3. Termination This section discusses the circumstances under which either party can terminate the contract. It addresses the consequences of terminating the contract and outlines the obligations each party would have to each other if the contract were terminated. 4. Timing This section provides an anticipated timeframe for project completion and outlines anticipated timelines for key project milestones. It also addresses delays due to factors like permitting issues, weather and delays due to potential changes in project scope. This section provides a mechanism for notifying parties about delays and navigating those delays. 5. Payment Construction contracts typically include payment terms, including the total cost, payment schedule, and any holdbacks. This financial framework helps homeowners manage their budgets effectively and ensures that funds are released at appropriate stages of the project. Holdbacks, in particular, can protect homeowners by withholding a portion of the payment until the work is completed satisfactorily. Typically, homebuilding contracts are fixed- price contracts, cost-plus contracts or a construction manager-type contract. Your contract should clearly outline what type of contract it is. Fixed-price contracts set out the price for everything all at once, and are usually only used for very small, simple projects. In this case, the quality standards should be very well defined so that the pricing can be adequately predicted.
Cost-plus contracts are typically used for more complex projects. In a cost-plus contract, the builder will charge for materials, labour and other expenses plus an additional fee for managing the project. That fee is often calculated as a percentage of the total cost. In this case, the contract should very clearly outline what constitutes a “cost.” For example, an owner might originally agree that the builder will purchase the light fixtures, but the owner might later decide to purchase their own light fixtures directly to reduce the total cost of materials that the management fees are based on. However, the management fee may still be charged as if the builder had purchased the light fixtures because the builder will likely continue to be involved in construction management related to the light fixtures. Sometimes an owner hires a builder as a construction manager on an hourly or other basis to oversee all the trades directly. Owners should make sure they understand the responsibilities and risks of this type of contract. Owners using a construction mortgage should familiarize themselves with the schedule of the construction draws and make sure they have enough funds available to make any payments owed. For more information about construction mortgages, see Budgets, Financing and Estimates .
Hiring a Builder in BC: A Consumer Protection Guide
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