Posted by Rainbow on October 23, 2005 at 23:27:14:
Have you contacted an attorney?
Contractor issues - Posted by Robert
Posted by Robert on October 19, 2005 at 20:24:51:
I hope someone here can help. I am having a house built and then we had a storm called Katrina. The builder wants to change the contract to “cost plus” instead of our fixed contracted price. They said there is a federal law that allows them to do this in natural disasters, since building material prices go up.
Anyone ever heard of this? My realor is lost. We have asked for the info for our attorneys to look it up, but I wanted to see if anyone here has heard of if while I was waiting.
Thank you.
Robert
Re: Contractor issues - Posted by Robert
Posted by Robert on October 21, 2005 at 10:06:28:
Thanks for the comments and advice. Just to clarify a few things if it makes a difference.
The builder is a developer for new home construction. He has his own plans that you choose from and does spec homes and semi-custom homes. He has set pricing (i.e. no bidding) for each of his floorplans and we included upgrades in the pricing. So, we didn?t force a low bid. He has told us that his usual profit margin is 25%.
The builder obtained the construction loan and the builder?s insurance. He wants to do a new cost-plus contract to cover all expenses from the beginning of the build. I?m not sure how to determine how much is covered by insurance and how much would be paying for the original construction and then rebuilding to pre-storm condition.
So far, the builder can?t provide us a copy of statute or case-law to support requiring us to enter a new contract. We want to be flexible, but want the builder to be accountable for containing costs, so we?re uncomfortable with cost-plus. I?m not excited about having to hire an bookkeeper to oversee the costs and it seems like it?s just more trouble than it?s worth.
Re: Contractor issues - Posted by John
Posted by John on October 20, 2005 at 21:37:00:
Robert, Having spent 30 years in construction, I have never heard of this before. Like other post state the price increases my be killing him profit wise. I would suggest you try to work with him within reason. If you try to force him on this he will have to cut other corners and deliver a poorer quality building. He may also just walk off the job and leave you sit or strung out for months. The hurricane caused a spike in prices that will last quite awhile, it was unforseen and unpredictable. I am sure that you forced a low bid on the project that cut his profits to a minimum, there may just not be enough room to assorb a 15-50% increase in cost of materials. The hurricane cased a large spike that changed numbers on most projects around the country. If his quality is good and his history is reputible try working this out. This may not be a law but is common in residential construction.
Re: Contractor issues - Posted by River City
Posted by River City on October 20, 2005 at 17:12:25:
One of you should have had insurance coverage on the new home as it was being constructed. This insurance should cover the builder so that he will not lose his investment before the hurricane. If you obtained a construction loan, your lender most likely required you to carry insurance on the home during the construction phase, just for this reason.
As far as an increase to cover the increased price of materials, tell the builder to show you the federal law that states he can do this. If he does increase the price, I would suggest that he account for the increase piece by piece because his profit was calculated in the original price. So, if a 4x8 sheet of plywood increased by $5.00, and there are 40 in the home, the price for the plywood should only increase by $200.
Re: Contractor issues - Posted by Brian (UT)
Posted by Brian (UT) on October 20, 2005 at 11:41:10:
Robert
Looks like he knows his profits are going south and he wants you to make up for his mistake of not covering this possibility in his contract. Reminds me of a gambler that want his money back because he lost so the game must have been fixed.
My father was a contractor and went through earthquakes, floods, and fires, and never once did he mention a law that allowed him to revise his contracts. As a real estate broker for 36 years I never had a client run into this either.
Call his bluff, tell him to cite the statute and you will have your attorney check into it. I doubt he can do it, I’ve had so many people tell me something was against the law, or the law permits them to do whatever, over the years when things weren’t going their way, it seems to be a common technique for desperate people.
Brian