Why Do I Need a Building Contract?

Not sure a written agreement is really necessary for your project? Giles Dixon reveals why you need to think again
by Self-Build Zone
29th October 2020

It’s always a good idea to have a proper contract with your builder. 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 any disputes arise, and it’s difficult to prove your case if you don’t have any evidence in writing.

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A fair contract fosters 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. These are 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:

  • 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.
  • Price & payment Obtaining a fixed price gives you reasonable assurance on project costs. The contract will also specify how payments will be made – eg monthly, for example. Try to ensure they’re made in parallel with the value of the work (not ahead of it).
  • Timing Agree a start and completion date, ideally backed up with a project schedule. You’ll also need a mechanism to deal with delays outside the builder’s control, so you can set a new agreed completion date in that situation.
  • Work on site Set out basic rules for safety, regular working hours, cooperation with others etc.
  • Defects The builder has a legal responsibility for defects, normally for six years post-completion. The contract will often specify a six or 12 month period after completion when the builder must fix any problems in their work. If you’re creating a new home, taking out a 10-year structural warranty from the likes of Self-Build Zone covers this from day one, which is safer than relying on your legal rights and protects you should the building firm go out of business in the future.
  • Termination This clause allows the client or builder to cancel the contract if the other seriously fails to meet their obligations; although hopefully you will never need to resort to it.
  • Changes & problems You need a procedure to deal with unforeseen issues and changes. Any divergence should also be agreed on a change confirmation form, so both you and the builder have a written record.
  • Changes to scope A good contract provides for the builder to estimate the time and cost implications if the client wants an alteration to the work, and for these plus the scope to be agreed in writing before it’s implemented. You can, of course, decide not go ahead or to negotiate on the finer details if the estimate is higher than you’d hoped.
  • Delay & unforeseen risks Sometimes the builder encounters an unexpected problem, such as very bad weather or unforeseeable ground conditions (eg finding archaeological remains). The contract should outline a similar procedure to the above: the builder notifies the client of the issue and the two parties meet to decide how best to deal with it, including whether the problem justifies an extension of time for the work and/or extra cost.
  • Covid-19 risk You could benefit from a coronavirus clause. There are two principal risks with a pandemic – either the build team is infected or, due to government regulations, they have to self-isolate or stop work altogether. So it’s useful for the contract to have a Covid clause similar to that for delays.

Where can I get good contracts?

Contrary to what some in the legal profession might suggest, a contract doesn’t have to be complicated.

In conjunction with insurance and warranty specialist Self-Build Zone, ContractStore.com has developed a range of plain English contracts for self builders and renovators.

The value-for-money suite includes a standard form for building a new house (contract B152, priced at £22.50) and a shorter version for appointing individual trades (£21). They are easy to read and complete, and come with explanatory notes you can access online before you buy.

Having a simple agreement in place, alongside a straightforward claims form, can also put you in good stead with your insurer. For instance, Self-Build Zone offers reduced premiums for self builders and renovators buying into these contracts; along with three-year legal expenses insurance cover for its structural warranty clients. That’s because an effective contract allows the claims team to move quickly on your behalf when issues arise.

Bear in mind that no contract can guarantee the quality of the builder; so always make sure you seek several quotes and take up references. They also can’t stop things going wrong.

But they do give you and your builder the legal framework needed for your project and a method of sorting out any problems that do occur.

Giles Dixon is a specialist construction solicitor and a founder-director of ContractStore. He wrote the plain English contracts mentioned in this article in conjunction with Self-Build Zone.

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