Five Important Things a Building Contract Must Contain
May 4, 2011
If you are planning on building a house you must have a building contract. A building contract will outline your general rights and responsibilities. A legal building contract will protect both you and the builder and lay out clearly the terms of the project. It is important to read the contract careful and even have a solicitor check it for you before you sign it. Conveyancing fees will apply as the legal title of the property is passed over to you.
Costs and location
The contract should include the entire costs of the project. Be wary if entering into a ‘costs-plus’ contract as this does not give you the finished costs of the project but rather costs are calculated as the building happens, like a running tab. Make sure you get good advice regarding this as you may find that building costs exceed your budget. The contract needs to include a time frame and an expected completion date. You also need to be aware of what the payment terms are. The contract needs to include details of the location, such as the address and also a description of the job site. There should also be information about the residential area that you are building in.
Rights and insurance
The rights of all parties need to be clearly stated within the contract. You should know what access you have to the building site and what the inspection procedures are. Insurance must be taken out during the building process to protect both your property, the building materials from any possible theft and the builders themselves from any injury. You need to be covered for any accidents or problems that may occur during or after the building of your home. It is also important to include a section in the contract regarding conflict resolution, what the procedures are and how to handle any disputes.
Dates
The start and finish dates of the project need to be included, as well as estimates of when different parts of the building process will occur. It should state what is an excusable delay and the builder should inform the buyer of how many days of work were interrupted and for what reason, for example, poor weather. The contract should include any penalties, if any, for failure to complete the project within the stated time frame.
Plans
Any drawings, plans or sketches should be included in the contract. These should be clearly marked as to what is included and what the procedure is if the buyer wishes to make any changes. It should be made clear to the buyer before building commences if they will incur any extra cost if the plans need to be changed in any way.
Documents
Any documents from either the state or local governments regarding the building should be attached to the building contract, which will include the building permits. The building contract needs to be signed by all parties, and each page initialed. It will then become a legally binding document.
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