Third-Party Contracts for Opportunity Zone Construction or Redevelopment

What do third-party contracts for Opportunity Zone construction or redevelopment encompass? 

To successfully complete Opportunity Zone construction or redevelopment projects in Florida, investors must engage various third parties through contracts. These contracts facilitate the smooth execution of the project and ensure compliance with the Opportunity Zones program established under the Tax Cuts and Jobs Act of 2017. In this context, third-party contracts commonly include agreements with architects, engineers, general contractors, subcontractors, and property managers. 

For instance, a general contractor agreement establishes the terms and conditions for construction work, including responsibilities for obtaining permits, construction scheduling, and payment arrangements. Similarly, architect and engineering contracts outline the scope of services, design specifications, and fees for their professional expertise in the planning and design of the project. In addition, subcontractor agreements define the terms for specialized services, such as plumbing, electrical, and HVAC installations. Lastly, property management agreements specify the property manager’s responsibilities, including marketing, leasing, and maintaining the completed development. 

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Which laws and regulations apply to third-party contracts for Opportunity Zone construction or redevelopment in Florida? 

In Florida, third-party contracts for Opportunity Zone construction or redevelopment projects must adhere to state and federal laws and regulations. At the state level, the Florida Statutes contain various provisions governing contracts, such as Chapter 95 for limitations of actions, Chapter 255 for public property and publicly owned buildings, and Chapter 713 for liens and bonds. 

At the federal level, Opportunity Zone projects must comply with the Internal Revenue Service (IRS) guidelines for Qualified Opportunity Funds (QOFs), as detailed in IRS Notice 2018-48 and subsequent regulations. Furthermore, contracts for federally funded projects may be subject to additional requirements, such as the Davis-Bacon Act for prevailing wage rates or the Buy American Act for domestic materials sourcing. 

What are the strategic benefits of third-party contracts for Opportunity Zone construction or redevelopment?  

Investors may benefit from the following:  

• Risk mitigation: By engaging experienced professionals like architects, engineers, and contractors, investors can minimize construction risks, such as design errors, delays, or cost overruns, while ensuring compliance with local and federal regulations. 
• Quality control: Third-party contracts outline specific performance standards and project milestones, ensuring that each party adheres to the desired level of quality in materials, workmanship, and design throughout the project. 
• Streamlined coordination: Collaborating with multiple specialized service providers allows for better coordination and communication, leading to efficient project management and timely completion of construction or redevelopment work. 
• Financial benefits: Structured contracts help investors secure competitive pricing from vendors and service providers, leading to cost savings, better budget management, and enhanced return on investment. 

• Regulatory compliance: Contracts with third parties help ensure adherence to the guidelines established by the IRS for Qualified Opportunity Funds (QOFs) and other applicable state and federal laws, such as the Florida Statutes. 

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What steps should counsel take to facilitate third-party contracts for Opportunity Zone construction or redevelopment?  

Counsel should consider the following to protect their clients:  

• Conduct thorough due diligence: Research the qualifications, experience, and reputation of potential third-party vendors and service providers to ensure they possess the expertise and resources for the project. 

• Review and draft contracts: Prepare and review comprehensive agreements that clearly outline the scope of work, performance expectations, payment terms, and termination clauses. Consider incorporating dispute resolution and indemnification provisions to protect the investor’s interests. 
• Ensure regulatory compliance: Verify that contracts and project plans adhere to applicable state and federal regulations, including the Opportunity Zones program guidelines and relevant Florida Statutes. 
• Monitor performance and enforce contract terms: Throughout the project, counsel should maintain communication with third parties, track their progress, and ensure they fulfill their contractual obligations. If any party fails to meet the agreed-upon terms, counsel should take appropriate legal action to enforce the contract and protect the investor’s interests. 
• Coordinate with stakeholders: Facilitate communication among all involved parties, including investors, contractors, architects, and regulatory agencies, to foster collaboration and ensure timely project completion. 

When a set of facts is appropriate for legal intervention, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path to seek appropriate remedies. 

To determine whether your unique situation may necessitate litigation or another form of specialized advocacy, please contact our office to set up your initial consultation. 

Frequently Asked Questions 

1. Can an Opportunity Zone investor include contingency clauses in third-party contracts? 

Yes, investors can include contingency clauses in third-party contracts to protect their interests. Contingency clauses can address unforeseen construction delays, cost overruns, or regulation changes. By incorporating these provisions, investors can minimize risks and safeguard their investments while adhering to the Opportunity Zone program guidelines and relevant Florida Statutes. 

  2. How can investors ensure compliance with environmental regulations during Opportunity Zone construction or redevelopment projects? 

Investors should engage legal counsel and environmental consultants to conduct thorough assessments of the project site, identify potential environmental concerns, and ensure compliance with federal and state regulations, such as the National Environmental Policy Act and Florida’s Environmental Resource Permitting. By doing so, investors can mitigate potential environmental risks and avoid costly fines or penalties. 

  3. What role do third-party contracts play in securing Opportunity Zone tax benefits? 

Third-party contracts are crucial in securing tax benefits under the Opportunity Zone program by outlining each party’s project timelines, milestones, and responsibilities. To qualify for tax benefits, investors must ensure that their projects adhere to  IRS guidelines and meet specific capital deployment and project completion deadlines. Well-structured third-party contracts help investors monitor progress, hold parties accountable, and maximize tax benefits. 

Have more questions about how Opportunity Zone investing could impact you?  

Crucially, this overview of third-party contracts for Opportunity Zone construction or redevelopment does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances. 

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively. 

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain tireless advocates at every step. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant. 

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to schedule a consultation.