This is the contract between you and the developer, contractor or builder. The builder’s agreement should have the following information:
- The location of where the house will be built
- The size of the property, as per the plan which is attached to the agreement
- Servitude (A charge or burden resting upon one estate for the benefit or advantage of another)
- The cost of the building
- Other legal costs
- The completion date
- Any penalty clauses for late completion
- Final payment agreement
- Guarantees against structural defects e.g. roof leaks
- Obligations to fix faults due to poor workmanship within a certain period after hand over to the buyer
- A cancellation clause e.g. if a buyer’s loan application is declined
- Consequences of breach by either party
- Schedule of progress payments – i.e. the amounts to be paid by the lender at each stage in building process
Things to remember when building
Building a house is a complex process, and to do so successfully, you should remember the following:
- The Builder’s agreement is not between you and the lender, so if there is a problem with the house and the workmanship, the dispute will be between you and the builder. You will still have to pay the loan installments.
- Get advice from an appropriately qualified professional e.g. architect, surveyor, real estate agent, land developer or town planner.
- Investigate the reputation of the contractor or builder before deciding on one to contract with. Contract with a registered builder with a good reputation.
- Carefully examine the quotation you receive and check prices to ensure the charges are reasonable.
- Build a house that meets the family’s needs but within your budget. You can always extend at a later stage, should this be necessary and your affordability allows.
- Keep to agreed plan and don’t make unnecessary changes during construction. This will add to costs.
- It is your responsibility to see to it that the work is carried out according to the plan and specification list.
- You become the legal owner of the home immediately the mortgage is registered in your name, even if the house is still under construction.
A specification list is attached to the agreement. This lists the fittings and finishes to be included in the house. E.g. type of flooring, ceiling, roofing, the cupboards, lights and building materials.
Before you take delivery of the house you must inspects the work and draw up a “snag list”. This lists all incomplete work or problems that you have noticed, and anything that is not built in accordance with the plans. DO NOT LEAVE ANY OUT
When the construction of your house is complete, you will sign a document that confirms that you are satisfied that all issues on the snag list have been dealt with. This acceptance documents is required by the lender before the loan is paid out.
Note: Do not agree to sign this document before your house is complete.