I own a small construction company. We have built several spec homes, we owned the lot and got the loan, then sold the house when it was complete. The situation now is that a customer wants us to build a house for him on one of our lots. I am looking for help finding some examples of a construction contract for new constuction. Any help would be appreciated.
Steve
Replies
Are you allergic to lawyers?
Not trying to be sarcastic, but this is the best advice you will find in responce to this. Find a leagle beagle that is familiar with conmstruction and real estate law in your state.
Every state has different proscriptions and restrictions. For what you consider doing, his help is as neesarry an investment expense as a hammer or a truck.
Welcome to the
Taunton University of Knowledge FHB Campus at Breaktime.
where ...
Excellence is its own reward!
No, but I do have a sensitve prostate. . . so limited lawyer contact is medically advised.
(sorry, couldn't resist)
I'm afraid I'd be banned for the rejoinder to that one.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Maybe I can go you one better: if he joins the HBA in his region or state he can probably get contracts from them, along with the various attachments like payment schedules, etc. Buying the JLC Legal Guide is a good start, but don't write your own.
Steve:
Essentially the contract includes the following elements:
Scope of work: This is defined by the "contract documents," which consist of the drawings and specifications (material and workmanship standards).
This is not much different than on you spec homes. You have drawings, select your subs based on workmanship expectations, and use materials based on prospective buyer preferences and cost.
The real difference is that you MUST define all this upfront in a custom job and, once defined, have little flexibility in making changes along the way. The bottom line (cost) in a spec. has more leeway because if you have some cost overruns they can usually be passed along to the buyer. Custom jobs are done either fixed cost or time+material+margin. The first option is usually most acceptable to the client, but be sure to include a 5-10% contingency factor in the pricing. Recent material cost increases are a prime example of how to get burned.
Some differences:
Cost: Fixed or cost + margin.
Payment Schedule: In spec. you upfront the costs (depending on sub/supplier policies). In custom, payment is based on "phases" or stages of completion, such as completion of excavations and foundations. Likewise, any material on site (no yet installed)is paid for. These payments are typically monthly.
The purpose of any contract is to clearly identify to each party their repective reponsibilities and mitigate any future conflict. You will in a custome need to deal with "changes orders" that can only be done on a cost + margin basis. The source of the contract documents is also an issue. If from a local architect, the architect adminisiters the contract and authorizes payment. If from a "plan book" watch out! There are often errors, conflicts or worse, things that can be drwan but not resonably constructed.
My solution (you may hate it), especially for a first go around, is to hire an architect to review the drawings (not seal them) and administer the contract. The fees are the client reponsibility, but as you can explain, in their best interest.