the MOC. Instead, the MOC gave enforcement authority only to prosecutors and the Attorney General. The only exception given to private persons is the right to seek an injunction (an order to stop) against an unlicensed practice. The Court of Appeals agreed with the trial court and affirmed dismissal of the claim.

The trial court also dismissed the Association’s claims for professional negligence, ruling that the claims were filed too late. Again, the appellate court agreed, ruling that the Association did not file its claim within the six-year period of limitations which began to run when the Association occupied, used or accepted the improvement. Furthermore, even though the Association might have been permitted to file its claim within one year of discovering the defect, the evidence established that the Association likewise did not file its lawsuit within that one-year time frame.

Finally, the appellate court observed that even if the Association’s argument was correct – that AZT was not properly licensed – the Association’s claim would be controlled by the three-year statute of limitations for negligence claims. The period of limitations for such a claim begins to run “at the time the wrong upon which the claim is based was done regardless of the time when the damage results.” Here, the alleged “wrong” was the negligent design of the project. The Association argued that the damage did not occur until it first noticed the leaking. The appellate court disagreed, ruling that the “‘damage’ actually occurred when the portions of the project that were negligently designed were actually built, i.e., when the problem could no longer be corrected without the need for plaintiff to spend money on redesign and reconstruction. It was at that point that all elements of negligence were in existence, though plaintiff at the time did not know that its legal rights had been impacted upon.”

Lesson Learned – While the Condominium Association’s claim for improper licensure was dismissed, design professionals should nonetheless take care to assure they are properly licensed in accordance with the Michigan Occupational Code, otherwise they may face an administrative enforcement proceeding. And, building owners who encounter design or construction deficiencies cannot sit on their claims, otherwise, they risk dismissal for untimeliness.

Well-Drafted License Provisions in Architectural Design Agreements are Good Business

Posted by: Hilger Hammond On: 4th November 2014 | no responses.

1221951_27660008 - CopyBy Mark Rysberg

Originally published on the American Institute of Architects Grand Rapids website.

Architectural design agreements should be carefully drafted to identify the extent to which someone may duplicate or otherwise use the resulting work product.  In the legal context, that concept is referred to as a license.  Many times, however, the benefit of drafting license provisions to advance business strategies is overlooked.  Architectural design agreements should include license provisions that advance sound business strategies for the following reasons:

  • First, there is a direct correlation between license provisions and possible exposure to liability.  Risks of possible duplication or use of design materials by third-parties can increase the probability of liability.  Therefore, the scope of a license provision should be a significant factor in quantifying possible risk and, in turn, calculating a design fee that takes such risk into consideration.
  • Second, carefully drafted license provisions can help ensure that the costs and fees incurred in preparing the design documents are paid for.  For example, the granting of a license to use design materials may be conditioned on the full payment of the design services.  A license provision may also be drafted such that the license expires if contract administration fees are not paid.  Making a license conditional is especially important if a dispute ensues out of the design documents or agreement.
  • Third, the scope of a license provision is conversely proportional to the protections afforded by copyright law.  Generally, the copyright laws protect against the unauthorized use of copyright protected materials.  That means that claims based on copyright infringement cannot exist if the design materials were used within the scope of the license provision.  Therefore, if a contractual license is very broad, or open to broad interpretation, the ability to rely on copyright protection is conversely limited.

The scope of license provisions in design agreements should be considered before undertaking each design project.  Such provisions relate to risk allocation, the ability to ensure payment, and, if necessary, the legal recourse available if problems arise.  In those respects, careful review and drafting of license provisions in design agreements is a sound business practice.


New Michigan Law Allows Architects and Engineers to Use Electronic Seals and Signatures

Posted by: Hilger Hammond On: 15th January 2014 | no responses.

1191990_61729697By: Benjamin H. Hammond

For several years architects and engineers have had the technical ability to affix an electronic seal or signature to drawings, but were prevented from doing so under the law when submitting those plans to governmental authorities for approval. That has now changed and the law in Michigan has finally caught up with technology.

Effective February 25, 2014, architects and engineers will be able to submit a plan, plat, drawing, map, title sheet of specifications, addendum, bulletin or report to most governmental agencies for approval with an electronic seal and signature.

House Bill 4585 provides that a “seal” now includes an electronic seal, and a “signature” now includes an electronic signature. “Electronic seal” means a seal created by electronic or optical means and affixed electronically to a document or electronic document. “Electronic signature” means a signature created by electronic or optical means and affixed electronically to a document or electronic document with intent to sign the document.

However, the bill does not require plans and reports be submitted electronically and allows for individual local units of government that do not have the capability to accept and store documents electronically to still require paper copies to be submitted. One should double check with the local authority prior to the submission of any plans to ensure they will accept electronic seals and signatures.

These subtle yet important changes should improve the efficiencies and time involved in submitting plans for approval and receiving the green light on projects across the state.

Bats Gone Wild – Unlicensed Michigan Contractor Loses Claim and Suffers Sanctions

Posted by: Hilger Hammond On: 22nd October 2013 | no responses.

batsBy Aileen Leipprandt

You just can’t make up facts like these. Straight out of a scene from an old Vincent Price horror flick, a contractor performing work on a bat-infested house learned a hard lesson about Michigan’s licensure requirements for residential building and maintenance contractors. In Complete Animal Control Solutions v Wolney, (Mich. Ct. App. 2013), the homeowners (Wolneys) hired Complete Animal Control Solutions (CACS) to provide labor and material for bat remediation and restoration of their home. The home was severely infested with bats – the attic was filled with bats, bat feces and urine, and debris. Bat excrement had destroyed the roof and siding which had to be repaired. The damage to the home from bat excrement and debris was so extensive that it was determined that the home had to be gutted. And, making matters worse, rain contaminated with bat feces and urine leaked into the home because the roof was not properly covered.

For reasons unexplained in the ruling, shortly after starting work, CACS stopped working on the home. CACS recorded a construction lien on the property and then sued the owners for payment of nearly the entire contract amount. The owners countersued claiming that CACS’s claims were barred because CACS was working as an unlicensed residential maintenance and alteration contractor. The owners also argued that CACS’s construction lien constituted a slander of title and that the owners were entitled to sanctions because CACS’s claims were frivolous.

CACS argued that it was exempt from the licensing because it was already licensed to engage in “damage control and nuisance caused by wild animals, and to use non-pesticide methods to control and remove wild animals.” CACS also argued it was not required to be licensed because the work that required licensure was performed by a licensed subcontractor. The Court disagreed with CACS and dismissed its claims ruling that the primary scope of CACS’s work involved extensive home restoration services. Furthermore, CACS failed to prove that it had entered into a contract with a subcontractor, failed to prove that the subcontractor was properly licensed, and failed to meet other technical requirements of Michigan’s Occupational Code governing licensure. The Court concluded that CACS’s claims were frivolous and awarded the homeowner sanctions.

Lesson learned – Michigan law is unforgiving for unlicensed contractors. Contractors must comply with the technical licensing requirements of each jurisdiction in which they are working or otherwise suffer the consequences.

Michigan Court of Appeals Rules Unlicensed Builder Liable for Treble Damages

Posted by: Hilger Hammond On: 8th July 2013 | no responses.

rain puddleBy Aileen Leipprandt

In the recent case of Epps v 4 Quarters Restoration, L.L.C., et al (June 2013), an unlicensed builder received a rude awakening when the Michigan Court of Appeals found the builder liable for treble (triple) damages for cashing insurance checks for a flood repair.  In the Epps case, the homeowners hired Mr. Willis and his related companies to restore their home after a flood.  Although Willis represented that he was a licensed builder, he was not. To facilitate payment from insurance proceeds, the owners gave Willis a power of attorney.  During construction, Willis signed all the checks issued by the owner’s insurance company to pay for repairs, even where the checks were made payable to the owners.  The owners sued Willis and his related companies claiming that Willis misrepresented that he was licensed, fraudulently inducing the owners to hire him and sign the power of attorney.  The owners claimed Willis’s work was defective and that he stole or converted the insurance proceeds.

The court ruled that even though Willis was unlicensed, he could still defend himself in the lawsuit.  Unfortunately for Willis, however, the Court ruled that because Willis was unlicensed, the power of attorney he procured from the owners was void.  Since the power of attorney was void, Willis had no right to cash the insurance checks, therefore, Willis had to return the insurance proceeds.  Willis sustained a double whammy when the court then ruled that not only was Willis required to return the insurance proceeds to the owner, because Willis had no authority to cash the checks, Willis converted the funds and was liable to the owners for treble (triple) damages!

Lesson learned – professional licensing must be taken seriously.  Failure to maintain the proper license (and to confirm that builder companies are properly licensed) can have a devastating impact.