Formulating Construction Agreements Requires Superior Skill

Posted on: February 7, 2013

For the past three years, new home construction has steadily increased in Palm Beach and Broward counties. The demand for homes is exceeding the supply and housing prices are rising. The high demand for homes may be attributable to low mortgage rates and the realization that housing prices are not dropping anytime soon. Although the supply is low due to home construction falling during the housing crisis, builders are now busier than they have been in several years. New homes in new developments are selling out quickly in Palm Beach and Broward counties. Builders cannot construct homes fast enough to keep up with consumer demand.

Similarly, the supply of condominiums in South Florida is decreasing as demand and prices increase. Investors have purchased many of the condominiums that were available with hopes of taking advantage of escalating rental rates. The diminished condominium inventory has opened the door for developers. Ninety-nine condominiums that combine for over ten thousand units have been announced or started in Palm Beach, Broward, and Miami-Dade counties; however, the majority of projects are in Miami-Dade County. When entering into a construction contract for a condominium or new home, the parties should be extremely careful when formulating the agreement’s terms.

Construction agreements are very complex. If not negotiated and drafted with superior skill, disputes will develop. One common area for disputes is delays. A well-drafted construction agreement will have a section regarding the time for starting and completing a project. Within that section, the agreement should state the effect of failure to complete work on time and contain a provision for extension of time. An extension of time may be allowed for certain causes beyond the contractor’s control. An example where an extension of time would be allowed is when the owner makes changes to the work. Work changes are usually permitted in construction agreements, but require modifications to price and termination time that will be included in the written change order.

Another area where construction disputes arise is from construction defects. A construction agreement should have a section that designates an architect and includes the duties and authority of that architect. Usually, an architect’s duties will include periodic inspections, opinions, and progress reports on the quality of the work. A knowledgeable architect may be useful in facilitating a project free from defects. Likewise, a contractor will have his duties and rights addressed in a section of the contract. An agreement should provide that the contractor supervise and direct the work to the best of their ability, that the contractor shall not employ anyone unfit or without sufficient skill to perform, and that the contractor shall comply with construction laws and regulations. These are just a few of the terms in a construction agreement that will assist in preventing future disputes.

Every detail in a construction agreement should be carefully formulated. Hiring an experienced attorney to help formulate the terms of a construction agreement will save time and money by preventing unnecessary disputes.