Contracts for Builders Ross Kinzler, Executive Director

Contracts Address Risks

What are your risks? You will order a home for big $ from a manufacturer based on What? A promise or a contract You will do work on property owned by others based on What? A promise or a contract You will arrange for others to do work on a home based on What? A promise or a contract

Two Contracts to Discuss Modular Home Purchase Contract Sub Contractor Agreement

What we are NOT going to cover Agreements between builder and manufacturer Agreements between owner/buyer and others There are particular risks here since they are likely to directly affect you but you have little control

Modular Contract - Risks Addressed Buyer backing out Builder wanting out if buyer doesnt perform The buyer really owns the land – dah! Lot is build-able Scope of work – just what you are doing and not doing Liability limitations Possession and control of the property

Risks Addressed - continued Owner responsibilities Lien Notices – more later on this Security agreement for property Insurance for property Price changes during contract Default remedies

How to Use the Modular Contract Pick the Version Standard Trade-in

Top Mistakes No Blanks

# 2 Top Mistakes Messing up the financing condition – this is NOT OPTIONAL if contract is conditioned on getting financing! a. Minimum amount: $________________ b. Minimum term: ___________ months c. Maximum interest rate: If checked here, a fixed rate not more than _______% per year. If checked here, a variable rate loan in which the initial interest rate is not more than ____% per year, which may change not earlier than ________ months and thereafter not more frequently than every _______ months, and will not change by more than ____% per year at any change and not more than _____% per year in total. d. Maximum monthly payments: $___________ e. Maximum points or origination fees of any description ________________________ f. Other special terms apply if checked here and a schedule is attached.

Cash Deal? Make sure to check the box at the end of finance section

#3 - Top Mistakes Scope of Work – What are you doing? SCOPE OF THE WORK: _____ HOME ONLY - Attach the Home on a foundation provided by Owner, in accordance with Builders procedures. Owner understands that the Home is a modular home which will be constructed by __________________________________________ designated as model __________________________________ and delivered to and installed on the Owners property as described in this Contract. _____ HOME PLUS – Attach the Home on the foundation and perform other Work and services as described on the Addenda.

#4 - Top Mistakes Failure to identify who is in charge of project PRIME (GENERAL) CONTRACTOR: _____If checked here, Builder is acting as Owners general contractor. General Contractors License # ___________ _____If checked here, Builder is not acting as general contractor and Owner is either acting as the general contractor or has chosen to hire a general contractor. As a condition to Builders obligation to perform under this Contact, Owner will provide to Builder originals of all permits that are the responsibility of Owner to obtain under this Contract. Owner acknowledges the construction and legal risks in assuming the role of general contractor.

Having the Owner act as his own general contractor does not isolate you from liability Example - placing the home on foundation done by others - you will still be liable for failure

# 5 - Top Mistakes Changing the contract by re-writing it.

# 5 - Top Mistakes Dont do it. Use Change Order

#6 – Top Mistakes Get enough detail in plans and specs Attach all relevant documents! ADDENDUM A Plans and Specifications Included In Scope of Work [The following become a part of this contract once completed and signed or initialed by the Owner – base model spec sheet, factory order form, floor plan print, foundation print, plot plan and any other documents required by lenders or other similar 3rd parties. ]

#7 – Top Mistakes Other Construction - Getting enough detail in Addendum B including pricing if appropriate

#8 – Top Mistakes Addendum C - Included items or Allowance Select one or the other or cross out!

#9 – Top Mistakes Get Initials on non-signature pages _______________Initials Page 2 of 9

#10 – Top Mistakes If you use an arbitration clause you may want to delete the Jury Trial Waiver

Modular Contractor Q & A

Sub Contractor Agreement This is a new form! Modified since last discussed at Spring Seminar last year It is a template! Take to your attorney to square up with your business practices One size probably doesnt fit all This is a member benefit and will be revised from time to time based upon member input

Sub Contractor Agreements Why? A modular home requires a variety of contractors to complete You dont want the tail wagging the dog You dont want subs employees deemed to be yours You want to establish standards

Would You Contract with these Guys Bill GatesPaul Allen

This contract is between businesses You as builder and your sub contractor Not between you and your customers subcontractors

Comments As you read this contract you realize all of the areas where your customers sub can get you in trouble. Why not control those issues?

Agreement Basic Theory One General Agreement that might go on for years One Scope of Work/Project Schedule for each job. Acceptance Report to Verify end of each job Agreement jobJobjob Job

Topics Covered Who provides/protects materials Payments and liens Payments subject to Scope of Work Completion – When is a job done? Job changes – builder must approve Clean up Performance to industry standards

Topics Covered Safety and OSHA compliance Extensive provision on default Builder can step in If builder takes over sub shall give permits and materials to builder Permits and Laws Sub is responsible for their own compliance Insurance General Liability – builder to be additional insured

Topics Sub warrants their work All work to be done to meet/exceed UDC Mutual Indemnification Tools Availability for meetings Confidentiality Sub wont solicit project owner Conduct & Appearance

Topics Independent contractor relationship – not employer/employee Builder owns plans & specs Governing law Dispute resolution - options Courts Arbitration

Items You Might Add Insurance – consult with your insurance agent for additional coverage they might want. Severability Clause Compliance with Immigration Laws Modify Scope of Work/Project Schedule to add more information Modify Acceptance Report

Sub Contractor Agreement Questions