Protecting your firm against client disputes
Wednesday, January 31, 2018
Interior design firms in many parts of the country experienced a surge in business during the second half of 2017. Given the new tax law that takes effect this year, along with strong demand for new and remodeled homes, that trend likely will continue in the months ahead.
While that means designers should expect to be busier, it also means they may be exposed to more risk. As you start off the new year, you want to be sure you have taken the proper steps to safeguard your firm from disputes.
Consumer confidence is at a near-historic high due to improvements in the economy and employment. Many affluent Americans enjoyed substantial gains to their financial portfolios last year due to a succession of record stock market gains and can look forward to keeping more of their money this year. Housing prices, and thus asset values, have risen fairly steadily in the past six months, particularly among higher-priced homes.
Yet, despite all these gains, consumers remain cautiously optimistic about their future financial well-being. Consequently, although they are willing to spend money to improve their homes and businesses, and have been spending more on average recently than in previous years, they have high expectations for what that money will buy them and how involved they will be in their project. They also are likely to consult outside sources for advice, suggestions or recommendations.
In such conditions, where there are elements of mistrust or uncertainty and a lack of clarity around decision-making, disputes can easily arise. To help protect your firm from possible liability, you should take the following steps now:
- Review your current letter of agreement or contract documents to ensure they are clear, comprehensive, specific and detailed. If you don't already have it, include language about how disputes will be handled and resolved. Have an attorney review your documents as well to ensure they conform to current law.
- Check that you have an adequate level of professional liability insurance and that your policy and premiums are up to date.
- Consult legal help to verify that you have completed the proper incorporation papers for your type of firm, if you have any doubt. Be sure you understand what your and your firm’s liabilities are under the law.
- Examine all your promotional and marketing materials, including your website, to make sure they do not contain any claims or ambiguities that could lead to potential liability.
Needless to say, you want to confirm and reconfirm in writing any and all terms and conditions you and the client have discussed and agreed upon. Never begin a project without the client's written agreement and full understanding of the work to be done and how you will be compensated.
Even with these safeguards, you may find yourself involved in a dispute, especially if the client has not worked with an interior designer before. The client may not be happy with the final result or upset because of some delay outside of your control. It could be the client believes you are at fault or that they refuse to abide by the agreement because they claim they misunderstood what they were told.
They may balk when receiving your invoice and question some charges or purchases. Or, for whatever reason, the client may be remiss in paying or refusing to pay at all.
When such situations arise, it is best to try to talk with the client, attempt to clear up any dissatisfaction or misunderstanding, and resolve the matter to your mutual satisfaction. If, however, the dispute escalates to an ethics complaint or legal action, you may want to consider enlisting the services of an expert witness.
Because industry practices are varied and not well understood by outsiders, having a disinterested third party who is familiar with professional standards and how firms operate can be of great help in defending your firm against an action or during arbitration.
Disputes can be costly financially, in time lost, and to you and your firm's reputation. It's worth your while to take the proper precautions, including avoiding working with clients who appear to be overly demanding or indecisive.
When they do arise, disputes should be dealt with directly and as quickly as possible. Delay will only make it more difficult to reach an amicable solution.
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