Construction Contracts for Homeowners — What to Agree Before Works Start

A written contract protects both the homeowner and the contractor by:

**Establishing the scope**: the contract defines exactly what works are included (and what is excluded). Without a written scope, every change becomes a dispute about what was 'agreed'. A clear scope prevents the most common source of construction disputes — the client thought it was included; the contractor thought it was extra.

**Establishing the price**: the contract states the contract sum — the amount the contractor is entitled to be paid for carrying out the works as described. A verbal price is unenforceable and open to later revision.

**Establishing the programme**: the contract states the start date and the completion date (or period). Without a programme, a contractor who takes twice as long as expected has no contractual obligation to complete by any specific date.

**Managing variations**: changes during construction are inevitable. The contract should include a variation process — how changes are requested, priced, and approved in writing — so that the final cost is managed and documented.

**Managing payment**: the contract establishes a payment schedule — how much is paid at what milestones, when invoices are issued, and when payment is due. Contractors are protected by the Housing Grants, Construction and Regeneration Act 1996 (HGCRA) — statutory rights to interim payment and adjudication — on most residential projects.

**Providing remedies**: if the works are defective, late, or incomplete, the contract establishes the remedies available to the homeowner — rectification, retention, withholding payment, or termination in serious cases.

There are several standard-form contracts used on residential construction projects in the UK:

**JCT Building Contract for a Homeowner/Occupier (JCT HO/C)**: Prepared by the Joint Contracts Tribunal specifically for residential building projects where the client is a homeowner. Plain English, relatively short, and appropriate for extension and loft conversion projects. Widely used and familiar to residential contractors. Available from the JCT website for a modest fee (around £40).

**JCT Minor Works Building Contract (MW/MWD)**: The most commonly used standard form for small to medium construction works. More formal than the Homeowner version. Suitable for projects with an architect or contract administrator appointed to supervise the works.

**FMB Building Contract**: Prepared by the Federation of Master Builders (FMB) for use by FMB member contractors on domestic projects. Plain English, fair to both parties, and widely used by smaller contractors.

**Contractor's own form**: Many smaller contractors use their own contract form — a document prepared in-house or by their trade association. These vary significantly in quality and fairness. Before signing a contractor's own form, review it carefully against the checklist below.

• **What to be wary of**:
• •Contracts that allow the price to change without a formal variation process
• •Contracts with no completion date (or a completion date that can be extended indefinitely at the contractor's discretion)
• •Contracts with large upfront deposits (more than 10% of the contract value)
• •Contracts with no retention clause (allowing you to withhold a final payment pending defects correction)
• •Contracts that exclude liability for defects after completion

At a minimum, a residential construction contract should address:

**Scope of works**: a detailed description of the works — either written as a specification, or referenced to a scope document or architect's drawings. The more detailed, the better.

**Contract sum**: the fixed price, or a method of calculating the final price if it is not fixed (cost plus, provisional sums, etc.). If the price is not fixed, insist on a method for agreeing changes before they are carried out.

**Payment schedule**: interim payment amounts and triggers (e.g., 20% on start; 20% on completion of foundations; 30% on wall plate; etc.), final payment terms, and the retention (typically 5% held for 3–12 months after completion to cover defects).

**Programme**: start date, anticipated completion date, and the conditions under which the completion date can be extended (extensions of time) — e.g., for delays caused by the client, severe weather, or unforeseeable site conditions.

**Variation process**: how additional works or omissions are instructed, priced, and agreed in writing before the work is done. A variation instruction should be signed by both parties.

**Defects period**: a period after completion during which the contractor is obliged to return to rectify any defects that emerge. Typically 6–12 months. The retention is held through this period.

**Insurance**: the contract should require the contractor to hold public liability insurance (minimum £1 million — ideally £2 million or more), employers' liability insurance, and all-risk contract works insurance (insuring the works in progress against damage).

**Dispute resolution**: the process for resolving disputes — typically negotiation, then referral to an independent mediator or adjudicator. The HGCRA gives all parties in a construction contract the right to adjudication (a rapid, binding dispute resolution process) at any time.

When reviewing a contractor's quote and contract, watch for these warning signs:

**Very large upfront deposit**: a requirement for more than 10–15% of the contract value before works start suggests the contractor has cash flow problems or is not financially stable. Standard practice is a small mobilisation payment (5–10%) with the balance paid in stages against progress.

**No written scope**: a quote that simply describes the works in a sentence or two, without a detailed scope document, is a recipe for disputes about inclusions. Insist on a written scope.

**Vague exclusions**: common exclusions in a residential contract include unforeseen ground conditions, asbestos removal, changes required by Building Control, and works outside the agreed scope. These should be clearly identified — but vague exclusions worded 'all works not specifically included' give the contractor too much room to charge for things that a reasonable client would expect to be included.

**No programme**: a contractor who cannot give you a start date and a completion date is not planning the project properly. An approximate programme is the minimum; a detailed programme (week by week) is better.

**Price that changes without notice**: a contract that allows the contractor to increase the price without a formal variation process leaves you exposed. Any price change should require a written change order signed by both parties before the work is done.