Building Contracts - boring but important

Three documents are important when you are renovating – your plans, your specifications and your building contract.

The plans are the drawings on which your builder will base the build. It is important to get these accurate before getting the builder to start work, as costs can spiral if things change once the build has started.

The specifications list is the list of all the sizes and types of doors and windows you want, the flooring , the fixtures and fittings you want. Again, if these change once the job has started, you will incur extra costs. If you can, get your chosen builder to give you the names of his suppliers in advance of signing the contract. Go to see them and work out what you are likely to need for the job, then base the contract on this.

The contract lays out what is agreed in terms of the work to be done, the timescale and schedules for payment between you and your builder. It is a very important document and you should go through it carefully, preferably with the help of a lawyer. It’s worth remembering that contracts are not really there for when things go right, but for when they go wrong. If your builder goes bust, doesn’t do the job properly or costs spiral, all you will have to rely on is your contract.

You should get two copies of the contract and each should be signed on each page by both you and the builder.

It worth reading up on building law. This is my summary of the key areas to look out for:

1. Provisional and Prime costs

I have mentioned this in some of my other posts. These are costs for which the builder is not aware of the total at the time of the quote. By the time you sign a contract there should be very few of these. I would suggest that you try to iron out as many as possible before signing the contract. There may be some that are impossible to guage in advance – in our case, taking out the slab as no one could quite know how thick it was or what was underneath. In this scenario be sure you have guidance (or independent advice) on what the costs could be.

2. Variations.

This is when something has to be changed either because you change your mind or because the builder uncovers something during the build that wasn’t foreseen and which will involve extra cost. Variations are very often what blows out the cost of a build. Usually it is because the client changes their mind. Of course, sometimes this is just what happens - you can't get everything right at the planning stage, especially if it is your first project. But the more times you change your mind, the more it is going to cost you.

3. Payment schedule

This is how much you pay and when as the job progresses. Roughly it could be 5% deposit, 10% on base being laid, 15% on the frame being errected, 35% when the house is able to be “locked up” securely and 25% at the fixing stage. This leaves 10% for contingency at the end in case anything is found to have not been done properly, or needs fixing.

4. Warrenties and guarantees.

Warrenties are supposed to insure you against any defective work or against the job not being completed. In my experience you should never rely on warranties. Make sure you check your builder is solvent before you give him any money, that there are no court cases pending against him, and don’t hand over any money until you are satisfied that the job has been done well.

5. Other Insurance

Your builder will need to have contract works insurance and public liability insurance. This will cover any accident that happens on site to either the builder’s contractors or members of the public. Your house becomes the “property” of your builder while the work is taking place – this is so that you are not held liable for any accidents during the job – so he will also need to insure your property against damage while the building work is going ahead. Be careful to check what insurance is put in place. Has the total cost of rebuild been reflected in the policy?

6. Timescale

The contract should state a start and completion date. The contract should specify what are considered acceptable delays – ie for bad weather. The contract should also specify what compensation you are entitled to if the build goes over time – for example, that your rental costs for moving out will be covered. “Practical completion” is when all but minor works have been done. At this point you should be issued a “certificate of final inspection” and can move back in to your house. Be aware that many contracts specify that when an owner moves back in to a house this constitutes acceptance of completion – so don’t move in before you are sure the job is done, no matter how tempting it is to do so! If the project is not completed on time you should be entitled to “liquidated damages”.

As a final tip, I would suggest making a diary of the build, writing down and logging everything that happens, including conversations that have taken place and the work that has gone on each day. Take photos and have witnesses. Confirm things in writing to your builder wherever you can. Hopefully these will all end up in a photo album of memories and nothing more, but if anything goes wrong with your job, you may need to rely on this evidence in court.