How are mandatory elevator upgrades causing tension in co-ops and condos? Habitat sat down with Adam Finkelstein, partner at Kagan Lubic Lepper Finkelstein & Gold, to get a legal perspective.
Combining old elevators with new technology can cause stress. But threatening to go to court with your contractor is sure to compound the situation. The first deadline for mandatory elevator upgrades arrived on January 1, 2020. Did this cause a lot of tension with your co-op and condo clients?
Actually, I have had some problems recently with fairly major modernization projects in multiple-elevator buildings. Because people are complaining that the completed elevators are not working properly, I've gotten calls from board members saying, “We have to terminate the contractor and get someone else in there to finish the job.”
That's pretty radical.
It's probably as radical as you can get when you're talking about a project that's midstream.
What do you advise?
First, we find out from the consultant and the contractor what's going on. Is this a one-off problem? Is this part of what is to be expected from work like this? There are a lot of moving parts, so to speak, in an elevator. These are customized projects, and they're very technical. There're computers driving everything, and if there's a slight glitch, it can throw the whole system off. And when you're dealing with multiple elevators now being controlled by one brain – but one elevator is new and one is old – it doesn't always mesh properly. So you have to get the board and the contractor talking to each other to understand where the wrinkle is.
So your thinking, generally, is: Don't go to war.
Don't swing wildly. You need to be strategic in this because the worst-case scenario is getting into a huge dispute with the contractor, stopping the project midstream, and bringing someone else in to finish the work. You don't want to have that happen. I would avoid it at all costs.
What happens if a board decides to sue the contractor midstream?
They’re looking at three to five years of litigation, with tens if not hundreds of thousands of dollars of litigation costs. Plus you have to lay out money for your new contractor. If you prevail in court, the best you’re going to get in damages is the difference between the cost of the old contractor and the new contractor, plus possibly legal fees.
What’s the best way for boards to avoid this?
The first thing is engaging a consultant who is known in the industry, who knows this type of work – residential elevator modernization. There are a number of very good ones out there. Get them lined up. Then proper bidding: Make sure that you're vetting the contractors you're seeking bids from, and you know they come with the credentials to finish the work that you have. Then, obviously, a strong contract. We use a typical AIA contract with a rider. We are very keen on time limits – and liquidated damages if you exceed them – because of the personal impact on people.
My clients don't set their budgets anticipating a huge legal bill for a lawsuit with a contractor. If it comes to that, they have to go forward and protect themselves. But if you can avoid that, I think that's always the best advice.