Harris Law
304 North 35th Street
PO Box 712
Morehead City, North Carolina 28557
Phone: (252) 247-1880
info@harrislaw.net
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Building a Home

Many clients will ask us what they need to consider when building a home and hiring a contractor. We think they should consider the following.

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Your builder should provide to you a list of the names, addresses and phone numbers of all subcontractors who will be working on the construction. You should also be provided a draw schedule and time table for the construction. This will give you an idea of when draws will be made and how much to expect to pay with each draw.

There was a time when lenders were more prudent and required that before the lender disbursed each draw to the builder, the builder must provide to the lender a lien waiver signed by each subcontractor who performed work on the property since the last draw was disbursed. The builder would also be required to sign the lien waiver. Nowadays, many lenders no longer require this since the lending business has become so competitive and many builders consider getting lien waiver signed to be too burdensome. Because of this, subcontractors can file a lien on your home if the builder is not paying them. Getting lien waivers signed before each draw will ensure that all subcontractors are timely paid by the builder.

If you make changes to the home construction by adding or changing the plans, both you and the builder should put the changes in writing and both should sign them. This "change order" should specifically identify the work to be done and the cost. This is the #1 area of complaints we see. A door may be moved or a cabinet may be enlarged and when the bill comes it is twice what you thought it would be.

Some builders will insist that all lender draw checks be payable to the builder only. This leaves you out of the process and does not allow you to check everything out (including signed lien waivers) before money is disbursed by the lender to the builder. You may want to consider having the lender make you the co-payee of all draw checks so that the check cannot be deposited by the builder until you approve. If you cannot be present locally for each draw disbursement then you should consider hiring a local architect or an independent home inspector to perhaps be the co-payee and to assist you with this oversight.

If a subcontractor files a lien during construction and you are made aware of it, immediately advise your lender not to disburse any more draws until the claim is paid and satisfied. This notice to the lender should be in writing. If you fail to do this the lender could pay out more money to the builder in spite of the subcontractor's lien. Further payments to the builder could subject you to personal liability to the subcontractor for payment of the subcontractor's bill, and if the bill is not paid the subcontractor can file a lien on your property and hold a foreclosure sale to sell your property at public auction. If essence, to remove the lien you would have to pay the subcontractor twice (once to the builder and second to the subcontractor) for the same work. You should contact a lawyer immediately to assist you with removing the lien if one is filed.

Most importantly, you should have an attorney review he building contract before you sign. Most construction contracts are prepared by the builder and all too often are done so without the assistance of an attorney and are very general in nature. Such contracts are often slanted in favor of the builder. An attorney can make changes that will protect your interest without hindering the building process.