Legal Aspects of Contracting for Construction
Edward J. Kinberg
Attorney

In this column, I will address some of the basic questions you should ask yourself before entering into a contract to build or remodel a home.

Do I need a formal contract?

Yes. A contract is basically a tool used to describe the rights and obligations between a contractor and an owner. A well written contract will clearly describe the work that is to be performed, the time in which the work must be performed and the timing and manner for making payments. In addition, the process of preparing, reviewing and finalizing the details of your contract will help you and the builder develop a solid understanding as to what each of you expect from the other.

How extensive of a contract do I need?

There are a number of standard issues that should be discussed in any contract. However, the extent to which such issues are discussed will vary depending on the nature of the work to be performed. In trying to decide if your contract is adequate, you must ask yourself if it clearly describes the agreement between yourself and the builder.

What are some of the "standard" issues that should be addressed in your contract?

Your contract should have a specific starting date and a specific period to perform the work or a date by which the work must be completed.

Since "changes" are a common occurrence in most construction contracts, the contract needs to establish a procedure for changes. In this regard, you must keep in mind the fact that a change can reduce the cost of your project as well as increase the cost. Before you agree to any changes, you should have a written agreement as to the cost of the change and its effect on the required completion date.

You also need to require that the contractor provide a partial release of lien from each subcontractor and supplier involved in the project before you are required to make payment.

There are a number of other issues that should be considered in preparing a construction contract. You can obtain more information on construction contracts from the Law Library at the Moore Justice Center in Viera or by consulting your attorney.

What is a lien?

A lien is basically a claim against your home to recover the value of supplies and services used to build or remodel your home when payment has not been made. The individual that holds the lien may force the sale of your home in order to recover unpaid obligations. A lien can be placed on your home by the prime contractor as well as any supplier or subcontractor.

How can I protect myself against liens?

The first step is to ensure a "Notice of Commencement" is properly prepared and recorded. A "Notice of Commencement" must include your name and address, the name and address of any person making a loan for the construction in addition to several other items. If your name and address are not properly listed on the notice of commencement, you may not receive a "Notice to Owner" form which alerts you to the possibility that a lien may be placed on your property.

What is a "Notice to Owner?"

A notice to owner is a form that each supplier and subcontractor on the job provides an Owner notifying the Owner they have an interest in any payments you are to make under the contract. If you will be making partial payments during the course of construction, you must insist on a partial release of lien from any individual or firm that has given you a "Notice to Owner" as well as from the prime contractor. If you issue a payment to your contractor and he/she fails to pay a subcontractor or supplier you could be forced to make a "second" payment.

Can I require my contractor to give me a list of all subcontractors and suppliers he/she used?

Yes. Florida Statute 713.165 requires a contractor to provide you with a list of all subcontractors within 10 days of receipt of your written request, which must be sent by registered or certified mail to the address of the contractor shown in the "Notice of Commencement." If the contractor does not respond to your request or fails to include a subcontractor or supplier on the list, the contractor forfeits any lien rights he/she may have if you are prejudiced by the failure to respond or ommision.

Do I need an Attorney?

At a minimum, you should meet with an attorney experienced in construction law to review any contract you are considering. The Attorney will be able to advise you as to any terms in the contract which may not be in your favor, suggest additional terms needed for your protection and explain the basic legal issues you will confront while your home is being built or remodeled.

If you encounter any problems during the course of construction, you should consult an attorney before taking any action. By seeking prompt professional advice when a problem first develops, you may be able to avoid a protracted and expensive legal dispute.