Many people dream of building a new home for themselves. If you are fortunate enough to live that dream, and you have saved to hire a talented architect, then the most important step comes next: finding a reputable builder whose commitment to quality, cost, and schedule is proven. When the builder presents their standard construction contract, do not hesitate to reach out to our team of attorneys at Levy | von Beck | Comstock | P.S. to review the contract before you sign it. Failing to do so could cost you greatly – maybe even hundreds of thousands of dollars down the road.
Here are just a few things that can go wrong when you sign a builder’s contract:
- Many contracts waive your right to go to court, or to have a jury decide your case. Instead, they require you to arbitrate disputes, often by a group that works only for builders. This is similar to the financial industry, which requires you to agree that you will resolve any disputes with your broker by submitting your complaint to an arbitrator chosen by the broker.
- Some builder contracts require you to agree to a third party’s warranty while also asking you to waive any rights you may have under state law. A third-party warranty typically requires you to pay an administrative fee of hundreds of dollars, then also requires you to pay for the arbitrator upfront before the arbitrator will begin reviewing the case. Moreover, the actual warranty provided may be all but worthless.
- Some unscrupulous builders will put in a provision that says the builder has the right to determine whether the quality of work is satisfactory and that you have no right to challenge the builder’s decisions. Imagine you being the victim in the true-life story of a builder who forgot which edge a homeowner wanted on her kitchen counter, so instead of installing one continuous edge, the builder put round edges on one side and square edges on the other. When challenged, the builder pointed to the contract and said the homeowner had no right to complain.
- Another typical provision requires homeowners to pay the costs of any changes before the builder proceeds with the work. While that may sound fair, frequently, it is the builder that causes the change by making a mistake, and so this unfair contract language essentially requires the owners to pay for that mistake.
- Finally, imagine a contract in which the customer pays $100,000 down at the beginning of the contract and then pays for any and all upgrades and changes. Just before closing, when the homeowner inspects the work and finds missing toilets, missing faucets, and missing doors, the contractor says, “Take it or leave it.”
These are all real examples of builder contracts and conduct we have seen over the past several years. Fortunately, there are several provisions that can be included in your contract to better protect you, the owner. These can range from something as simple (but as crucial) as requiring that the builder comply with the building code to a section on dispute resolution.
Don’t take on unnecessary risk that can be avoided, whether you are building a custom home or remodeling your kitchen. Our experienced team of construction law attorneys can assist you in both the drafting or review of contracts, and negotiating the terms with your builders. Feel free to contact us today.