Building Contracts: Do You Really Need One?

If you pay a contractor to do some work on your property, you have a building contract with him. It doesn’t have to be in writing – but even for a fairly small job, it’s sensible (I’d argue essential) to at least set out the main terms on paper.

Without this, it’s your word against the builder’s if disputes arise, and it can be difficult to prove your case based on verbal agreement.

A fair contract will foster a good rapport, so a decent builder will want one as much as you do. Plus, having an agreed price and payment terms works in their favour as much as it does yours.

What should a contract cover?

Building a new home or tackling a renovation is a complicated process. A written contract has two main goals: to record the agreed terms; and to provide a mechanism for dealing with problems or changes should any arise.

With that in mind, the key areas a good contract will cover are as follows (we’ll pull out a couple of these in more detail later):

• Scope of the work: It’s important to set out what the project entails. The more detailed the specification, the less risk there is of uncertainty, extra cost or delays being added later.
• Payment terms: Securing a fixed-price agreement is often a good route, as it gives you reasonable assurance on your project costs. The contract will also specify how payments will be made – monthly, for example. Try to ensure they’re made in parallel with the value of the work (and not ahead of it).
• Timing: You need to at least agree a start and completion date – ideally backed up with a project schedule.
• Problems & changes: The contract should put a procedure in place for dealing with issues and changes.
• Work on site: Setting out basic rules for safety, regular working
  hours, cooperation with others etc.
• Defects: Post-completion, your builder may have a responsibility to make good any defects that arise in their work (usually within a six or 12 month period of completion). If you’re creating a new home from scratch, then taking out a 10-year structural warranty from the likes of Self-Build Zone covers this from day one.
• Termination: There should always be a clause allowing the client or builder to cancel the contract if the other seriously fails to meet their obligations; although hopefully
  you’ll never need to resort to it.

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