Signed, Sealed, and Liable - Lender Certifications
At the outset of your project, you did your due diligence—reviewing and negotiating your client’s contract to strike out language regarding; standard of care, warranties, guarantees, etc. However one small clause managed to slip by;
“The Design Professional shall cooperate fully with the Client’s lender, including executing requested documents and certifications at the completion of the project.”
At first glance, it seems harmless. After all, “cooperate” is a vague term, and the clause doesn’t appear to impose any immediate burden. But in reality, language like this can open the door to significant legal exposure for design professionals.
How Lender Certifications Become a Liability Trap
When developers, particularly limited partnerships seek construction loans, especially on public projects, lenders often require design professionals to sign lender certifications as a condition of funding. These certifications frequently include language that far exceeds the design professional’s scope of services and standard of care, requiring them to warrant or guarantee compliance with a laundry list of regulations and conditions.
Real-World Sample Language:
“The undersigned certifies that the Project has been completed in strict accordance with the construction documents, and complies with all applicable conditions, restrictions, reservations, whether or not of record, statutes, regulations and ordinances, including, without limitation, all pollution control, environmental protection, zoning, planning and land use requirements, building codes and all requirements of public utilities. The undersigned also agrees that all design documents are free of error and that all reports and specifications, including their copyrights, are the property of the lender.”
Why This Language Is Dangerous
Signing such certifications can expose a design firm to substantial risk:
- Warranties and guarantees that the project complies with “all” codes, statutes, and environmental laws—many of which are subject to interpretation or change over time.
- A perfection standard: Statements such as “design documents have no errors” impose an impossible burden and go far beyond the professional standard of care.
- Certifying work outside your scope: You may be asked to verify contractor work or construction quality that you did not observe or supervise.
- Loss of ownership: Assigning copyright or control of your design documents to the lender can create future liability—especially if the documents are reused or altered.
- Time pressure: Lenders and owners often demand immediate signature to avoid delays in funding, placing the design professional in a vulnerable position with little time for review or legal counsel.
Practical Solutions To Protect Your Firm
- Remove vague lender cooperation clauses during contract negotiations. Language requiring “full cooperation” or undefined obligations to lenders should be stricken or revised.
- Propose fair and limited alternatives, such as: “The Design Professional shall reasonably cooperate with the Client’s lender to the extent consistent with the Design Professional’s standard of care, professional judgment, and obligations under this Agreement.”
- Refuse to sign certifications that require;
Knowledge or verification of work outside your scope.
Guarantees or warranties of code compliance or construction.
- Statements declaring zero error or flaw in design.
Assignments of copyright or ownership without compensation or control.
- Document your objections in writing when certifications are presented under pressure. Propose alternative language or ask for legal review before proceeding.
- Lenders won't change the certification language and without it owner won't get the funding; request a indemnity provision from the owner that you will be held harmless through the statute of limitation and with sale of the property.
Conclusion
Lender certifications are not just routine paperwork—they’re legal instruments that can dramatically expand your liability. Design professionals must remain vigilant and never sign documents that go beyond their scope of services or professional judgment. The best protection is early action: negotiate your contracts carefully, define your limits clearly, and educate your team to spot high-risk language before it becomes a costly problem. |
