Cost overrun in the design: the architect's liability to the client

Law 38/1999 on Building Regulation (Ley de Ordenación de la Edificación, LOE) regulates the parties, not the budget. The promotor is the person who "decides, drives, plans and finances" the works (art. 9.1, unofficial translation) and the designer prepares the design "on the instructions of the promotor" (art. 10.1). The law does not use the word presupuesto (budget) in the sense of cost and does not assign to any party the obligation to keep the cost within a figure. The roles of each professional are described in the article on the architect and the technical architect.

Nor does the professional association control cost. Law 2/1974 on Professional Associations provides that the visado (the colegio's endorsement of the design) does not cover "the fees or the other contractual conditions" (art. 13) and prohibits the colegios (professional associations) from setting indicative fee scales (art. 14). No ethical rule obliging the architect to design within a budget has been found in the texts reviewed; if such an obligation exists in a particular case, it arises from the appointment.

The consequence is uncomfortable for the client. An appointment that does not mention the budget, or mentions it without a date or tolerance, leaves the argument over the overrun on uncertain ground.

These are two separate regimes, and it is best not to confuse them. The warranties and liabilities under the LOE concern physical damage to the building, for defined periods and causes; they are explained in the article on LOE warranties and liability. A cost overrun in the design, by contrast, is not damage to the building: it is a breach, or not, of the appointment contract.

Aspect	Cost overrun in the design	Damage to the building
Basis	appointment contract	LOE and Civil Code
What is disputed	whether the design kept to the agreed budget and whether the architect warned of deviations	whether there are defects and to whom they are attributable
What the client needs	written budget, date, tolerance, documented warnings and decisions	technical evidence of the damage and its cause
Where it is prevented	in the appointment and in managing the design	in the design, site supervision and quality control

Case law offers no rule, only pointers. Two decisions of the Tribunal Supremo (the Supreme Court), known through published case notes, show which way the courts lean.

Fees and inflated cost. According to the case note published on vLex, Supreme Court judgment (First Chamber) 750/2012 of 12 December rejected a claim by the architects for fees calculated on an actual cost of the works increased by their own defective work, and upheld the defence of a contract not properly performed (exceptio non rite adimpleti contractus). The reading that matters to the client: when fees depend on cost, the professional cannot profit from an overrun they caused themselves.

The duty to inform. According to a case note published on elderecho.com, a Supreme Court judgment of 18 January 2000 found fault with the contractor and the architect for not informing the client of a 54% price increase, as the pliego de condiciones (contract specifications) required. Here too, the duty to inform came from the contract document.

What is not on record. The sources reviewed contain no case-law tolerance threshold for the architect's estimate, of the kind "a deviation below such and such a percentage is acceptable". Any figure of that kind in circulation should be treated with caution; the prudent course is to agree one.

In public works the regime is different, because the design is a public contract. Law 9/2017 on Public Sector Contracts (LCSP) contains a specific rule on the geotechnical survey: if it failed to foresee circumstances that cause an increase of "more than 10 per cent of the initial price" of the works contract, the author of the design must pay compensation under article 315, whose 20% threshold is reduced to 10% for this case (art. 233.4). This is a rule specific to public procurement, with no equivalent in the LOE for private works.

The author of the design also has a say when the works contract is modified. Before an unforeseen modification under article 205, the author of the design, if a third party, must be given a hearing "within a period of not less than three days" (art. 207.2). For the órgano de contratación (contracting authority), that hearing is the moment to record whether the modification stems from a defect in the design.

In a claim for a cost overrun, the client's position is worth what its documents are worth. Five items make the difference.

Item	What it proves	When it is produced
Appointment with target budget, price date and tolerance	what was asked of the architect	before the design
Signed brief	that the overrun does not stem from a change of brief	before the design and at each change
Estimate at each stage with its written comparison	when the overrun appeared	at the close of each stage
Warnings from the architect, or their absence	whether the duty to inform was met	throughout the design
Signed decisions by the client	which changes were accepted with their cost	at each deviation

The item most often missing is the last one. Many overruns come from changes requested or accepted by the client itself in meetings, with no written cost. In that case, the overrun is the client's, even if nobody priced it. When the design already exceeds the budget, the method for deciding before tendering is in the article on what to do when the design estimate exceeds the client's budget.

Fees proportional to the net works cost (PEM) unintentionally reward overruns. The more expensive the works, the more the designer earns, even if the client has not asked for more work. The 2012 judgment, as reported, addresses the extreme case, an overrun caused by defective work, but not the ordinary case of a design that simply turns out more expensive.

Three formulas reduce the problem. Lump-sum fees per stage; fees calculated on the target budget in the appointment rather than on actual cost; or a proportional basis capped at the target budget plus the agreed tolerance, with express revision only if the client changes the brief.

The client's protection is written before the design. The useful clauses (target budget and its date, scope, tolerance, a duty to warn and to price every change of brief, revision of the design without additional fees if the budget is exceeded without a change of brief, cost deliverables per stage) are developed in the article on writing the budget into the architect's appointment.

On site, the risk changes hands. Once the works are contracted, overruns come mainly from changes and additional works. Under a fixed-price contract, article 1593 of the Código Civil (Civil Code) does not prevent the contractor from being paid for an increase in the works authorised by the owner, and, according to legal scholarship, case law tends to accept that authorisation even when tacit; the consequences for the client are analysed in the article on extra works under a fixed-price contract.