Choosing a builder and building contract

Whilst  taking a schedule of condition, I was asked “How do I choose a contractor?” We also ended up discussing best practice for minimising risk and helping to get a project finished on time and on budget. It made me think others would probably need to know the answers to this, so, here are our top tips for choosing a building contractor, using a building contract and setting up a small residential building project.

Building work to a house - project management

Finding a building contractor

Finding a builder is best done by recommendation – ask around and see who else has had work done locally. Make sure that the work you are comparing is similar to yours.

Take references, most reasonable contractors will be happy to provide them. Ask the people they have worked with before about costs and variations, quality of work and whether they kept to their programme.  Ask if they kept a tidy site – its a great indicator of an organised builder.   Importantly, go and have a look at their previous work.

Ask the builders if they are busy – good contractors are always busy (even in a recession). If the contractor can start on Monday or has “a cancellation” then be alert.  you should expect to wait several weeks or months for them to start.

Ask how many direct employees they have and what elements of work they will subcontract. It’s quite usual to subcontract electrics, plumbing, plastering etc. but unusual for most basic building trades to be subcontracted.

Once you a have a short list of 3 or 4 builders, ask them to price your project. They will need to be provided with a reasonable set of drawings and a schedule of work. This is important because you are clear what you want built and the contractor is clear what he has to build and how he has to build it.

Compare the quotes you receive and don’t be afraid to ask for more information. It’s likely that you will get quotes pretty close together. If one is much cheaper be alert – anything more than 15% under is cause for questioning. You may get a quote much higher than the others. Don’t worry – sometimes a contractor prices high if they don’t want the work.

Set up your building contract

One of our biggest sources of expert witness work is for residential building projects hat have gone wrong.  In almost every case there is no adequate contract in place.

There are proper building contracts that you can use, we recommend  either the JCT Homeowner Contract or the RIBA Domestic Building Contract

If you don’t use these then you can still agree a formal written building contract signed by both parties. In the contract set out exactly what the work is, how much you will pay the builder and how long the builder has to complete the work.

At its simplest it will say

Mr A Smith employs ABC Building Contractors to build an extension, as shown on drawings 1, 2 and 3 appended.  Mr Smith will pay ABC £27, 300.00 plus VAT for the work as detailed in the quotation dated 01.04.14 appended.  The work will start on 15.05.14 and take 12 weeks.  A payment will be made every four weeks and a final payment on completion of the works.

Don’t ever be tempted not to formalise the contract, a formal contract will protect both you and the builder. If the builder doesn’t want to sign one, then we recommend avoiding them.

Agree payments for your building work

You should agree when any stage payments will be made. There is no hard and fast rule, but every two or four weeks may be OK. You might wish to agree a retention against any defective work 2.5% is typical for six or 12 months.

Never, and we mean never, pay any money up front. If a contractor has cash flow problems then be alert. Always pay for completed works. If you agree to purchase components or material, such as bathrooms, make sure you buy them and take delivery and the receipt and delivery note is in your name so you can show you own them if there’s a mistake.

If the builder insists on money up front and you are agreeable offer to put it in an escrow account and properly document it in the building contract.

Extra costs on a building project

Allow yourself a contingency (10 or 15% is probably OK) for unforeseen items. Make sure you do not over pay the contractor at the beginning of the project. If the builder doesn’t have enough money to finish a job then he probably won’t.

Remember every time you ask the builder to do something that isn’t on the drawing or in the schedule of works you are likely to be charged for it as an ‘extra’. Try and agree any additional charges before they do the work. If you ask the contractor to do a lot of extra work then the programme will be affected and you will have to agree extra time for the builder to finish.

Planning consent, Building Regulations and Party Wall Agreements

It is usually your responsibility to get planning consent, agree party wall awards, get necessary licences to build over drains etc.  If you do not have these and there is a delay your builder might be able to charge you extra for the delay.  The builder will probably deal with the building inspector. Check this to be sure though.  He may use an “approved inspector”.  You might want to hold some money back at the end until a building regulation completion certificate is issued.

We know all this sounds a faff and hassle, but trust us, it’s nowhere near as much hassle as you could have – a half-finished building, a builder who has been paid too much, a final bill that is spiralling, surveyors racking up fees valuing work and assessing quality and lawyers threatening to sue everybody, not to mention a builder dumping a skip on your drive and leaving! If you are in this position and need a surveyor to help then give us a call and we’ll see if we can assist.

If you are going to do your own project management, do not underestimate the amount of time and stress that it involves, document everything!

You could of course ask a surveyor or architect to act as a contract/project manager and administrator, they will probably be able to prepare the drawings and schedules of works as well as deal with statutory consents. They will take responsibility for managing variations, extras and costs, check on quality and programme and agree what should be paid for what and when.  But that service costs – probably 8 to 10% of the construction cost.

Get in touch if you need project management for your work.

(Originally published by Steve Way, 21 January 2013)