HLP Secures $2+ Million Arbitration Award for Project Owner

Construction arbitration is a private dispute resolution process in which a neutral arbitrator — often one with construction industry experience — hears evidence and issues a binding award. Most owner-contractor agreements, including standard AIA and ConsensusDocs forms, contain arbitration clauses that make arbitration the mandatory forum for payment, delay, and defect claims. Owners typically find themselves in arbitration not by choice but because the contract they signed at the outset requires it. The process resembles a bench trial: witnesses testify under oath, exhibits are admitted, and experts are examined and cross-examined. The HLP matter described here was resolved through a four-day evidentiary hearing. Arbitration awards are difficult to appeal, which raises the stakes on hearing preparation.

Substantial completion is the trigger date for several contractual consequences: it typically stops the accrual of liquidated or delay damages, starts warranty periods, shifts risk of loss, and releases retainage. Moving that date by weeks or months can change the damages calculation dramatically. In the Atlanta mixed-use matter, the contractor argued substantial completion occurred when the certificate of occupancy issued — a position that would have cut off multiple years of delay damages. The arbitrator rejected that argument and held that substantial completion ran from the Architect's certification, consistent with the parties' agreement. The practical lesson is that the contract language controls, and owners should understand which milestone their agreement designates before a dispute arises.

Not necessarily. A certificate of occupancy is a municipal determination that a structure is safe to occupy under applicable building codes. Substantial completion is a contractual concept, typically defined as the point at which the work is sufficiently complete for the owner to use it for its intended purpose, and commonly certified by the project architect. The two can diverge, sometimes significantly, particularly where code compliance is achieved while contract-specified work remains unfinished or defective. Contractors frequently invoke the certificate of occupancy to argue an earlier completion date and shorten the delay damages window. In the Atlanta matter, the arbitrator declined to equate the two and applied the architect's certification as the governing milestone.

Georgia courts enforce liquidated damages provisions when three conditions are met: the injury from a breach must be difficult to estimate accurately, the parties must have intended to provide for damages rather than a penalty, and the stipulated sum must be a reasonable pre-estimate of the probable loss. If a clause fails that test, it is treated as an unenforceable penalty and the claimant is limited to actual damages. Delay damages on a development project — lost rents, carrying costs, extended financing — are often genuinely hard to quantify in advance, which supports enforceability. In the Atlanta arbitration, the contractor argued the clause was an unenforceable penalty. The arbitrator rejected that argument and enforced the clause as written, awarding the owner full liquidated damages.

The building envelope is the system separating conditioned interior space from the exterior — exterior walls, cladding, windows, roofing, flashing, waterproofing, and sealants. Envelope defects typically manifest as water intrusion, which can damage framing, insulation, drywall, and finishes well beyond the original defect location. Remediation is costly because access is destructive: correcting a flashing or waterproofing failure often requires removing and replacing cladding across large areas, along with interior finishes. On occupied mixed-use properties, repairs also carry tenant disruption, relocation, and lost revenue consequences. The Atlanta owner funded extensive repairs itself after the general contractor refused to correct widespread envelope defects, then pursued recovery of those costs in arbitration.

Recoverable categories depend on the contract and governing law, but commonly include the cost of repair and remediation, delay or liquidated damages, consequential losses where not waived, and expert and testing costs incurred to investigate the defects. Prejudgment interest and arbitration costs may also be assessed against the losing party. Attorneys' fees are recoverable only where a statute or the contract provides for them — Georgia's expenses-of-litigation statute, O.C.G.A. § 13-6-11, supplies one potential route where bad faith or stubborn litigiousness is shown. The final award in the Atlanta matter included liquidated damages, repair and remediation costs, expert and testing costs, prejudgment interest, attorneys' fees, and arbitration costs.

That decision is fact-specific and should be made with counsel, but owners frequently have little practical choice when ongoing water intrusion is damaging a revenue-producing building. Before self-funding, owners generally need to satisfy any contractual notice and cure provisions, document the defects thoroughly through photographs, testing, and expert inspection, and preserve the defective conditions or materials where feasible. Careful cost segregation also matters, so repair costs can later be distinguished from betterments or unrelated work. The Atlanta owner funded extensive envelope repairs after the general contractor refused to correct them, then recovered those repair and remediation costs — along with its expert and testing costs — in the arbitration award.

HLP obtained an arbitration award exceeding $2 million for the owner and developer of an Atlanta mixed-use residential and retail project. After the general contractor refused to correct widespread building envelope defects, the owner funded repairs itself and pursued delay damages, repair costs, and expenses of litigation. The contractor raised two defenses aimed at the damages exposure: that substantial completion occurred when the certificate of occupancy issued, and that the liquidated damages clause was an unenforceable penalty. Following a four-day hearing, the arbitrator rejected both, holding that substantial completion ran from the Architect's certification and enforcing the liquidated damages clause as written. The award included full liquidated damages, repair and remediation costs, expert and testing costs, prejudgment interest, attorneys' fees, and arbitration costs.