Volume 47, Issue 3 - March 2012


Multifamily Construction Stays Strong, Still Offers Challenges to Glazing Contractors
Multifamily construction is being touted today as the “bright spot” in the midst of otherwise bleak building starts. Within the condo segment specifically comes a specific set of challenges.

“Condo projects where a developer builds and sells to individual owners with an association are, in my opinion, a higher type risk project,” says Tom Bell, president of Bell Architectural Windows Inc. in Stokesdale, N.C. “Often these projects are built as inexpensively as possible to be resold for immediate profit, and thus I personally don’t go after them that often. There is always the chance that an individual owner or group of owners will band together and form a class action type suit.”

Bell is hardly alone in this thought, but in today’s economy it doesn’t pay to be picky.

“There’s definitely a greater risk; in fact, most standard insurance policies don’t cover condo work,” says Dan Larkin, owner/manager of the glazing contractor Capital Glass in Carson City, Nev. “You need what’s called a wrap policy or an OCIP (owner-controlled insurance policy), basically because our insurance, as well as most standard policies, exempt condo work for the fear of class action suits,” which have been prevalent across the country, Larkin explains.

“These owners or associations often are not nearly as savvy as a larger general contractor who carries special insurances. The key to being successful in this sector of the business is to have really good insurance, top lawyers and do large volumes and top quality work. Most of the better glaziers migrate to higher-end work where there is a builder who can take on this larger risk. It is really a matter of picking your customers who have a reputation for doing the work properly, and who really sweat the roofing and flashing details. Even then I find it a higher risk. A higher-end architect who specializes in this type of work and who larger general contractors regularly follow is probably also a prime consideration. Novices, beware; they are often the first to get hit. We currently also find that many bonding companies will not bond this type of work due to higher claim frequency ands change in ownership,” says Bell.

Novices and experienced subcontractors alike can protect themselves with a few contract stipulations.

“Really the big thing, we’ve got to make sure those OCIP policies are adequate,” Larkin advises. “Our bid might be dependent on review of the OCIP.”

There’s definitely a greater risk; in fact, most standard insurance policies don’t cover condo work.
—Dan Larkin, Capital Glass, Carson City, Nev

Review Contract Language
Reviewing and ensuring that the contract does not overly favor the general contractor is an important safeguard, especially in this project type.

“Request a copy of the general contractors’ contract and review his language to be sure that these risks are not being transferred to the glazier, roofer, etc.,” Bell agrees. “Write in contract language that includes site field test to show that your installation conformed with the architects details and was tested and approved prior to construction, get it in spec before bid if possible. This can go a long way from preventing someone claiming installation was done improperly. This also shifts some of the responsibility back on designer or construction manager. Don’t accept incomplete openings or contract language where others terminate to you after window or glass installation, especially roof monitors or others delays that would preven you from installing properly could be compromised.”

Bell adds, “Pre-glazed windows are less risky than storefront or curtainwall, as you then have a manufacturer to lean on. Rely on manufacturer’s installation instructions and follow them to a tee.”

Rick Nuhn, a professional engineer and private building envelope consultant in Greensboro, N.C., adds an additional precaution for glazing contractors.

“I would agree you need the designer to sign off on your work before covering over your flashings and attachments. I would really encourage photo documentation to be kept in a safe place (easy to find years later) to show what was built so you don’t have to do destructive testing,” he says.

Nuhn also advises glazing contractors to stress “really good shop drawings—signed off by the construction manager, general contractor, architect and anyone else involved. Also, do water testing at the time of installation—something simple, Monarch flood test at completion—and have the architect sign off on the work.”

Finally, Nuhn stresses the importance of documenting work in this potentially litigious projects. “In litigation, the subcontractors generally do not have enough documentation of what they actually built,” he says. “They need to take pictures and have the general contractor or homeowners association approve what they are doing before it is covered up. Approved shop drawings with general contractor/owner review and approval should be provided. Also, they need to document anything that affects them in which the as-built conditions do not match what is shown on the bid documents. Substitutions and RFI answers need to be well documented and saved in files.”

Larkin adds another point to consider in today’s retrofit heavy market.

“Generally [condos] are occupied so there are those kinds of stipulations as well,” Larkin says. “There’s a little bit of liability because a condo owner might say ‘hey, your guy just stole $100 off my dresser’ … Knock on wood, it’s never happened to us, but we do have stipulations: it’s an occupied unit, pick up your valuables before you leave, etc.”

Where the Market’s Moving
Larkin notes that condo construction has slowed down, although government subsidized apartments are providing fresh work for the company.

Bell says, “We do a lot of university housing work, some through private developers and this is still pretty strong, but most often done through construction managers at risk delivery methods. Typical private developer residential work is way down; this sector is really getting hurt as property values decline in many parts of the country making new starts less attractive for developers,” he adds.

The National Association of Home Builders’ (NAHB) Multifamily Production Index (MPI) in December 2011 showed continued improvement for the fifth consecutive quarter for the apartment and condominium housing market. The MPI, which tracks the sentiment of builders and developers about the conditions of the multifamily market on a scale of 0 to 100, increased from 44.4 in the second quarter to 47.3 in the third quarter—the highest reading since the fourth quarter of 2005. For the condo segment specifically, the index rose in the third quarter of 2011 to 31.9, the highest recording since the second quarter of 2006.

The MPI component tracking for-sale units rose to 31.9, the highest recording since the second quarter of 2006. Builder and developer perceptions of market-rate rental properties recorded an all-time high of 63.8, while low-rent units remained steady at 50.1.

Looking forward to the next six months, builder and developer expectations improved in the third quarter for market-rate rental properties and for-sale properties, up to 67.2 and 37.3, respectively, NAHB reports. Expectations for low-rent units decreased slightly, to 50.2.

—Megan Headley


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