Construction Contract Checklist: Quick and Smart Review

When building your brand new home, navigating the process of signing construction contracts can feel overwhelming. With numerous forms, decisions, and legal terms, it’s crucial for every homeowner to carefully review each part of the contract to avoid potential problems and future disputes. This complete Construction Contract Checklist will walk you through what to look for, the essential steps, and best practices to ensure a successful project, protect your interests, and help make the construction process as smooth as possible.

Note, you are discussing a contract not for when things go right, but for when things go wrong. Protect your interests, please.

Engage Financial Advisors & Loan Officers

Before reviewing any documents, consult financial advisors and loan officers to confirm your budget, obtain pre-approval, and understand the impact on property taxes. Assess the contract price and estimated construction costs, including advance payment and additional costs, to avoid cost overruns.

Conduct Site Assessments and Secure Approvals

Complete soil tests, review the floor plan and project plans, and obtain necessary permits. Good practice dictates having enough time for a detailed evaluation of square feet and specific items for your new builds.

a. Detailed Description of the Work & Scope of Work

• Confirm that the scope of work is clearly outlined, describing the construction process, materials, light fixtures, paint colors, and all tasks in detail.
• Ensure blueprints, construction documents, and the floor plan are part of the contract forms.

b. Contract Terms and Conditions

• Specify the contract terms, including start and completion dates, substantial completion, and final completion milestones.
• Identify breach of contract penalties, warranty requirements, builder’s obligations, privacy policy, and dispute resolution clause.

c. Construction Costs, Payment Terms & Final Payment

• Break down the contract price, construction costs, payment terms, schedule for advance payment, and timing for final payment.
• Clarify how additional costs and change orders are handled to prevent disputes over unforeseen circumstances or additional work.

d. Change Orders and Additional Work Clauses

• Require thorough documentation for all change orders and additional work requested during the project.
• Define the process for approval and pricing of any deviations to avoid cost overruns.

e. Mechanic’s Lien Notices and Legal Fees

• Check for mechanic’s lien notices to protect yourself from future claims by unpaid subcontractors or suppliers.
• Clarify responsibility for legal fees in the event of future disputes.

Avoid Verbal Agreements

All agreements about the construction process, square feet, or construction costs should be written. Verbal agreements are not enforceable and can result in disputes.

Verify Project Completion and Final Decisions

Ensure the contract clearly defines how final completion and substantial completion are determined, including a timeline for final walkthrough and final payment release. A good practice is to require a blue tape walkthrough, where any issues are marked for resolution before project completion.

Step 1: Attorney Review & Legal Advice

Have your contract reviewed by a legal professional. Legal advice and attorney review can identify potential problem areas and inclusion of a strong dispute resolution clause.

Step 2: Confirm Schedule for Regular Updates

Set terms for communication with the general contractor on a regular basis to remain informed about progress, possible additional costs, unforeseen circumstances, or required decisions.

Step 3: Monitor Progress and Change Orders

Conduct periodic on-site inspections, keep track of all change orders and additional work, and update the scope of work as necessary.

Step 4: Prepare for Final Walkthrough and Project Completion

Before making the final payment, conduct a thorough new construction walkthrough and a blue tape walkthrough to ensure all specific items, finishes, and light fixtures meet contract specifications. Address any incomplete work before accepting substantial completion.

Plan for the Unexpected

Even with a well-drafted contract, unforeseen circumstances—such as material delays or extreme weather—may cause changes to the completion date and escalate construction costs. Open communication is key.

Insurance, Property Damage, and Mechanic’s Lien

Verify who is liable for property damage during the construction process, and ensure proper insurance coverage is outlined.

Dispute Resolution Clause

A strong dispute resolution clause helps resolve issues without litigation, reducing legal fees and delays.

Documentation & Record Keeping

Keep all parts of the contract forms, change orders, inspection results, and signed agreements organized in case of future disputes. Keep a folder to have it all in one place – it can be digital or an old-fashioned binder.