An owner ought to contract with a reputable, experienced builder who possesses the appropriate licensing from the State of Florida. There are a variety of construction-related licenses that are issued by the state's Department of Business and Professional Regulation. A contractor's licensing status (and any disciplinary actions against him or her) can be verified by visiting www.myfloridalicense.com. In addition, an owner should not be bashful in requesting the contractor to produce a copy of his or her current lisense as issued by the State of Florida. Moreover, Florida law requires the contractor to recite his or her license number within the contract document.
Confirm the contractor's insurance coverage.
The builder should carry appropriate amounts of insurance coverage for general liability, automobile liability and workers' compensation. The general liability policy should include coverage for completed operations. The construction contract should require the builder to maintain such coverages for the life of the project and for four years thereafter. Any reputable contractor will gladly supply the owner with the well-recognized certificate of insurance evidencing all such coverage and with copies of the actual policies, if requested. In addition to the coverage listed above, a builder's risk policy, covering losses to the improvements themselves during the course of construction, is critical, whether purchased by the owner or the contractor.
Insist on a specific time for completion of the project.
The contract should contain an express completion date, including language requiring the builder to at all times diligently prosecute the work. The easiest method by which to gauge the time of completion is the date of the City's or County's issuance of a certificate of occupancy for the residence. Preferably, the contract should also include a specific statement that "Time is of the essence in this contract."
Insist on specific warranty provisions.
Typically, a builder's workmanship warranty is one year (ten years for structural components) running from the date of obtainment of "substantial completion" (oftentimes, the date of issuance of a certificate of occupancy). Preferably, the warranty provisions should provide a specific mechanism by which the owner notifies the builder of warranty claims.
Insist on delivery of manufacturer's warranties.
The construction of any new residence necessarily includes the incorporation of numerous components that carry their own separate manufacturer's warranties. Examples include appliances, air conditioning equipment, windows, roofing materials and flooring. The contract should contain a specific provision requiring the builder to deliver all such written warranties to the owner at the time of substantial completion and to otherwise perform his or her work in such a manner so as to preserve all manufacturer's warranties.
Insist on a specific draw schedule.
The schedule of payments to be made to the builder should be specifically spelled out. Progress payments are typically made in conjunction with the achievement of particular construction milestones. Ordinarily, these milestones consist of (1) pouring of the concrete slab and installation of rough plumbing, (2) completion of all exterior walls, (3) installation of the sub-roof, rough electrical and windows, (4) completion of interior drywall and exterior carpentry, (5) completion of exterior landscaping, and (6) issuance of a certificate of occupancy.
Insist on a promise of good quality workmanship.
I am amazed at the number of construction contracts that I am called on to review that do not contain this very basic requirement. More often than not, if a dispute arises down the line, it will center around the builder's good workmanship (or lack therof) or the timeliness of completion of construction (see section 3, above). There should thus be a basic provision whereby the builder promises to provide good quality workmanship AND to comply with all applicable building codes.
Insist on all NEW materials.
An owner should not leave open the possibility for the builder to utilize anything other than all NEW materials.
Hire an independent inspector.
Your home is oftentimes your biggest investment. Don't skimp. Hire an independent inspector who answers only to you, the owner. Insist on a contract clause that allows you to hire such an inspector and provides the inspector with unfettered access to the job site at all times. The inspector should likely visit the site at least once weekly.
Insist on monthly progress meetings.
The contract should include a provision that obligates the parties to meet once monthly to discuss progress on the job and any outstanding issues or problems. Communication is critical as between owner and builder.
Include addresses for written notices / communications.
The contract should contain a provision setting forth the street addreses (not p.o. boxes) to which either party may deliver written notices/communications, whether by hand delivery, U.S. Mail or courier. To repeat, communication is critical as between owner and builder.
Include an express termination clause.
I am again constantly amazed at the number of construction contracts that I am called upon to review that do not contain termination provisions. If the relationship between owner and contractor turns south, it is critically important that the aggrieved party be able to terminate the contractual relationship. The termination provision should be specific as to those situations where the right to terminate can be exercised and as to the final payment to which the builder is entitled in the event of such termination.
Include a provision allowing changes, BUT...
avoid them if at all possible. Both owner and builder should place a premium on finalizing the plans and specifications for the home and finalizing all product choices BEFORE construction commences. Changes incorporated during the construction process (the document itself is referred to as a Change Order) can range from a simple change in color schemes to a complex relocation of one or more load-bearing walls. This can be fertile ground for disagreement, including disputes over payment and timely completion of the work. In a nutshell, have the plans and specifications in final form before the first shovel hits the dirt.
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