Contractor contract request

9 Replies

I am a newbie doing my first BRRR. Does anyone have a draft contract agreement that I could use or follow to get the contractor to adhere to the terms & conditions during the duration of the work? Yet still if there is a website to download a generic contract agreement. My project is in the Houston area.

Joseph-  There is no "standard form" that will protect you. You need specifics about your project: payments, material grade, line items including sqft, dates, trades that require a license listed w/ proof of license. etc. You also need to make sure they are properly insured for both General Liability as well as workers comp (workers comp is rare for contractors to have, but you should at min make them sign a waiver of liability for you and the property.) Insure they are going to get permits when required and indicate who is paying for those permits. Also you should indicate what happens if you want to fire them, or they want to fire you. As well as what venue will moderate if there is a disagreement. i.e. if you agree to mediation then they can't sue until they go that route first.

This is the #1 failure for new and seasoned investors. Making sure everything is properly documented and incredibly detailed is vital to insure what you believe you are getting is what the contractor is promising. i.e. "install wood flooring throughout" could mean they install wood flooring, but don't finish it, or used engineered wood when you thought you were getting solid. That difference can/will add up to thousands of dollars.

I would suggest getting a pro to help you do this AT LEAST the first time around....but I am a pro that does that, so I am certainly biased.

A large percent of law suits on breach of contract come out of the construction industry.  For new construction, AIA puts out a good set of base docs, but require a nifty licensing fee.  

Otherwise, it starts by managing expectations on the front end.  You have the scope of work and the contractor bids your scope.  This way he/she/it is pricing what you want done instead of doing what they want to do on your property.

Then you maintain compliance by your course of actions during the relationship.  Require his/her/its insurance add you as additional insured on their policy.  Verify periodically.  Demand a list of subs and materialmen...in case a satellite drops on them on the way home one day.  Get a copy of everyone's driver's license that comes onto the job site.  No DL?  No entry.  No exception.  This way some rando can't claim injury on your job site when there's no DL on file.  You now have a defense to claims.  Every draw request requires M&M release affidavit.  Every draw request is based on work done and improvement made on a project schedule, not the GC's need to make payroll.  Every draw request is based on visual inspection by a licensed property inspector.  The request states that electrical rough out is 70% done, and if inspector concurs, then GC gets paid 70% of the budgeted amount.

As for a contract, I have a package that is a balanced doc that doesn't favor Owner or GC.

@Joseph Eiwuley , you might have to use the contractor's base contract because some municipalities require the contract to be on the contractor's letter head etc.

What I have done is this. I use the contractor's contract. It will give a description of the project, the cost, and the payment schedule. Example "1/3 up front, 1/3 rough work complete, 1/3 upon completion". Then I have the contract say something like "Additional details on attached project scope agreement".

I will write a project scope agreement that fills in some critical details only. I will generally do something in outline form breaking the work into phases and then into smaller groups by room or whatever makes sense. I will put in any details I think are critical such as # of outlets to be added to a room etc.  Then I will specific what gets paid at the end of each phase and also I have put in there a bonus for early completion and a penalty for late completion.

The basic idea is that the contractor's contract is a summary and what will be required for permitting, but you can have another document that you both sign that specifies out the details.

You cannot require a GC to divulge their trades/materialmen- Why would any GC work to build their team only to then have to give all that over to someone who may/will cut them out of their next deal/project?  You cannot require that a GC get every DL (person info) of every trade/person who goes onsite; as GC's hire subcontractors and I assure you no legit subcontractor is going to send over their employees private information.

I have worked with some of the biggest GC's in Houston, Austin, and Dallas. Every subcontractor is liable for their own people. You cannot then demand they also provide private info on their staff. i.e. Imagine telling Home Depot that they must provide their delivery guys' DL to drop off cabinets at your project. Its also a step that any real GC wouldn't add to their already vast list of responsibilities, unless they NEED the work.(and you don't wanna hire one of those).

Originally posted by @Jerel Ehlert:

A large percent of law suits on breach of contract come out of the construction industry.  For new construction, AIA puts out a good set of base docs, but require a nifty licensing fee.  

Otherwise, it starts by managing expectations on the front end.  You have the scope of work and the contractor bids your scope.  This way he/she/it is pricing what you want done instead of doing what they want to do on your property.

Then you maintain compliance by your course of actions during the relationship.  Require his/her/its insurance add you as additional insured on their policy.  Verify periodically.  Demand a list of subs and materialmen...in case a satellite drops on them on the way home one day.  Get a copy of everyone's driver's license that comes onto the job site.  No DL?  No entry.  No exception.  This way some rando can't claim injury on your job site when there's no DL on file.  You now have a defense to claims.  Every draw request requires M&M release affidavit.  Every draw request is based on work done and improvement made on a project schedule, not the GC's need to make payroll.  Every draw request is based on visual inspection by a licensed property inspector.  The request states that electrical rough out is 70% done, and if inspector concurs, then GC gets paid 70% of the budgeted amount.

As for a contract, I have a package that is a balanced doc that doesn't favor Owner or GC.


I read this now and think back of how we somehow flipped that house, and I just cringe. A lot of things didn't go right on that project, but man, I am so thankful nothing went really wrong.

Originally posted by @Account Closed :

You cannot require a GC to divulge their trades/materialmen- Why would any GC work to build their team only to then have to give all that over to someone who may/will cut them out of their next deal/project?  You cannot require that a GC get every DL (person info) of every trade/person who goes onsite; as GC's hire subcontractors and I assure you no legit subcontractor is going to send over their employees private information.  

Noted on the private information front, but is it really a concern that someone could cut out the GC and hire (say) the plumber directly? Doesn't "GC Joe" get a discount from "Plumber Sally" who he gives regular work to all the time (v me a pesky homeowner who is going to be a pain in the butt to deal with all around, or even if I'm a flipper I'll only give her 2 jobs a year)?

@Chris Mason _  I used to have a "no contact" clause in my contracts w/ trades and clients (as a GC) A lot of people would question it, but in the end the logic is simple. If the owner shows up to do a walk through just to see whats up and a trade says, "Hey, you like these outlets here or do you think you will need more?" and the owner says, "No thanks, thats fine." and the guy leaves. Now, according to the plans there was supposed to be more; the owner agreed to no more than what was done. Or worse, no more were needed but the owner agree's to more work w/out getting a written agreement. Now the guy wants to get paid and the owner refuses and wants you to deal with your trade. Problem is that he did the work that the owner agreed to have done- its the owners property and he could be sued by that trade. My job is to protect the project from having any liens- So I have that clause.

Here is another example- If a GC or trade doesn't give me line item quotes then I don't hire them. I dont' ask, it better just show up. And the reason is very simple. As a GC you don't want a client to say you agreed to more than you claimed you would do. You dont' want them to say they thought they were getting more rooms painted or that it included ceilings. You don't want any reason to not pay- and if there is a problem you don't want debate on what is complete having what value. Line item w/ pricing benefits the GC more than the owner. So, if they don't do it then I know they aren't really an expert in what they do. Experts protect themselves and their clients; line item quotes and keeping control of ALL communication is key.

As far as investors contacting trades directly to work for them directly, yes; happens constantly. If a GC finds a great painter he tries to find enough work to keep him swamped then goes and tries to find another painter for the overflow the great one can't handle. If you add any extra factors you add more work as a GC. A good GC makes 10% profit on a project. So 100k = 10k. The average crew is 500 a day. Thats a lot of hustle to just keep a crew paid. The less drama and potential for drama the better. I drop shipping containers with camera's wifi and remote locks to keep materials in and have delivered to. Then remote locks on the jobsite- I let everyone in to get their materials, everyone into the home to work. When I leave I take everything with me to the next. Materials don't walk off as much and nobody can lie about people being onsite.

With all that effort to remove any "issues" why not just line item, "No contact with any trades on site for any reason. Any contact or communication between yourself, your partners, company, friends, or family, will be a material breach." If they need info or have issues they can talk to me- If they don't then I am not obligated to waste my time on their not doing like needed.

*Just to be clear- I am no longer a GC- I can't be hired as one. And no, nobody who is an expert wants to work for a discount when they could easily get plenty of full pay work as an expert. Only those who need work give discounts. Only those who aren't good "need" work.