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Building or Adding Contract Pitfalls and Cautious
By arlene | November 19, 2008
Few satisfactions can come close to matching the sense of pride and achievement that goes with being able to have your own home, or additions to your existing home, built to your own specifications. Taking this reasoning to the ultimate requires going as far as actually building the house yourself. In an age of specialization, this has become increasingly impractical — although it can be done, and profitably too.
Plot and plan
Plot and plan building schemes are the most common method of acquiring a newly-built home, if only because the developers look after the paper work and other details, and costs are generally lower, thanks to the element of mass production.
Unfortunately, total originality in design and choice of location is restricted by these schemes which by their very nature are limited to plots and plans offered by the developer or builder. Certain alterations in design are quite possible, but it still comes down to the owner largely adapting to what is on offer rather than helping in the creation of something more individualistic. On the other hand, savings on price, frustration and time are certain to be very considerable and choice of design should be from a relatively large catalogue. Bond finance is likely to be arranged by an estate agent or the developer of a plot and plan unit.
Of cardinal importance on entering into a contract for the purchase of a plot and plan house, is agreement on the detail, standard and type of finish. This must be clearly set out in writing and many builders provide a convenient check list to make the process easier.
Builders
Hiring a builder to construct a house to your own design or to provide additions to your existing home usually presupposes the customer already owns the property and has organized his finances as well as made his own arrangements for an architect to draw up plans. At least three quotes should be obtained for the work involved and it is a good idea to talk to an architect or somebody else with considerable experience in the industry about choosing a builder if the prices quoted do not differ significantly, as might well be the case.
Generally, builders prefer to tender on a lump sum for the contract which, however, is likely to make provision for payment in instalments as the work progresses. Still, it is possible, particularly when times are tough, to come to a ‘cost plus‘ arrangement if you feel you have the time and experience to take full advantage of this method. The term ‘cost plus‘ in a building contract refers to the payment of a percentage of the price in addition to cost of the materials, expertise and labour for the job. It can be seen as the builders profit, and a ‘cost plus‘ contract of 10 percent would mean the builder is expecting to make 10 percent profit after all normal expenses on the project concerned. Most builders are not members of the Master Builders and Allied Trades Association, so do not rule them out on that alone, but of course, you have a sound indication of their experience and performance if they are.
Costs for a one-off dwelling are likely to be higher than is the case for plot and plan — the builder will not be able to pass on savings from the improved efficiency, convenience and bulk buying opportunities of having several adjacent houses on the go at the same time, and the home-owner’s architect is likely to incorporate more expensive features into the design than would otherwise be found in a plot and plan selection. In addition, the builder of a one-off design home will probably up his quote to cover himself against possible hidden costs arising from the plans and of course there will be a degree of extra care required in the practicalities of doing what has not been done before.
Owner-builders
Successful owner-building requires either a lot of experience on the part of the owner, a very comprehensive service on the part of the sub-contractors, or commissioning an architect to oversee the construction. It also requires realism and foresight in working out costs. It is essential to keep some kind of record of cash flow and expenditure in a readily accessible form, ideally a cash book, so that you will have some idea of where you stand financially at all stages of the work. You will be surprised and disconcerted at how fast receipts and delivery notes mount, to say nothing of expenses, and these should be kept in a box-file for ready reference. The same applies to all other correspondence and agreements related to the building project.
Surprisingly, a great many people think they can design and build their own home or do their own alterations or additions, with a little help from sub-contractors, at a huge saving on prices quoted by large, experienced builders who have much of their own equipment and benefit from discounts on supplies. Sure, there can be savings, but do not overestimate them. Stick with the experts where possible.
If you have complete faith in the builder, and many deserve this, it is just as well to save the extra cost of architectural supervision, particularly where the work is largely straightforward.
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Topics: Agent, Contract, Course, Form, Job, Property | 8 Comments »
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