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August 26th, 2025
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Before An Important Construction Project Begins Make Sure You Have All Of These Papers Signed
Aug 26, 2022
Unsplash/Jan Huber
When you embark on a big construction project, you must have a few critical documents. Among them are the building permit, the contractor's license, and proof of insurance. Make sure all of these are signed and in order before work begins. If they're not, it could cost you time and money. Let's take a look at each of these documents more deeply.
Construction Contract Agreement
This document spells out the terms of your relationship with the contractor. It should list the scope of work to be done, a timeline, and a payment schedule. Having this in writing is essential, so there's no confusion about what is expected from each party.
The rule of thumb is that the more detailed the contract, the better. That way, if there are disagreements down the road, you can refer back to the document to see who is responsible for what.
Surety Bond
This is a financial guarantee that the project will be completed. It protects the property owner in case the contractor defaults on the contract. The surety company will either pay for the completion of the project or find a new contractor to finish the job. The bond amount usually equals 10-20% of the contract value.
When searching for a surety bond, you want to ensure that the company is reputable and has a good rating. You can check the company's rating with the Better Business Bureau or another similar organization. Know that a bond party should be just as concerned about the project's success as you are. A precise knowledge of the project's scope of work and timeline is essential to getting a bond. Besides, ensure that the terms in the bond are the same as those in your contract.
Building Permit
This permit is required by law in most jurisdictions and permits you to begin construction. You'll need to submit plans for your project to the local building department to get a permit. Once your plans are approved, you'll be able to pick up your permit and get to work.
However, ensure that your permit is valid by checking that it has all of the following:
- The correct address for the project
- The name of the property owner
- The name of the contractor
- The permit number
- The date of issuance
- The expiration date (if applicable)
The permit may not be valid if any of these items are missing.
Scope of Work
This document needs to be comprehensive, as it will be used to determine the project's price. The scope of work should include:
- A detailed description of the work to be done
- The materials that will be used
- The start and end dates of the project
- The names of any sub-contractors who will be working on the project
Make sure you're clear about what you want before starting the project. The last thing you want is to be midway through and realize that the contractor misunderstood your vision. Besides, during the bidding process, you want to ensure that all the contractors are bidding on the same thing.
It should also state the handling of the change orders. Change orders are requests from the property owner to change the scope of work. They can be for adding or removing work, and they can also affect the schedule and budget. If not managed correctly, they can lead to big problems down the road.
Drawings and Specifications
These two act as blueprints for your project, including everything from the layout of the building to the type of materials that will be used. The contractor will use these to price the job and determine how long it will take to complete.
Before you begin construction, ensure that the drawings and specifications meet your expectations. Once construction starts, it will be challenging and expensive to make changes.
Lien Waiver
Unsplash/Dylan Gillis
This document releases the contractor from any liens that may arise from the project. Liens can happen when the contractor doesn't pay their suppliers or subcontractors. If this happens, the supplier or subcontractor can put a lien on the property. This means that the owner won't be able to sell or borrow against the property until the debt is paid.
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A lien waiver protects the owner by ensuring they won't have to pay for any debts incurred by the contractor. It's essential to get this in writing before the project begins. Otherwise, you could be on the hook for thousands of dollars.
There are a lot of important papers that need to be signed before a construction project can begin. Make sure you have all of them before you start so that there are no surprises down the road.
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