Preserving Architectural Innovation with Specialized Agreements

A specialized architectural firm creates bespoke designs using modern, energy-efficient and often unusual materials. The desire of the building owner is for the architect to create a signature design for the building. The building is then occupied by a high-end residential tenant. The operative documents involved including a lease, vendor contracts, etc., utilize a generic form of sophisticated real estate LLC operating agreement, even though the project and the ownership structure are unique. This article focuses on the “lessons learned” in this scenario, and how a sophisticated real estate LLC operating agreement can prove helpful in preserving the value of this architectural innovation and real estate investment.

Essentially, this article addresses such topics as: While none of this information is new, the reality is that sophisticated real estate is often acquired with generic form contracts being utilized rather than a substantial approach to the massive investments being made. This situation applies equally to both tenants and landlords and is therefore relevant to the responsible owner/investor and to the responsible tenant/user of real estate.

More often than not, there is a tendency to use generic form agreements and contracts that do not adequately express the true intentions of the parties and are challenged by the uniqueness of the project. The unique architectural and engineering details of this investment are vital to the rental value of the property. Accordingly, it is imperative that wise investors utilize their ownership agreements and contracts to preserve these key aspects of their investment and avoid the uncertainty of generic agreements.

For corporate stakeholders, this might entail having a company employee review all new agreements, contracts, and agreements to determine whether appropriate enhancements to existing agreements to address the unique aspects of a project. Referring to the above example, if the architect used a new material that is no longer manufactured directly, an agreement should be drafted that protects the company’s interest in the continued use of the product or materials for replacement or repair. If the prevailing practice in the area is to utilize generic form agreements, it is essential for the company to require its targeted contractor to utilize a sophisticated real estate LLC operating agreement to mitigate its risks.