What is a Time and Materials Construction Contract?
Construction contracts establish the parameters for building projects for both residential and commercial real estate. The contract must be created before the project begins and should establish the specifications for an individual project. The terms of the agreement should be negotiated so the contract is fair to both the builder/contractor and the investor/owner. The contract should set out both the details of the project to be completed as well as the cost for completion.
Construction contracts divide responsibility for costs and set pricing in different ways depending upon the form that the contract takes. One common type of construction agreement is called a time and materials construction contract. A time and materials contract shifts much of the risk for cost overruns onto owners/investors. Anyone who is considering a building project needs to speak with an attorney before signing a time and materials contract. An experienced Las Vegas real estate lawyer at Pintar Albiston can advise you on what type of construction contract is right for you and can help you to negotiate a contract that protects your interests. Call today to learn more.
Using a Time and Materials Construction Contract
With a time and materials construction contract, an owner or developer who is hiring a contractor will pay a set price for the labor for the project and will pay a set amount for the builder’s profits. The materials and overhead costs are paid by the owner as the project unfolds and there is no predetermined price amount.
A time and materials construction contract provides protection for builders, as their profit is guaranteed and they are not responsible for any unexpected delays or increases in material costs. This is an alternative to a fixed price contract where an owner/developer pays a set amount of money for the project and the builder has to cover any overruns or unexpected expenses.
Owners/developers are disadvantaged in many ways by a time and materials contract. First and foremost, there is great uncertainty. Going into a project, it is difficult or impossible to assess what the final cost of the construction will be since the charges for time and materials will occur throughout. The builder also does not have any real incentive to cut costs on a project that is undertaken after a time and materials construction contract is created. After all, the builder will be paid for the work performed and for the materials used even if the project goes over budget.
Because of the risks of a time and materials contract to owners/developers, it is important to consider whether a time and materials contract is the best and most viable choice for a project. There are alternatives such as a guaranteed maximum price contract that are similar in many ways to a time and materials contract but that establish a price that the project cannot exceed.
An experienced Las Vegas real estate lawyer can provide advice on the best type of contract and can represent both builders and owner/investors in the negotiation of a construction agreement. Call today to schedule a consultation and learn more about your options for your next construction project.