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In Parkcrest Builders, LLC v. Housing Authority of New
Orleans, 2017 WL 3394033 (E.D. LA. 2017), the United States District Court
for the Eastern District of Louisiana held the Court could determine whether
substantial completion had been achieved, despite a contract provision
assigning this determination to the Architect.
The Housing Authority of New Orleans (“HANO”) hired
Parkcrest Builders, LLC (“Parkcrest”) to serve as the contractor for the
construction of a housing development in New Orleans (the “Project”). The
Project consisted of twenty-six separate buildings incorporating fifty-one
residential homes and one management office. HANO subsequently contracted with
Perez, APC (“Perez”) to serve as the architect on the Project. As the project
architect, Perez was responsible for tracking the construction progress by
signing off on all change orders and pay applications and was assigned
responsibility for certifying the Project was substantially complete.
Parkcrest and Liberty Mutual Insurance Company, the Bond
Company who took over the Project, informed HANO that it considered the project
substantially complete in May 2016. In June 2016, Perez stated it was unable to
certify substantial completion of the Project, citing numerous portions of
construction yet to be finished by Parkcrest.
Parkcrest sued HANO alleging breach of contract for the
failure to grant substantial completion and issue final payment. The Court
sought to determine whether substantial completion was solely determinable by the
Architect and whether that determination meant no remaining factual disputes existing
on summary judgment was warranted. The Court noted whether substantial
completion is reached is determined by the contract between the parties. In
this matter, the contract clearly stated the Architect was to make the
determination on whether the Project had reached substantial completion.
Despite this finding, the Court cited Louisiana case law which supported the
conclusion that a trial court can make a factual determination regarding
substantial completion, even if that determination contradicted the Architect’s
Substantial completion is a critical determination in
construction that affects everything from final payment to warranties being
triggered. In Louisiana, Courts will
continue to hear arguments regarding whether substantial completion has been
achieved, despite the determination by a project architect that substantial
completion has not been reached. Architects and Engineers should be aware that
their opinions regarding the date of substantial completion are not set in
stone. The Court can override the design professional’s opinion about
substantial completion and enter its own finding in Louisiana.