In previous articles, we’ve discussed the importance of choosing a licensed contractor with good references and compared the negotiated bid versus the competitive bid. After the general contractor (GC) has been selected, there are several pre-construction processes that need to happen:
The Contract: This document will govern every step of the construction project, so it’s very important that it is completely accurate and all details fully understood and agreed to by all parties. Key elements are an agreement on the plans, details, specifications, cost breakdown, financing, payment schedules, change order process, construction schedule, insurance, contractor’s duties and owner’s duties, dispute resolution and warranty. Taking the time to execute a well-written contract will pay off in a much smoother and more pleasant construction experience.
Permits: The general contractor usually coordinates this process. Depending on the complexity of the project, structural engineering may be required and other permits may be involved (septic, grading, demolition). The permitting agency (city or county) will evaluate the completed plans and permit application, checking for compliance with building codes and local ordinances. Some projects also require approval by the subdivision’s association.
Funding: At this point, most customers have determined their source of financing. For larger projects, a bank or mortgage company is usually involved. This will require an application from the customer, a copy of the contract documents, verification of the funds if a down payment is required, and often, the general contractor will need to be approved by the lender. The lender will also order the title work and an appraisal to establish the value of the finished project. Owner financed projects have more flexibility, but a contractor may require the customers’ funds to be deposited and disbursed through an escrow company.
Insurance: For a new building, “course of construction” insurance is required, which provides protection for the owner, the contractor and the lender from physical loss, such as a fire or theft. Remodeling projects generally just need an endorsement to the existing policy, ensuring that all parties are protected. The GC will also provide proof of their liability insurance to the owner and lender.
Preliminary Lien Notices: Mechanic lien laws can sometimes be confusing, but simply put, they provide protection for the contractor – a means to assure payment for work performed. If payment is not made, a lien can be placed on the project and it cannot be sold or financed until the lien is satisfied. However, the owner and lender must be notified in advance. This preliminary lien notice serves to let everyone involved know the general contractor, subcontractor or vendor intends to supply a service or product to a project and has a right to place a lien on the project if they are not paid. Once payment has been made, a lien release is issued, stating that the owner has made either a progress or final payment and releases rights to lien the property.
Site Protection: Prior to any new construction, the GC should take time to rope off the site in order to protect the existing vegetation and terrain as much as possible. Trees that are in close proximity to construction equipment should be wrapped to protect their trunks from scarring and breakage.
Most of these preliminary processes will happen simultaneously, but it still may take up to eight weeks for large projects, or just couple of weeks for a smaller remodel job. Most importantly, organization and ongoing communication during this time will ensure that everything is finally in place for that special day – ground breaking!
In the next article, we’ll discuss various aspects of the construction process, such as inspections, draw procedures, material selections and change orders. FBN
Written by Kevin Baltzell of Harmony Builders. More information is available online. http://www.harmonybuildersinc.com/