When you begin the process of constructing a new commercial building or remodeling project, you might be wearing a pair of rose colored glasses. You view the people that you are hiring and working with as honest, dependable, and experienced. And they probably are! But sometimes...they aren’t. Months into the project you might find yourself abandoned by the general contractor, left with poor craftsmanship, required to pay more money that you originally thought, and a whole host of other problems.
The one thing that will protect you, allow you to move on with your project, and possibly get your money back is a well-written contract. Having a contract is non-negotiable. If the general contractor that you hire doesn’t work with a contract, run the other way and find someone else. It is in the best interest of all parties to have a contract that works for everyone. Here’s why:
You will know what the final price will (probably) be. A thorough contract will contain either a fixed price or an estimated price. Either way, you will know roughly what you are going to end up paying. A fixed price is one that does not change if the project takes shorter or longer than expected while an estimated price could change based on the cost of materials and how long the project takes to complete. If the contractor did his job right and created a thorough breakdown of costs, you will know what to expect and you will know how much money to borrow, if necessary.
A contract allows every party to be on the same page regarding the timeline. A contract will have a rough timeline that sets project milestones according to specific dates. Because of this, you will be able to monitor the construction process and easily make sure that it is running according to the timeline. Your general contractor will be contractually obligated to stick to the timeline, however, it’s important to remember that setbacks do occur at the fault of no one in particular.
You will have a procedure for change orders. Change orders almost always happen during a construction job because of the owner’s preferences, mistakes in the original design, problems that arise, etc. The well-written contract will outline the procedure for change orders. A proper change order procedure should require another written document that is signed by all parties. It’s important that you know what it takes to change your project’s plans because in all likelihood, the issue will arise.
Your payments can be tied to project milestones. This will protect your interests as the one paying for the building. Since your contract has a timeline, you can make it so that you only make payments once work is actually completed. You will not be required to simply make a payment on a certain date. If the contractor decides to abandon the project altogether, you will still have your money.
You will have proof of the contractor’s license and insurance. A good contract will require that the contractor provides the client with proof of license and insurance. A license indicates that the contractor is experienced, knowledgeable, and is playing by the rules. Worker’s compensation and general liability insurance protects you, the client, should anything go wrong on site. You will want to see these documents before signing anything.
The general contractor will give you a warranty on his work. If 6 months down the road you start to realize that the work was less than satisfactory, a warranty included in the contract will protect you.
You are protected in case things go wrong. If you need to go to court with the general contractor, this is one of the only documents that your lawyer will have to prove your case. It needs to be well-written and carefully read. You should also have a lawyer look over the contract before you sign it.
There are too many risks involved when constructing a commercial building. It’s a huge investment that you don’t want to gamble with. A well-written construction contract will protect your money, your livelihood, and your investment.