If you are going to use a building contractor to construct your new small home, it is absolutely essential to have a legal contract in place before any work begins. Both parties must agree on the terms of the contract which will then be legally binding.
Unfortunately things can and do go wrong during construction projects, both big and small, and for this reason, all possible eventualities need to be taken into account.
Building Contract Options
Like any contract, a builder’s contract sets out clearly all the requirements and conditions of the job. It states what the builder is responsible for and gives timelines in terms of what will be done when. It also states what price the builder will charge for his work, and how and when he will get paid.
Many companies offer so-called “standard” building contracts that you and your builder can use. These are drawn up according to accepted industry standards, but may not incorporate all the specific issues you need to cover. This is not necessarily a problem, as additional clauses may be added to any contract.
Many builders have their own standard contracts. Alternatively you can have a lawyer draw up a contract that meets your needs. Whichever route you take, you must both read the contract carefully and make certain you both understand and agree to the terms and conditions stated.
What a Building Contract Should Cover
Any building contract will, at the very least:
- Briefly describe the project, stating for instance, that it involves the construction of a 1,200 square foot timber-frame house with two bedrooms and a bathroom, an open-plan living room and galley kitchen.
- Include a price estimate or quotation, as well as quantified terms of payment.
- State who is responsible for complying with all the legal requirements; these would include everything from obtaining permission to build and having plans passed, to organizing services including power and water supply.
- List exclusions that the builder is NOT responsible for (these will usually relate to interior design and landscaping rather than construction, although owner-builders might opt to do some of the building work themselves).
- State the acceptable variables in terms of the specifications (for example if you decide you want wooden floors rather than tiles, or you decide that you want to add a deck on one side of the house, or even what is allowable if the builder cannot access specified materials).
- State who is responsible in the case of unforeseen problems (for example, rain might delay the build, or you might hit rock during excavations).
- State what insurance is required and who will organize and pay for it.
- Specify how and where (in terms of jurisdiction and location) any disputes will be resolved.
Once you have read your builder’s contract carefully, and are certain that all possible elements are covered, you can sign it. If you have any apprehensions, consult a lawyer. Paying for legal advice in the early stages is preferable to paying legal costs in the event of a dispute, particularly if it gets ugly and ends up in court.
It is essential to have at least two copies of the contract for both parties to sign. Two witnesses should also sign the contract.
Then, hopefully, having your contract in place you can avoid misunderstandings, cost and time over runs, and legal disputes. And if you’re really adamant about getting it right you can always hire a real estate attorney to look over your contract before signing.