USA – SOUTH CAROLINA Law and Practice Contributed by: Matt Norton and Christian Kolic, K&L Gates
7.2 Assigning Responsibility for the Design and Construction of a Project In most projects, design responsibilities are separated from construction responsibilities – commonly referred to as “design-bid-build” . Typically, the design function is assigned to third-party architects. Less frequently, a design- build contract is used, in which the contractor itself provides the design services. 7.3 Management of Construction Risk Management of construction risk is largely through the use of third-party inspectors, ie, architects or other construction professionals. These inspectors make periodic inspections – typically coincident with each construction loan draw or advance – and assess the percentage of completion and verify that the improvements on the ground are consistent with the amount of funds disbursed to date. The use of fixed-price contracts with appropriate delay penalties is another method of addressing construction risk. Another common approach for the management of construction risk by lenders is to require a guaranty of completion from a parent or other affiliate of the owner entity. Lenders also typically require a substantial equity investment either pri - or to or coincident with advances of construction loan proceeds. The equity investment may or may not be segregated and pledged to a lender. Additional equity deposits are frequently required by lenders in the event a construction loan becomes “out of balance” . 7.4 Management of Schedule-Related Risk Schedule-related risk in construction projects is managed by use of third-party inspectors and the inclusion in the underlying construction contract of substantial penalties for delays in
ings typically take between several weeks and several months to complete. 6.22 Termination by a Third Party Condemnation of property that is subject to a lease will result in termination of the lease. As between the property owner and any tenant, a condemnation award is divided in accordance with the terms of the lease. Absent a governing provision in the lease, the allocation of the award between landlord and tenant will be decided by the courts. 6.23 Remedies/Damages for Breach In the event of a tenant breach that results in termination of the lease, a residential landlord is obligated to mitigate damages in South Caro - lina (S.C. Code Title 27, Chapter 40), which in general, means that the landlord must try to replace the tenant instead of simply collecting rent from the breaching tenant. If, despite efforts to mitigate, the landlord is unable to replace the tenant, the tenant would still be liable for the rent owed, and may also owe the landlord for its costs incurred in seeking to have the tenant replaced. It is typical for a landlord to hold a security deposit, usually equal to one month’s rent, and although letters of credit are some - times used, cash deposits are more common. 7. Construction 7.1 Common Structures Used to Price Construction Projects The most common form of construction contract pricing is the use of a fixed-price contract. Also used are cost-plus contracts, with general con - tractor compensation based on either a percent - age of total costs or a negotiated fixed fee.
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