Penalty Clause for building delay- such as?
- Thread starter ninsaga
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It is up to the client to stipulate the amount per week/ month etc. This could be based on the rental costs of a house per week/ month which would be incurred if the house was not completed on time. There is a school of thought that if a penalty clause is included in the contract this should be balanced with a bonus clause which would mean an additional payment to the contractor if the job is complted ahead of schedule.
Meathman99
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You should also expect that the builder will seek extra money for the job to arrive on schedule. He has to try to predict the weather over the next 5 - 12 months, he has to predict the conditions underground (Is the ground suitable for ordinary foundations) He also has to allow for non availability of materials due to strikes, etc
and that's all fine- which is taking it from a builders perspective. However if at the end on an agreed term, one finds that the builder has dragged things out & 2-3 months past that date - what are the typical penalties that one should have?
ningaga
Meathman99
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That is something that both yourself and the contractor are best in a situation to decide. It may be worth consulting an architect familiar with your site and design. items such as ground conditions, construction method(Timber frame v block built) Commencement date( Obviously less weather risk for a timber frame house starting now).
is correct, you can't just pick a number out of the sky and
charge this amount for every week the contract runs late. If you're
worried about delays then I suggest you employ a competent architect
who will explain the contract clauses in the RIAI contract to you.
charge this amount for every week the contract runs late. If you're
worried about delays then I suggest you employ a competent architect
who will explain the contract clauses in the RIAI contract to you.
..and that's my question... what have people typically put in place as penalties with their builder.
....... that's not my point.... so if anyone has built in such penalties in the past I wouldlike to know of their experiences.
ninsaga
The type of penalty clause really depends on what you are building e.g. a shopping centre opening X weeks late can accurately predict its lost revenue on a weekly or even daily basis - provided that the contract term is a realistic one then the clause can cover loss of revenue etc. In the case of a one off house its highly unlikey that any contractor will accept a penalty clause; in this instance a bonus for finishing on time or early might be more suitable than a penalty cluase. It must also be remembered that it is not in the interest of a contractor to remain onsite longer than necessary as his overeheads will increase e.g. hire of machinary or cabins.
It must be also taken into account that many delays occur due to lack of timely information from either the client or the design team, or indeed ongoing variations and changes which not only cost money but time. As far as bad weather is concerned, unless the weather is unusually bad, then the contractor cannot use this as an excuse.
The above comments regarding architect / RIAI contracts etc are important as they are well used to dealing with these issues, as are quantity surveyors.
It must be also taken into account that many delays occur due to lack of timely information from either the client or the design team, or indeed ongoing variations and changes which not only cost money but time. As far as bad weather is concerned, unless the weather is unusually bad, then the contractor cannot use this as an excuse.
The above comments regarding architect / RIAI contracts etc are important as they are well used to dealing with these issues, as are quantity surveyors.
I think that penalty clauses are more common on large scale building projects. It is unlikely that a contractor for a one off house would accept a penalty clause without feeling that he could complete within the agreed time frame. He might even add the penalty onto his quote for the job to cover himself anyway.
You may be better off talking in terms of retention money instead of penalty clauses. Our experience was of constructing a series of scheduled payments with the last (totalling 15% upwards of the overall budget) withheld subject to completion- including snaglist. That was incentivising for the builder who was out of pocket once the timeline derailed.
As it happened, there wasn't a happy ending for us but if it hadn't been for the retention money it would have been far more unhappy, and one-sided.
As it happened, there wasn't a happy ending for us but if it hadn't been for the retention money it would have been far more unhappy, and one-sided.
