Building Contracts For Extensions

Do I Need a Contract?

Yes having a building contract for the work is essential. It is the only way to know for sure what work the builder is required to do, and what you will pay for it. It is never a good idea to appoint a builder just with a handshake, no matter how much you feel you trust them. Proceeding without a contract can lead very quickly to claims of misunderstanding, extra costs, loss of trust, and even the complete breakdown of a project. Choosing the right building contract for a house extension does not have to be complicated. In this post we will put the pros and cons in plain English, and explain how and why to choose a building contract.


Is it a Legal Requirement?

No a contract is not a legal requirement. However just as travel or home insurance are not legal requirements, but are recognised as essential to protect against risk, so a building contract should always be used to safeguard your interests. After all, you have a lot on the line here. You would not book a holiday, buy a car or even join a gym without some form of contract. Contracts are a perfectly normal and sensible way to make an agreement, and should always be used.


Why Building Contracts Are Good

When someone appoints a builder without a proper contract there are 3 things that tend to go wrong. They happen time and time again, and most people know someone that they have happened to. So let’s start by looking at what the problems are that we want to avoid.

  1. The client thinks that certain items of work were included in the cost, but the builder says that they weren’t.
  2. So the builder claims some more money and time for the ‘extra’ work which leads to a break down in trust.
  3. The builder disappears to another job, causing frustration and leaving the work unfinished for a long time.

Using a proper building contract can break this cycle. We will go on to explain more detail of different types of contract and how to choose the right one for you. But whatever contract you choose the key points that make building contracts good for house extensions are:

  • The work to be done will be clear, so there are no misunderstandings over what is included and what is not.
  • Payments for the work will be clear, so there is no unreasonable extra costs and no breakdown in trust with the builder.
  • Timescale for the work will be clear, so that you know when it will start and finish and what the penalties are if these dates are missed.

Are Contracts Good For Builders Too?

Yes. A building contract should be seen as a good thing for both you and your builder. There is no builder who would not benefit from having the work, cost and time clearly set out before starting work. The only reason for a builder to refuse to sign a contract is if they do not necessarily intend to do what it says. So this brings us on to our first tip. In fact it’s more than a tip, it’s a hard and fast rule that you should never break.

If your builder will not sign a contract then walk away. No matter how well you get on or trust them. No exceptions.


 

What Does A Building Contract Do?

In simple terms a building contract records what work the contractor has agreed to do, and what you will pay them for doing it. And if that was all your building contract achieved it would still be much better than not having one. But a good building contract can (and should) do much more than this, including:

  • Set a start date for the work on site (so you can make firm plans)
  • Require the contractor to be on site at all times (so that they will not disappear to another job)
  • Fix the dates that valuations will be made for payments (usually every 4 weeks)
  • Fix the amount of retention that you will hold back on all payments until completion (usually 5%)
  • Require the work to meet defined quality standards (so the builder knows what they need to achieve)
  • Set out who will inspect and issue instructions and certificates for the work (usually your architect)
  • Fix details of warranty periods and guarantees that you will get (so you avoid possible future costs)
  • Set a completion date for the work (very important)
  • Set amounts to be deducted from the contractor if they miss the completion date (liquidated damages)
  • Fix the length of any rectification period in case any defects come up (usually 6 or 12 months)
  • Tip: Use these points as a checklist for your building contract, and when discussing your requirements with your architect or builder.

What Contract Should I Choose?

Any building contract is better than none at all. Even a simple clearly written list of the work to be done, and what will be paid when, beats just a handshake. But most house extension projects are a bit more complex than this and benefit from a well written building contract. There are lots of good contracts on the market that are suitable for building a house extension.

But which contract is best, and how do you know which one to go for? Our advice is to not necessarily accept contracts proposed by a contractor which can sometimes be weighted in their favour, and to avoid any obscure choices and stick to one of the main building contract providers, either the JCT or the RIBA. These are the most suitable types of contract for house extensions and are well respected for their clarity and fairness.


JCT Building Contracts

The JCT (Joint Contracts Tribunal) produce some of the most popular building contracts for house extensions. The contracts are updated every few years so make sure that you get the most current version.

  • Minor Works JCT MW(D) (good for most simple house extensions under £200k)
  • Intermediate Contract JCT IC(D) (good for most complex house extensions over £200k)
  • Standard Contract JCT SBC(Q) (good for large projects but unnecessary for most house extensions)

RIBA Building Contracts

The RIBA Building Contracts are newer than the JCT versions, and they are slightly more simple as they only publish 2 contract types, with only 1 choice suitable for most house extension projects.

  • RIBA Domestic Building Contract (good for most house extensions)
  • RIBA Concise Building Contract (good for big projects but unnecessary for most house extensions)

Other Building Contracts

There are a few other contracts that you might hear about. These include the JCT Homeowners Contract, but we find that this lacks some of the advantages and clarity of the JCT Minor Works. And the FMB (Federation of Master Builders) Contract, but we find that this is weighted to the builder. So we do not usually suggest either of those.


Best Building Contracts To Choose


Small House Extensions under £200k

If your house extension project is relatively small then a simple contract like the JCT Minor Works or RIBA Domestic should be great. They are flexible enough for most projects and tick all of the points in our lists above, without unnecessary complication that you find in bigger contracts. This is good because the simplicity will help to keep the building costs down.

Use the JCT Minor Works or RIBA Domestic Contract if your house extension is simple and under £200k.


Large House Extensions over £200k

For larger house extension projects we usually suggest the JCT Intermediate Contract. It has all the benefits of the smaller Minor Works form, but adds some of the features that contractors will want on bigger projects (and so will help to keep their tenders competitive) such as advance payments on some high ticket items, and more detail over sub-contractors.

Use the JCT Intermediate Building Contract if your house extension is more complex or is over £200k.

© 2PM Architects