Contracts with Builders in London: What to Include and What to Avoid

The majority of disputes between London homeowners and builders arise from misunderstandings about what was agreed — what was included in the price, what materials would be used, what the programme would be, and what happens when things go wrong. Without a written contract: there is no objective record of what was agreed; disputes about scope become a word-against-word argument; there is no defined process for agreeing variations (extra work and its cost); there is no defined programme or completion date, making it impossible to hold the contractor to a schedule; and there is no agreed mechanism for retaining money to incentivise the contractor to return to complete defects after practical completion. A written building contract is not a sign of distrust — it is professional practice that protects both the homeowner and the contractor. Any reputable London contractor will be comfortable signing a standard industry form contract. A contractor who refuses to sign any form of written contract is a significant warning sign. IMPORTANT: the contract document is only as good as the scope of works and specification it references — a contract that references a vague verbal description or a one-line quotation is not much better than no contract at all.

The construction industry has several standard form contracts developed for residential projects: JCT Minor Works Building Contract 2024 (JCT MW): the most widely used industry-standard form for small and medium residential renovation projects in London. Appropriate for projects where: a professional (architect or contract administrator) administers the contract; the works are reasonably well-defined by drawings and a specification; and the value is typically £50,000-£500,000. The JCT MW allocates risk clearly between client and contractor, provides mechanisms for valuing variations, and defines the process for certification, payment, and dispute resolution. Cost of the JCT MW form: approximately £50-£100 from the JCT website. JCT Homeowner/Occupier Contract (JCT HO): a simpler, homeowner-friendly contract designed for smaller projects without a professional contract administrator. Written in plain English. Appropriate for projects where the homeowner will manage the contract directly (without an architect) and the works are simpler. Appropriate up to approximately £50,000-£100,000 in value. The Federation of Master Builders (FMB) Building Contract: the FMB (of which RCB Design & Build is a member) provides a Building Contract form for use between FMB members and their clients. Similar scope to the JCT Homeowner contract but uses FMB-specific terms. Standard form available from the FMB. Bespoke contractor contracts: many larger London contractors have their own contract forms. These should always be reviewed carefully — a bespoke contractor form is drafted to protect the contractor's interests, not the homeowner's. Have any bespoke contractor contract reviewed by a solicitor with construction experience before signing.

Regardless of the form used, every building contract for a London project should contain: Clear description of the works: reference to the specific drawings, specifications, and scope of works documents. If only a verbal description or a brief quotation is used as the contract description, the contract is dangerously vague. Contract sum (price): the agreed price for the contract works and the basis on which it is calculated (fixed price lump sum, schedule of rates, or cost plus). All significant assumptions and exclusions should be listed. Fixed-price lump sums with clearly stated inclusions are the most straightforward for homeowners. Programme and completion date: a defined start date, key stage dates, and a final completion date. Without a completion date, a contractor cannot be held to a schedule. Liquidated damages provisions: if the contractor does not complete by the completion date and the delay is their fault, the contract should allow the client to deduct liquidated damages (a pre-agreed daily or weekly sum representing the client's loss). Payment mechanism: the schedule of stage payments (or monthly valuations) — when payments are due, what triggers each payment, and what the payment certification process is. Retention: a percentage of each interim payment is withheld as retention (typically 3-5%) until practical completion and then the balance until the defects rectification period expires. Retention is the homeowner's main financial incentive for the contractor to return to resolve defects. Defects liability period: typically 6-12 months after practical completion, during which the contractor is obliged to return to rectify defects that emerge. Variations procedure: how additional or changed work is instructed and valued. All variations should be agreed in writing before work starts — oral agreement to additional work is a very common source of dispute in London renovation projects. Dispute resolution: the mechanism for resolving disputes (adjudication under the Housing Grants, Construction and Regeneration Act 1996 is mandatory for construction contracts above certain thresholds; mediation or arbitration provisions are also common).

Payment structure in London renovation projects: the most common payment structures are: Fixed price lump sum with stage payments: the most appropriate for a well-defined, well-specified project. The total contract sum is agreed upfront. Stage payments are agreed at the start (e.g., 10% on contract signing, 20% on completion of groundworks, 20% on completion of roof, 20% on first-fix, 20% on second-fix, 10% on practical completion minus retention, then retention released after defects period). Cost reimbursable: the contractor charges actual cost plus a management fee or percentage. Used for projects where the scope cannot be fully defined upfront. Introduces cost uncertainty for the homeowner. Schedule of rates: the contractor prices each type of work at a rate per unit (£ per m² of blockwork, £ per m run of blockwork, etc.) and is paid on measured quantities. Useful for alteration and repair work where quantities cannot be predetermined. Deposits: a small deposit (10-15% maximum) on contract signing to fund mobilisation costs is common and reasonable. Avoid contractors who require a large deposit (30-50% upfront) before commencing work — this removes the financial leverage that ensures the work is done properly. Retention: 3-5% of each payment withheld. For a London extension costing £100,000, a 5% retention means £5,000 is held throughout the contract. At practical completion, 50% of the retention is released — leaving £2,500 held until the end of the defects liability period. This money is the client's primary incentive for the contractor to return to rectify defects. Never agree to a contract with no retention provision — this gives the contractor no financial incentive to resolve defects after they have been paid.

The most frequent sources of building contract disputes in London: Scope disputes: the client believes something was included in the price; the contractor says it was excluded. Prevention: use a detailed specification and scope of works as the contract document. Every significant element of the works should be explicitly described. Variation disputes: the contractor has done additional work and is claiming for it; the client disputes that the variation was instructed or agreed. Prevention: all variations must be instructed in writing by the client and priced in writing by the contractor before work starts. A signed instruction or a written exchange (email is acceptable) creates a clear record. Programme disputes: the contractor is significantly late; the client wants to deduct damages. Prevention: the contract must contain a completion date and a liquidated damages provision. Without these, the client cannot deduct damages — only sue for actual loss, which is harder to prove. Defect disputes: the contractor says the defect is not their fault; the client says it is workmanship or materials failure. Prevention: the specification in the contract should reference relevant British Standards and industry guidance for quality of workmanship and materials. The contract should contain a defects liability period requiring the contractor to return to rectify defects at their cost. Payment disputes: the contractor is owed money; the client is disputing the amount. Prevention: use a clear payment schedule with agreed stage milestones. The JCT contracts contain statutory payment notice provisions that must be followed — consult a solicitor if you are in a payment dispute.