The contract may seem to be just a formality, just another ‘bit of paper’…but it is in fact a most important document.
In it, you lay out how you want the build project to progress. It contains key elements, to clarify what you expect from your builder and in turn the builder has a recognition of progress, and of course… a reference for payment.
The contract should not be rushed. It should be considered. Call upon personal knowledge, previous documents (if you have been involved in the building of a house before), external references such as the internet, contract books, etc. when drawing up the contract to make sure you include everything.
Firstly…here is what NOT to do. Do not let the builder ‘help you’ by drafting or producing the contract. This will be the most one-sided document in history! Something like ‘pay me at the start of the stage’ or ‘split the cost into 3 or 4 and pay in advance’, or ‘pay me the contract value up front and in return I will deliver the house build at some point (undefined)’!
Obviously, that is not good
Before you start
You need to decide a few things before even drafting a contract. Is it a full contract? Or build only – will you purchase materials and the builder supply labour and expertise only? Will you organise specialist trades, such as plumbers or AC engineers, at set points?
The structure of the contract should include some basic elements
Include both stages and overall timescale. There needs to be a check at each stage of the build to make sure work is completed before moving on. This is a key element of the contract – it prevents the builder fulfilling parts of different works and then justifying a payment even though no stage has been completed. Complete each stage to get paid.
Linked to those timescale stage are the associated payments. Payments should NEVER be in advance. If the builder says he can only do the job if he has large amounts of cash up front you have to question the builder’s ability to deliver the project at all. Is he really that hand-to-mouth? What happens to your cash if he has a crisis at home? Of course, your cash will sort out his problem…but then he is again short for your project.
Also, beware of potential builders wanting huge up-front payments – some up-front costs can maybe be justified, but some builders may just build nothing and do a runner with your money.
Inclusions in the contract other than the build
What about the conduct of your builder and his crew? If a situation develops, say with a neighbour – who is responsible if a cost is incurred? This is important – this must be the builder’s responsibility – he is responsible for how his building team behave. That needs to be in the contract.
What about accidents? Can your builder come to you with a massive claim if his roofer falls and breaks his back on your property? Again – needs to be clarified.
Here is where your careful research into the finishes you want in the build are detailed. Yes, really. If you want an XYZ tile in bathroom 1 and an ABC tile in the kitchen – specify it. Tile. Reference number. Colour if relevant. Supplier. This again avoids the builder just sticking plain white budget tiles everywhere. He is building it but you will live in it. You need to be happy with the finishes and he needs to provide them. Be clear and specify everything to avoid doubt.
Changes to the contract
After thinking the contract through, agreeing it and signing it, that’s it right? It could be, but we all know that in the real world, things can ‘come up’ along the way – a change of specification, a solution to an unforeseen problem, a different way of doing something and there needs to be a mechanism in the contract to consider this.
As a start, it should be specified that notice and agreement must be in place before any contract variation takes place. This stops the builder agreeing everything and then cutting corners with materials of labour quality to save money. Notice of change must be given and agreed, not just given. This obviously favours the owner as his change is likely to be adopted as long as any additional cost is paid.
And, changes to contract that make savings should also be detailed. What happens to those savings? Who gets the benefit? It is important to write this into the contract.