Real Estate & Construction Law

Construction Law Overview

Construction law involves the formation of agreements and disputes between the builder and homeowner, covering a project that could run into several hundred thousand dollars.

Does a builder have to honor a written estimate?

Typically, no. An estimate is not a binding contract, but a rough calculation of the cost of the project.

How do I find a good builder?

You’ll need to do a bit of leg work, but the effort will pay off in many ways. Consider:

  • Contacting your local builders association for recommendations and obtain a number of bids
  • Verifying the license the builder holds if one is required in area. Make sure it is current.
  • Asking the contractor for proof of personal liability, worker’s compensation, and property damage coverage or bonding, especially if the coverage is required in your community or state
  • Checking with the Better Business Bureau for complaints filed against the builder you are considering
  • Asking the builder for a list of references you can call and then contacting them
  • Seeing work the contractor has already completed

How long is a permit valid?

Permits are valid for a certain number of days from the date of issuance or from the date of the last inspection. The time length will vary between communities.

Is a home inspection the same as a building inspection?

Generally, no. Home inspectors generally evaluate an existing home upon the sale or purchase of the property. Home inspectors evaluate readily accessible systems and components of a home. A building inspector evaluates the building project at various stages of construction to verify adherence to local building codes. Be aware that in some jurisdictions a certificate of occupancy, which allows you to move into the home, is given only after the home passes the final building inspection.

I’ve changed my mind about what I want. Can I make a change to the project?

Typically, yes. The type of change and when the request occurs can greatly impact the ability to physically make the change, as well as the associated costs. Changes should be agreed to in writing with a “change order” noting what is to be changed as well as the costs.

The builder has just destroyed the project with poor workmanship and materials. What can I do now?

Take a look at your contract. It should define how disputes are to be settled. If not, your only alternative may be to sue based on the contract you have.

The builder is asking for a large down payment on the project. Do I have to pay this?

Most builders do ask for a down payment, although the specific amount will depend on your contract agreement. Be very cautious about a builder who asks for the entire amount upfront. Some states even limit the amount that a builder can request. Contact your state or local consumer agency to find out what the law is in your area.

What happens if I do the work myself or hire someone else, but don’t have a permit?

Construction started or completed without a permit is subject to investigation by the local inspection department to insure the project complies with all building codes. Additionally, court fines may be imposed for not getting the required permits before beginning work.

What is a mechanics lien?

If a contractor or business is hired to work on your construction project and then you refuse to pay, the individual or business has the right to file a lien. The lien is a claim on your home. This means the contractors and suppliers could go to court to force you to sell your home to satisfy their unpaid bills from your project.

You may also receive a lien even though you have paid the general contractor in full for the project. If this happens, it may be because the general contractor did not pay a subcontractor or business, was slow in making payments or, possibly, closed up shop and filed for bankruptcy. Regardless of the reason, the individual or business has a legal right to be paid and can file claim on your property for the amount owed.

Making the homeowner pay twice for the work completed may seem unfair. But the homeowner, because he benefits from the improvements, is ultimately held responsibility for the debts. If you do end up paying twice – once to the general contractor and again to settle the lien – you have the right to file suit against the contractor to recover your costs.

What is a zoning permit?

A zoning permit often is used in some areas to mean or represent “building permit,” requiring contractors, owners, owner’s agents or tenants (with permission from the owner) to obtain a permit prior to beginning a building project.

What is considered “construction”?

The terms “erection,” “construction,” “moving,” “conversion,” “alteration,” “remodeling” or “addition” are all common terms used to describe a building which is under construction.

What permits or inspections are needed for a construction project?

The building inspection department, office of planning and zoning, or department of permits in your community will have a listing of permits and inspections related to building and zoning codes required for new construction or remodeling. Each community may have slightly different inspection criteria but they generally cover structural, electrical, mechanical and plumbing work. Building codes are constantly evolving and they can vary by state, county, city and town.

What should be in a construction contract?

A contract is a document that clearly states the expectations, responsibilities and rights of the parties involved in a project. Remember, if it isn’t in writing, it doesn’t exist. As a starting point, consider including the points listed below as well as having the contract either written or reviewed by an attorney prior to signing:The contractor’s name, address, phone, and license number, if required

Verification of insurance or bonding the contractor and sub-contractors are required to carry. Avoid doing business with contractors who don’t carry the appropriate insurance. Otherwise, you could be held liable for any injuries and damages that occur during the project.

  • A listing of any subcontractors which may be use on the project
  • A clear description of the work that is to be performe
  • A description of the materials, products and equipment to be used
  • A start and estimated completion date. Understand that situations beyond the control of the contractor can delay a project, such as weather, change orders, back-ordered materials, availability of specific subcontractors or other unforeseen problems
  • Procedures for change orders
  • A request for all written warranties from any appliances, equipment, or materials used in the project
  • The payment schedule for the project. Typically, the contractor will require a down payment and installments throughout the course of the project
  • Make the final payment contingent on satisfaction of the work performed and verification, via lien releases, that the subcontractors and suppliers have been paid
  • A method for settling any disputes
  • A written statement of your right to cancel the contract within three business days if you signed it in your home or at a location other than the seller’s permanent place of business

Who can obtain a building permit?

Generally, contractors, owners, owner agent’s or tenants (with permission from the owner) can obtain building permits. A general contractor often will obtain the permits covering the electrical, mechanical, and plumbing work in addition to the building permit, eliminating the need for any subcontractor to obtain a separate permit. Depending on the community codes, permits in addition to those listed may be required. Be cautious of a contractor who requires that the homeowner must obtain the necessary building permits. It may mean he isn’t licensed to work in your area.

Who is responsible for the insurance covering the project up through completion?

Generally, the homeowner is responsible for insurance. Depending on circumstances and the contractor used, the contractor may be required to supply this coverage.