New construction: What form of contract?

This article is the sixth in a series on new construction.  The contents of this series of articles apply to commercial as well as residential projects.

We discuss in this series the various difficulties in contracting for new construction of either a commercial building or a house.

Now that these issues have been considered, you are ready to build.  What contact form should you use?

Commercial forms

Most commercial projects involve either (i) a custom contract drafted by an attorney and negotiated between the parties or (ii) the use of standard contract forms from the American Institute of Architects.  In addition, some contractors have their own forms, and major corporate clients may have a standard form they demand to use for their projects.

Residential forms

For smaller builders, some Realtors attempt to use the standard Cincinnati Area Board of Realtors contract for existing housing for new construction projects.  This is almost always a mistake for both parties, as that form does not contemplate the many issues involved in new construction.  (Consideration should be given to a “spec” home, one that is completed or nearly completed at the time of the contract.  The standard CABOR form could suffice as long as construction is sufficiently complete that new construction variables are less important.)

Builders also have their own form of contract.  These may be acceptable, but buyers must read them carefully to understand whether their interests are protected.

Finally, of course, attorneys can draft a customized contract for builders and buyers to protect their interests in the transaction.

Customization

Whether representing the builder or the buyer, I find that almost any form contract (except perhaps the CABOR existing home contract form) can be modified with an addendum to protect my client’s interests on key issues and tightly reflect the terms of that specific transaction.

Conclusion

In any event, the buyer should consider the many variables of new construction in selecting the form of contract to be used and in completing that contract.

This article is one in a series on the Finney Law Firm blog on new construction.  Read more here:

New construction: The problem of “what” is to be built >>

New construction: The “when” >> 

New Construction: Change orders, allowances, and selections can significantly impact price >>

New Construction: On whose land are you building? >>

New construction: Cost-Plus versus Fixed-Price

New construction: Ohio residential buyers absolutely protected from liens in limited circumstances

Attorney | ‭513-943-6655 | chris@finneylawfirm.com | + posts

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