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21 June 2017 |
Developer and technical customer: how to properly structure contractual relations, manage the project and risks?On June 16, 2017, VEGAS LEX hosted a roundtable, Technical customer / fee-developer in development projects: best practices, for Russian and foreign developers and construction companies. Partner, Head of Real Estate, Land & Construction practice Igor Chumachenko analyzed in detail the system of technical customer / fee-developer relations under a general construction contract, including the structure, options and the qualification of contractual relations, and the areas of responsibility of the parties to a general contract. “According to the recent changes in the Town-Planning Code, the technical customer concept is key to the system of relations under a general contract, especially when the developer does not have its own customer service,” said Igor Chumachenko. “The technical customer must be a member of the relevant SRO, so that the functions of developer could be transferred to him. In this regard, it is extremely important to build a system of relations between the parties based on the balance of interests of the participants.” VEGAS LEX Partner, Head of special projects Maxim Grigoryev gave practical recommendations on structuring the relationship between the developer and the technical customer, listed the types of contractual structures and legal qualifications of such relations. Discussing the responsibilities and the purpose of using a technical customer, the expert spoke about the types and limits of its responsibility, highlighted alternative incentives or safety mechanisms that can be used instead of – or along with – taking a technical customer to court. He cited relevant examples of disputes over the quality and completeness of services, the terms and quality of construction. “The role and powers of a technical customer in major construction investment projects can be quite important, especially when the technical customer has other competencies along with its classic functionality: construction control, organization of tenders, organization of construction / construction management, preparation, editing and/or collection of documents necessary for the construction or management of the property (permits, specifications, executive or technical documents, etc.), etc. In this connection, is important for the developer (investor) both to choose a reliable partner for this role and work out reliable contractual arrangements for the technical customer’s stimulating and monitoring. One of the goals of our roundtable is precisely to discuss possible options to achieve the balance of interests of these parties to an investment project,” commented Maxim Grigoryev. Vera Setskaya, President of the development and consulting company GVA Sawyer, Vice President of the Russian Guild of Managers and Developers (RGUD), explained the concept of fee-development in real estate as a financial transaction; she discussed the kinds of remunerations for fee-developers and how they are calculated, how to properly manage the budget and schedule the project, what you need to pay attention to in development contracts, how to make the developer responsible and manage project risks, etc. *** For more information on VEGAS LEX’s activities in the Real Estate. Land. Construction sphere, please click here. For more information on VEGAS LEX’s litigation support services, please go here.
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