By AIA Contract Documents
May 31, 2023
Residential construction is fraught with risks. In order to manage and mitigate these risks, it is imperative for project teams to understand their exposure, and to use effective contracts. If you are planning to build or renovate your home, consider the following key provisions when entering into your next residential construction agreement. These key provisions help project teams plan for the work and obtain the best possible results for the homeowner.
Homeowners and project teams should determine and identify the decisionmakers throughout the project. It is imperative that team members are aware of who these individuals are, and how to contact them. The key project personnel may include the homeowner, architect, contractor, and their respective consultants. It is important to identify the exact person to contact if issues arise on the project. For example, when listing the contractor’s personnel, include the name and contact information of the contractor’s onsite foreman in the agreement. Additionally, if there is more than one homeowner, such as a married couple, the parties should identify whether one or both of the homeowners will need to participate in project-related decisions. Key personnel and their respective contact information should be identified in the homebuilder and design agreements. If there is a problem on the project, the parties may then go back to their respective agreements to find this information, rather than having it dispersed throughout a variety of locations and agreements.
At a minimum, residential projects must comply with local and state building codes and regulations. These can vary by jurisdiction and thus, it is important to know the requirements for the area of the project. The parties should consider whether there are applicable jurisdictional requirements for the project, such as consumer protection notices, permits and licensing, warranty requirements, and mechanic’s lien notices, that must be complied with prior to commencing construction. The homeowner should also provide other relevant information that is applicable to the residential project to the design and construction teams, such as information about site covenants, conditions, and restrictions, as well as Homeowners’ Association requirements.
In residential construction, payment to the contractor is typically made as part of a payment schedule. Amounts to be paid to the contractor usually hinge on construction milestones, such as the dates of commencement and completion of construction. Milestones and payment schedules should be delineated in the construction agreement to ensure that the parties’ expectations for payment are aligned. Additionally, if there is a construction lender, the payment schedule must not conflict with the lender’s requirements. Any lender requirements for the payment process should be included in the payment schedule.
For homeowners looking to remodel or perform residential construction, AIA Contract Documents has a variety of agreements that may suit your needs, including A110™-2021, Standard Form of Agreement Between Owner and Contractor for a Custom Residential Project, B110™-2021, Standard Form of Agreement Between Owner and Architect for a Custom Residential Project, A111™– 2021, Owner and Home Builder Agreement for Construction of a Single Family Home, and A112™– 2021, Owner and Home Builder Agreement for Design and Construction of a Single Family Home. These agreements cover important provisions that project teams need to manage expectations and complete a successful residential project. Also, these agreements address salient issues, so contract negotiations can be expedited, take less time, and the project is ultimately completed faster.
AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.