Why have a contract with your builder?
All too often there are stories in the media about cowboy builders who have left their clients in the lurch with unfinished, dangerous buildings. What are less seen in the headlines are tales of cowboy clients who demand extra work at no cost and then haggle over a final account with no intention of paying.
So, if you are building at home or planning a commercial development, or you are a builder, then this article is for you: because putting a contract in place protects both builder and client – commercial or residential – and gives clarity about what one might reasonably expect from the other.
Here are some key pointers:
- Contract sum and what it covers – there are many arguments about what constitutes a variation (or ‘extra’) to the agreed works and what does not. The more comprehensive the schedule of works and the clearer the price for each section of works, the better. It is a good idea to obtain advice from a building surveyor on drawing up a specification before you ask a builder to provide a cost.
- Extras – agree the basis upon which extras will be approved and priced. Do not go ahead without agreeing in writing (email is fine) what is to be done and ideally agreeing a price.
- Estimate/Quotation – an ‘estimate’ is not a guaranteed sum for the works and can be reviewed by the builder after the works have started (usually upwards!). A ‘quotation’ is a fixed price for the works unless the builder has made reservations in his quote, for example, for work on a roof structure the quotation assumes the joists are sound but on opening up they are rotten and require replacement. Estimates and quotations can contain some nasty terms in the small print: it is generally better to use an industry-recognised form such as one from the JCT building contract suite or, for Federation of Master Builders members, one of their standard forms.
- Standard form building contract – standard form contracts contain blanks which require completion. This should then prompt a discussion between client and builder and hopefully lead to agreement on such matters as: start and finish dates, use of electricity, water and toilets, the personnel attending site (subcontractors, suppliers), fixed damages for delayed completion and responsibility for health and safety including the CDM Regulations (2015).
- Payment – be clear on payment terms, whether any retention is to be held and if so in what sum. Usually smaller projects do not attract a retention but for new builds and larger extensions and commercial works usually 5% is held until completion of the works. Payment instalments vary and so be clear about what the instalments are (monthly/fortnightly?) and the period within which payment will be made (14/28 days?), and whether interest will be payable if payment is late.
- Defects – agree the time-frame for rectifying defects when the builder has the right to return to carry out remedial works free of charge – usually 6 months for residential and 12 months for larger or commercial developments. Some works will require urgent rectification and it is prudent to agree how this will be dealt with in practice.
- Insurance – check that your builder has the right insurance, for example, professional indemnity insurance (if designing) as well as Employer’s Liability, Contractors’ All Risks and Public Liability insurance.
- Dispute Resolution – agree how disputes will be resolved. Even in a residential contract consider whether rough-but-ready dispute resolution procedures such as adjudication (a binding decision in 28 days) should be included.
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