Construction Contracts

Things to Know About Construction Contracts

New construction and many renovation/remodeling projects require written contracts with a licensed residential or commercial contractor.  Depending on the cost of the construction/renovation/remodeling, the contractor will be required to hold an A, B or C Contractor’s License issued by the Virginia Department of Professional and Occupation Regulation (“DPOR”) as follows:

 

Class C – $10,000 max per job.

Class B – $120,000 max per job.

Class A – Over $120,000.

 

Each written construction contract between the contractor and the building owner should contain the following:

  1. Contractor’s name, address, DPOR license number, class of license, and classifications or specialty services,
  2. Start date,
  3. Estimated completion date,
  4. Provision for written change orders to be signed by the contractor and building owner,
  5. Itemization of cost and how arrived at (i.e. fixed fee? time and materials?),
  6. Statement of total cost of the contract and the amounts and schedule for progress payments including a specific statement on the amount of the down payment,
  7.  A “plain language” clause concerning events beyond the control of the contractor and a statement explaining that delays caused by such events do not constitute abandonment and are not included in calculating timeframes for payment or performance,
  8. Statement of assurance that the contractor will comply with all local requirements for building permits, inspections and zoning,
  9. Disclosure of the cancellation rights of the parties,
  10. Statement notifying consumers of the existence of the Virginia Contractor Transaction Recovery Fund that includes information on how to contact the Board for claim information, and
  11. For contracts resulting from a door-to-door solicitation, a signed acknowledgment by the consumer that he or she has been provided with and read the Department of Professional and Occupational Regulation statement of protection available to him through the Board for Contractors.

 

 I recommend having the construction contract reviewed by an attorney before you sign it. An attorney can flag specific provisions like putting the burden on the homeowner to take out builder’s risk insurance or analyzing the schedule of progress payments which may “front load” the payments.

 

 

Contractors

If you are a contractor about to start a project, be sure your contract provides for written Change Orders, signed by the parties and enforce that provision! When you are about to start a project, be sure you have the appropriate license(s) for the work you are doing. Lenders are starting to ask for proof of contractor’s licenses and areas in which contractors are licensed, especially as that relates to mold remediation, electrical, HVAC and plumbing. Should you be a subcontractor on a project, a thorough review of the prime contractor’s contract should be performed prior to you signing it.

 

One pitfall I have seen repeatedly is owner (or owner’s agent) hires their own subcontractor (not under contract with contractor) to perform certain work. Contractor must state in writing that contractor will not warrant this work.

 

To prepare for your meeting with an attorney, be prepared to bring a copy of your license(s), a list of sample clients, which should include size of the job and special areas of expertise.

 

 

 

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