Legal issues part three by Bicycle Bungalows Custom homebuilder Houston Heights
Written for Bicycle Bungalows
Another custom homebuilder Houston Heights hasn’t had a lien or lawsuit successfully filed against their business, and more than 20 years, which is about when the company adopted a business model that significantly reduces his liability and cost of insurance.
Shedding contractor liability: space during the late 1990s the custom homebuilder Houston Heights is building and remodeling houses as a general contractor and didn’t like the enormous amount of liability he had to assume even though all of the subcontractors also had liability insurance for their parts of his projects. He also dislike the general contractor game of trying to make more money from clients by selling change orders, finding mistakes in the drawings if you could charge for, and piling on other extras. His fees were climbing, partly to cover the cost of insurance, and potential customers couldn’t afford to hire him. He didn’t want the liability and didn’t want to charge his clients these exorbitant fees that general contractors have to charge to cover their absurd Lehigh and unreasonable liability. Then he met a client who at one time considered building his house by being his own general contractor with assistance from it now defunct company calling itself homes now. By coincidence the builder had attended at homes now seminar to find out about what the company was teaching homeowners and was intrigued by the business model. When he discovered that the client was asked at homes now contract, the builder asked to see it. He used that document as a beginning template to transition from general contracting to construction management.
During that first year, the custom homebuilder Houston Heights gave clients the choice of having him work for them as either a general contractor or as a consultant for a fixed fee. As a consultant, the builder could prepare a cost breakdown documents to submit to the bank, facilitate beds and negotiate contracts with trades and suppliers, manage the construction schedule, handle change orders, and track invoices, just like contractor. He would be involved in a project from for the land was bought in till long after the homeowner moved in. The difference was that he didn’t sign any contracts or pay the bills. The homeowner did that.
When the contractor pulled a building permit, it was in the clients name and paid for with a check from a client. The custom homebuilder Houston Heights track invoices from the subs and paid what was due, he would forward the bill to the homeowner with instructions to write a two party check with the names of the subcontractor and the subs supplier. In that state, any person providing materials, equipment, or professional service for the improvement of real property must send, by certified original shirt mail, a notice of their right to claim a lean to the property owner. The builder tracks these notices to, so he can tell his client the name of the suppliers to include on a two party check submitted to the subcontractor.
The benefit for the custom homebuilder Houston Heights was he didn’t have to buy expensive general contractors leather look insurance. He merely needed and errors and omissions policy to cover him and his employees probably manage the project. That meant much less liability for the contractor. The benefit for the homeowner, the builder could work for them at a much lower fee. Clients understand what’s going on since the builder they understand that it is them and me on one side of the table and all the rest of the subs and suppliers on the other side. Before, it was me on one side of the table at them on the other side. Now are all working together. We’re a team. During the first year, All of the builders customers chose to hire him as a consultant. He shut down his general contracting division the following year and now exclusively builds custom houses as a construction manager. He has since had that contract scrutinized and revised by lawyers, accountants, and audit specialist so his business isn’t entangled with the liability that generally falls on a builder. He has also been audited and deemed a professional service provider by the state Department of revenue, and I’d like a general contractor, professional service providers are subject to the state sales tax, which is another advantage. All he had done was rediscover the profession of construction management and applied it to the custom home construction he says. He’s doing that with the contract to keep him out of the liability and allowed him to charge less and fix his fees which everyone loves.
Getting paid: space disputes with clients tend to percolate during the construction phase and boil over on change orders and allowances push the bill towards a level beyond with the client originally expected to pay. However, if a project is funded by a construction to permanent loan, the builder can draw on funds from an escrow account after the bank in specs and verifies that stages of construction has been completed. That arrangement makes it more difficult for a homeowner to withhold payment based on FM. One builder structures the payment of his fee starting with 15% upfront, followed by increments paid upon attaining construction milestones Such as completing the foundation, the roof, and occupancy. They will hold out 10% for the occupancy payment just in case someone doesn’t want to pay. That has been rare, but it’s just 10% so it’s not the end of the world if it happens. A goodThat has been rare, but it’s just 10%.
A good set of plans with abundant detail can go a long way toward avoiding the final bill surprise and maintaining the clients trust. The builder recalls architectural drawings on a project for a space at Sibley had – marks that he has managers thought represented to beans. So they budgeted $5000 per babe or $10,000 for allowance. Construction started, and three modifications later the architect specified as many as eight beams with tongue groove ceilings pushing the cost of $40,000. The builder likes to have as much detail as possible and have his plans be finished.
If you start a project and the plan is 80% finished, it’s going to look bad because the architect destroying all these details for which the builder never had allowances for pricing. Did the project turn sour and everybody looks like the bad guy because they have to go to the homeowner and say the project it’s gonna cost more than what was originally budgeted. Some custom homebuilder Houston Heights take a vanish that, but we don’t. A good project starts with a detailed set of plans, and that a lemonade a lot of legal legal issues. There will always be difficult clients, litigious people, and even those who need to create drama when a project is going smoothly. Try to exert control over factors like those is a fools errand. But protecting yourself as much as possible from the unpredictable to help protect your business.