Essentials of a New Home Construction Contract Template

Contract Basics

A construction contract is an agreement between two parties for the construction of a certain property. It may not explicitly say it in your contract, but all construction contracts first require a plan in order to accomplish the construction desired. Once both parties come to an agreement that they will create the property in question the contract becomes enforced. Construction contracts are important because they hold the integrity and guarantees of both parties. Failing to uphold the agreements of a contract can bring out penalties for either side that can not be fulfilled.
The basic components of a construction contract are the following: The parties involved in the contract , start and end dates, price, methods of payment, permits, and the services that will be provided (or excluded). Parties generally involved in a construction contract include the owner or builder, the contractor where work is being performed, the vendor who delivers products or services used for the building, and subcontractors who are hired to take care of a small segment of the construction. Overall, these contracts are created in order to make sure everyone involved in a project is responsible for their actions.

Critical Components of a New Home Building Contract Template

When it comes to newly-built homes, the construction contract template serves as a foundation upon which everything else is built. Essentially, it is the terms and conditions of a legally-binding agreement, a blueprint for negotiation that clearly identifies all parties involved, sets the stage for a working relationship, and establishes the responsibilities and obligations of each individual. The following are considered to be key elements of a new home builder contract template: Scope of Work – This section of the construction contract template should fully explain both what work will and won’t be completed in the proposed price. It should provide a complete description of each element associated with the build, including the specifications of materials, the sequence of construction, and even the responsibilities of the owner and contractor. If the work specified in the scope isn’t understood by a party entering into the contract – or if the scope isn’t clearly defined – a lawsuit could ensue. Timeline – In the construction contract template, be sure to specify all start-dates, deadlines, and acceptable delays of the project. You may also want to include a list of exclusions which may prevent contractors from being penalized for any unanticipated delays to the project. Cost-Estimates – This section should identify the specific costs for the project, including amounts allocated to labor and materials, and it should clearly identify the responsible party for paying those costs, along with the frequency and amounts of each payment. If interest is due for any late payments, this information should be outlined in this section as well. Dispute-Resolution Clause – All construction contract templates for new home builds should require the parties to resolve any disputes through a method that isn’t litigation. The best choice, in most cases, is alternative dispute resolution. The dispute-resolution clause should also require the disclosure of any and all related documents by each party, and that the review of inspections, bills, and estimates will be offered to the other party as a means of dispute prevention.

Tailoring Templates to Your Needs

To meet very specific needs and requirements, a new home construction contract template can be customized. How the contract is drawn up greatly depends on the scale of the project as well as any local regulations and standards. Of course, there are also specific client needs to consider. A reputable builder will review the contract with the client to ensure that for all parties involved, everything is properly covered. Both the client and builder can have peace of mind knowing that the contract is both clear and concise. At the same time, the contractual agreement is detailed enough to cover any concern that the client might have prior to signing. The important thing to remember is that a general new construction contract template will not cover all projects. It needs to be specifically drafted to include everything required in the state or province where the home is being built.

Advantages of a Contract Template

A contract template for new home construction offers plenty of advantages for both builders and clients. By ensuring that all the relevant information is included on the very first draft, time can be saved in the drafting process . Thorough contracts decrease the number of misunderstandings and disputes, protecting all parties and encouraging a more amicable relationship between the designers, builders, and clients. An added bonus? The use of a template serves as a reminder to everyone involved in the process of their responsibilities and obligations, (including payment schedules), throughout the project.

Legal Considerations and Best Practices

The legal implications of these contracts cannot be understated. A poorly written or vague contract can lead to costly disputes between builders and homeowners. It is essential that you make it a priority to use legally binding language that is well-defined. This should be fully understood by both the homeowner and the builder. Be aware that any omissions in contracts can also result in liability. It is not safe to assume that the absence of a clause will benefit a builder or a homeowner during a dispute. Both parties must agree on what is included in the contract so that documentation is as clear as possible.
Contract templates for new home construction should make solutions to common homeowner-builder disputes readily accessible. One such solution is mediation. Mediation gives the ability to save time and money by resolving disputes without taking them to court. During mediation, both parties, along with a neutral third party, will attempt to resolve the issue without escalating to an expensive lawsuit. Without a robust new home construction contract in place, however, the legal system can be far less forgiving.
Reputable builders know that contracts are as important to protecting them as it is to homeowners. This is why a legally solid and tight contract is so critical. While our templates have been thoroughly reviewed by lawyers, it is best practice to have any contract you plan to use attorney reviewed to ensure contracts are airtight and validate the construction project.
When creating your contract, be sure to avoid the marital home as the address for all contracts. Although this may seem like a reasonable thing to do, in the event of a divorce from a common law partner, it is incredibly damaging to the builder. This is why a lot of builders use their contact information instead.

Selecting the Right Template

There are various factors to consider when selecting a new home construction contract template. The first and foremost is where the template has been purchased, obtained, or downloaded from. A contract template that is issued by a credible industry entity, such as a builders’ organization or trade commission, can often be trusted to be fairly comprehensive and reliable. This is particularly true for reputable organizations that issue forms that have either been adapted for use by their target market, or have been developed and fine-tuned by professionals in the field who have an extensive understanding of the various circumstances involved in new home construction, and the potential pitfalls that may occur.
The second thing to pay attention to is whether the template can be tailored to the specific needs of the project. This does not mean that the contract template has to be significantly altered from its basic contents , but rather that the particulars of the project can be easily incorporated into the contract, so that it reflects the scope of work that is being done. The template should also be adaptable to changing circumstances, which means it is important to check if any clauses include stipulations as to the extent of the proper materials and finishes to be used. If the template is not flexible, it may end up with excessive restrictions, or without enough qualifications.
The final factor to consider when choosing a contract template is how clearly it conveys the desired terms of the transaction. A template may use legalese that is difficult to comprehend, and may therefore require the assistance of an experienced lawyer to draft it into a usable format. Even if it is not equipped with complicated terminology, it should still leave little room for doubt as to what the boundaries of the agreement actually are.