Builder wants to charge me more for house and lot.

Baton Rouge, Louisiana
Legal & Legislation
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Builder wants to charge me more for house and lot.

Allen Lopez
Rental Property Investor · Baton Rouge, LA · Member since 2018 · 151 posts · 13 votes

Background:

There is a very reputable builder in Baton Rouge that is building a new neighborhood. About 3 months ago I sign a contract to build the home of my dreams. Simple 3/2 called an “Oxford” model. We agree to put it on a certain lot, certain model, for a certain price.   they accidentally pored the foundation for an “Oxford” model from 2017 which is about 20k more expensive. The builder is saying if I want the home, I have to pay the additional 20k. 

The contract say that they are allowed to increase the price if the cost of material goes up. Not if they mess up. Additionally, the contract only states that it has to be an Oxford model on that lot for a set price by a certain time (two weeks after the utilities have been turned on). There aren’t any design drawings on the contract. 

I fee like I have the upper hand and they have to either destroy the concrete slab and build the home we agreed for or give me that home for the same price. Or am I missing something?


the builder is giving me a few options:
1. Pay the 20k if I want the house on that lot.

2. Pick a different lot and they will build my house on it but that will delay closing.

3. Get out of the contract and get my upgrade money back.

anyone have a good attorney that can look at my contract to make sure I’m not missing anything? 

They mentioned that they were originally going to file an insurance claim to get that slab demo and start but the long term coast would be too much for them as their insurance would go up, have to order new material and delay the project further. 

No matter how we look at it, it’s pretty much breach of contract 

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  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y

    Well you never know about anything, but it sure seems that you should get what you signed up for. I would think that a single call to an attorney and a letter sent to the builder would make this problem go away.....

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  • Allen Lopez
    OP
    Rental Property Investor · Baton Rouge, LA · Member since 2018 · 151 posts · 13 votes
    3y

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  • Taylor Stow
    Attorney · New Orleans, LA · Member since 2017 · 38 posts · 19 votes
    3y

    @Allen Lopez Sorry to hear about this hassle, especially when part of the point of buying a new home is to avoid the headaches that come from an old one. But it does sound like you’ll have decent bargaining power in this situation. I agree with your instinct to get an attorney, but for the sake of discussion, here are a couple of issues I would consider:

    Breach of Contract Claim?

    In simple terms, if the builder is refusing to build the home in accordance with your agreement, you may have a breach of contract claim against the builder. See La. C.C. Art. 1983 (“Contracts must be performed in good faith.”) https://www.legis.la.gov/legis/Law.aspx?p=y&d=109236 It’s important to review the contract and the communications with a lawyer to determine how best to proceed, including what claims you might or might not have at this point, but here are few initial issues your lawyer will probably help you analyze:

    • Fixed-Price vs Cost-Plus Contract
      Is your contract a fixed-price or a cost-plus contract? In a fixed-price contract, the builder agrees to build you a home for a set price, subject to exceptions and conditions. Home buyers generally prefer these types of contracts because they provide certainty on price. In a cost-plus contract, you pay the builder for all the costs of materials, labor, and/or subs, plus a certain amount to cover the builder’s overhead and profit. There are other variations on pricing that may come into play, so a full review of the contract is important.

    • Material Escalation Clause
      Many builders are insisting that their contracts contain material escalation clauses since the pandemic, when the cost of lumber soared. Additionally, builders are worried about the risk that inflation poses in the future. That said, simply having to buy more materials because of a mistake on a jobsite is not what is usually contemplated by a material escalation clause, so check the contract.

    • Insurance, Indemnity, and Subs
      Your builder may or may not be the company/entity that poured the foundation. If a subcontractor did the work, it may be necessary to determine what insurance each party has and whether they have any agreements amongst themselves about who pays for mistakes.

    • Delay Damages
      If the contractor unreasonably delays the construction process and/or misses a deadline set in the construction contract, consider whether you are incurring additional damages because of this delay. For example, are you renting a home that you otherwise wouldn’t have to rent if your new home was ready?

    Next Steps

    Every claim is different so it’s best to consult with an attorney to assess the strength of your position. When you do so, be sure to provide the lawyer with 1) the contract, 2) any change orders or other changes you made to the contract, and 3) copies of all communications with the builder. The lawyer will inevitably ask you for more documents, but this will be a good start. Lastly, you may want to contact a lawyer sooner rather than later to avoid letting your rights expire or even an argument by the builder that you were the cause of any delay.

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