Factsheet B2 - Building Contract/Agreement
Having a written agreement for the works is essential for any project. This may be a standard ‘pro-forma’ agreement issued by bodies such as The Joints Contracts Tribunal (JCT) or the Federation of Master Builders or it may be prepared by the builder himself. Either way, it should form the basis of the agreement between you and the builder and you should fully understand the terms.
You may wish to have a solicitor look over any agreement before you sign it to ensure that it is not unfair.
We have summarised below the main areas your agreement should include.
1. Agreed Parties/Documents
Any agreement should define who the contract is between. This may sound obvious but you need to be clear whether you are dealing with a limited company, a sole trader or partnership and who is liable for the works should things not go to plan.
The agreement should also clearly define the contract documents which should include drawings, the work specification, structural calculations and any other agreed documents. Remember that there can be many revisions of these documents so make sure you have listed the latest versions.
2. Contract Price
Make sure the agreed contract price is defined in the agreement and whether this includes VAT.
The agreement should also include payment terms and make sure these are clearly defined. We would recommend using milestone payments as a fair method of paying for the works and these can be included on a programme of works as item 3 below. For example, a percentage of the contract sum is paid once the works have reached a certain stage.
Valuing the work completed at regular intervals is also another common method of payment but you need to ensure that the valuations are realistic.
Define how to deal with variations to the contract where works are added or removed from the specification. Some contracts include for a formal variation certificate that is to be signed by both parties which is a good way of avoiding any misunderstanding on changes to the contact sum.
It is good practice to hold a retention for a period of 3-6 months after the works are complete to cover the cost of any drying out defects or snagging items.
3. Contract Period
The agreement should include a start and completion date for the work and define if there is a procedure for amending the date if required. Builders overrunning the agreed end date is a very common issue and often this can be caused by poor weather or delays on delivery of specialist fittings such as kitchen units or external glazing.
These issues can often be outside the control of the builder but you need to be aware of the impact on your agreed completion date.
It is a good idea to get a programme of works for the project which will help you identify if the work is on schedule and when key activities are due to take place.
It is a good idea to have a weekly meeting with the builder and write down things that are agreed. We would also recommend keep a diary and a photographic record during the works.
4. Insurance Details.
The agreement should define the insurance cover for the works and the amounts that are insured. Ask for a copy of the builders insurance details for your records.
It is also worth checking that your own household insurers are aware that building works are being carried out as this is often a term of your own policy.
5. Disputes
This is probably the hardest area to define in an agreement but it is a good idea to summarise how any disputes will be dealt with.
If possible, name an independent arbitrator that all parties agree to who will advise on a solution to any problem should a dispute arise.
We would always recommend talking to your builder as soon as possible if there is anything you are not happy with such as the site being untidy, musice being too loud, etc. The builder may not be aware that there is an issue unless they are informed.
6. Other Items
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