New house construction - do I need an attorney?
-
- Posts: 373
- Joined: Tue Feb 23, 2016 8:32 pm
New house construction - do I need an attorney?
Currently finalizing plans and specs with developer/builder. Developer owns the lot. I would take out a construction loan. Bank would pay the builder in periodic draws as the work gets done. I was originally thinking of buying the lot and house in one transaction but I'm thinking I don't want my money being used to build a house on a lot that the developer owns. So now I am thinking of purchasing the lot first and then signing the contract to build later.
I contacted one law firm and the impression I got was why do you need us? The title company will do the research, what do you want us to do?
So, what does the collective group think? Do I need an attorney to look over the lot closing documents, & contact to build? Is there s better way to frame what I would want them to do?
I contacted one law firm and the impression I got was why do you need us? The title company will do the research, what do you want us to do?
So, what does the collective group think? Do I need an attorney to look over the lot closing documents, & contact to build? Is there s better way to frame what I would want them to do?
Re: New house construction - do I need an attorney?
I don't think I would want to own the lot while they build. For starters, you'd likely have some EPA liability for erosion and sediment discharge. May be worth having an attorney read the purchase agreement, but honestly I think you're just looking at a standard real estate transaction where you get the lot & house at settlement.
- Sandtrap
- Posts: 19591
- Joined: Sat Nov 26, 2016 5:32 pm
- Location: Hawaii No Ka Oi - white sandy beaches, N. Arizona 1 mile high.
Re: New house construction - do I need an attorney?
Why?Tracker968 wrote: ↑Tue Nov 30, 2021 10:50 am Currently finalizing plans and specs with developer/builder. Developer owns the lot. I would take out a construction loan. Bank would pay the builder in periodic draws as the work gets done. I was originally thinking of buying the lot and house in one transaction but I'm thinking I don't want my money being used to build a house on a lot that the developer owns.
So now I am thinking of purchasing the lot first and then signing the contract to build later.
I contacted one law firm and the impression I got was why do you need us? The title company will do the research, what do you want us to do?
So, what does the collective group think? Do I need an attorney to look over the lot closing documents, & contact to build? Is there s better way to frame what I would want them to do?
Isn't this a full package sale upon completion?
j
Re: New house construction - do I need an attorney?
OP, you haven't mentioned what state you're in. Local custom makes a very bug difference. While I have no experience with new home construction as you're proposing, from my experience buying and selling resale homes in California and Illinois, in California, attorneys are not normally used and the title company makes sure everything is done correctly; in Illinois, attorneys are used and the title company is passive just following the instructions they are given.
-
- Posts: 373
- Joined: Tue Feb 23, 2016 8:32 pm
Re: New house construction - do I need an attorney?
State is Wisconsin.
It can be a package deal, or I can purchase the lot first. My choice.
It can be a package deal, or I can purchase the lot first. My choice.
-
- Posts: 3286
- Joined: Tue Oct 02, 2018 6:10 pm
- Location: NYC
Re: New house construction - do I need an attorney?
OPTracker968 wrote: ↑Wed Dec 01, 2021 11:04 pm State is Wisconsin.
It can be a package deal, or I can purchase the lot first. My choice.
You need an attorney who is familiar with AIA 101
https://www.aiacontracts.org/contract-d ... contractor
https://help.aiacontracts.org/public/wp ... 1638421720
You need advice from your Architect who can check against the GC contract and plans & specification.
https://www.aiacontracts.org/contract-d ... -agreement
Will the bank have their own construction monitor? I would request for one.
best
Re: New house construction - do I need an attorney?
One thing that a lawyer will help with is to make sure that you are protected if something unexpected happens.
There was a post awhile back where someone was having a house built and they had a good contractor and it was going well.
Then the contractor died in something like a car accident or they had a heart attack.
They were left with a half built house, unpaid subcontractors, some house plans that could not be found, building permits that were in the contractors name, and it was not clear who could represent the contractor if they needed someone to sign off on something. They were also having problems finding a contractor to finish the house since they did not want to take on the liability or have to deal with the mess. I never heard how that was resolved.
I have also heard of things happening like a house under construction having fire or storm damage.
There was a post awhile back where someone was having a house built and they had a good contractor and it was going well.
Then the contractor died in something like a car accident or they had a heart attack.
They were left with a half built house, unpaid subcontractors, some house plans that could not be found, building permits that were in the contractors name, and it was not clear who could represent the contractor if they needed someone to sign off on something. They were also having problems finding a contractor to finish the house since they did not want to take on the liability or have to deal with the mess. I never heard how that was resolved.
I have also heard of things happening like a house under construction having fire or storm damage.
-
- Posts: 3286
- Joined: Tue Oct 02, 2018 6:10 pm
- Location: NYC
Re: New house construction - do I need an attorney?
I know of a developer whose project was 70% completed and it was burned down completely, fortunate for the developer & GC had insurance, it took months to resolve.
Re: New house construction - do I need an attorney?
Everyone building a home on their own lot should have a builder’s risk policy. If you have a construction loan the bank will require it.retire2022 wrote: ↑Thu Dec 02, 2021 12:28 amI know of a developer whose project was 70% completed and it was burned down completely, fortunate for the developer & GC had insurance, it took months to resolve.
Yes, get a lawyer to review the contract for any “gotchas.” Also, be aware that contracts can’t protect against everything. I’m a lawyer, my ex was an architect, and when we built in 2007ish we paid a lot of attention to the contract, which started with the AIA form. The contractor didn’t pay attention to it and we ended up in a dispute.
Re: New house construction - do I need an attorney?
Do you need an attorney? Around here most don’t engage counsel, but it sounds to me like a consult for you might be advantageous.
I would ask the lawyer if whatever structure will be used will protect you in the event the general contractor goes bankrupt or the GC fails to pay any of the subs, or their failures of performance, etc. I would discuss with the lawyer whether not he/she thinks the lawyer needs to read the contract documents. That is to say, in the consult I’d be flying at 30,000 feet and tackling the big risk sort of issues, and asking the lawyer how far down in the weeds he/she should get.
In my experience, as a retired lawyer who represented banks, and also personally having built and renovated homes, engaging a quality general contractor that you could trust on a handshake is job one (I recommend a written contract of course, but I think you get the point of the trust on a handshake).
Also, of course, reach out to your insurance professional and make sure he/she is satisfied you are well protected.
I would ask the lawyer if whatever structure will be used will protect you in the event the general contractor goes bankrupt or the GC fails to pay any of the subs, or their failures of performance, etc. I would discuss with the lawyer whether not he/she thinks the lawyer needs to read the contract documents. That is to say, in the consult I’d be flying at 30,000 feet and tackling the big risk sort of issues, and asking the lawyer how far down in the weeds he/she should get.
In my experience, as a retired lawyer who represented banks, and also personally having built and renovated homes, engaging a quality general contractor that you could trust on a handshake is job one (I recommend a written contract of course, but I think you get the point of the trust on a handshake).
Also, of course, reach out to your insurance professional and make sure he/she is satisfied you are well protected.
Re: New house construction - do I need an attorney?
We had one where the owner died and we had to value the half built house (together with the contract) for estate tax purposes.
- fishandgolf
- Posts: 794
- Joined: Fri Nov 25, 2016 1:50 pm
Re: New house construction - do I need an attorney?
DW and I live in Green Bay Packer country also. We built a new house (first one) in 2019. Initially, we discussed our intentions with a developer from southern WI. He offered to purchase the lot then build the house to our spec. I didn't get the warm and fuzzies from this guy so we purchased the lot ourselves then hired a local General Contractor who had a sterling reputation.Tracker968 wrote: ↑Tue Nov 30, 2021 10:50 am Currently finalizing plans and specs with developer/builder. Developer owns the lot. I would take out a construction loan. Bank would pay the builder in periodic draws as the work gets done. I was originally thinking of buying the lot and house in one transaction but I'm thinking I don't want my money being used to build a house on a lot that the developer owns. So now I am thinking of purchasing the lot first and then signing the contract to build later.
I contacted one law firm and the impression I got was why do you need us? The title company will do the research, what do you want us to do?
So, what does the collective group think? Do I need an attorney to look over the lot closing documents, & contact to build? Is there s better way to frame what I would want them to do?
We did not hire an attorney. Actually...and this may sound a bit odd or even risky, but everything with this guy was done on a handshake; we never signed a contract.... nothing; he never even asked us to so we didn't. How did things turn out? Wonderful This guy, and all his subs did an outstanding job. His communication and follow-up skills were A+++. There were a few snafus along the way but most of it was on us. We were neophytes at this and we learned so much about the home building process.
Good luck to you and your family!
-
- Posts: 373
- Joined: Tue Feb 23, 2016 8:32 pm
Re: New house construction - do I need an attorney?
Thanks for all the feedback. I haven't heard of AIA101 before. The bank providing the construction loan does have an inspector who needs to sign off before each draw is paid out. Good points about needing insurance during the build. I guess someone would need insurance during construction, either the builder or me, or maybe both. I'll try to find an attorney. First one didn't seem interested.
Re: New house construction - do I need an attorney?
Builder's Risk is a commercial policy. The Builder should be carrying that. It is very difficult to find a company that will sell one to the homeowner. Assuming the Builder has a builders risk policy, the home owner should then have a Course of Construction policy to protect their interests.chazas wrote: ↑Thu Dec 02, 2021 6:48 amEveryone building a home on their own lot should have a builder’s risk policy. If you have a construction loan the bank will require it.retire2022 wrote: ↑Thu Dec 02, 2021 12:28 amI know of a developer whose project was 70% completed and it was burned down completely, fortunate for the developer & GC had insurance, it took months to resolve.
Yes, get a lawyer to review the contract for any “gotchas.” Also, be aware that contracts can’t protect against everything. I’m a lawyer, my ex was an architect, and when we built in 2007ish we paid a lot of attention to the contract, which started with the AIA form. The contractor didn’t pay attention to it and we ended up in a dispute.
Once in a while you get shown the light, in the strangest of places if you look at it right.
Re: New house construction - do I need an attorney?
Not to be pedantic, but that’s what we had, it wasn’t hard to get, and every link on the google says “builders risk insurance, also known as course of construction insurance.” Whatever it’s called it’s needed.marcopolo wrote: ↑Thu Dec 02, 2021 8:13 pmBuilder's Risk is a commercial policy. The Builder should be carrying that. It is very difficult to find a company that will sell one to the homeowner. Assuming the Builder has a builders risk policy, the home owner should then have a Course of Construction policy to protect their interests.chazas wrote: ↑Thu Dec 02, 2021 6:48 amEveryone building a home on their own lot should have a builder’s risk policy. If you have a construction loan the bank will require it.retire2022 wrote: ↑Thu Dec 02, 2021 12:28 amI know of a developer whose project was 70% completed and it was burned down completely, fortunate for the developer & GC had insurance, it took months to resolve.
Yes, get a lawyer to review the contract for any “gotchas.” Also, be aware that contracts can’t protect against everything. I’m a lawyer, my ex was an architect, and when we built in 2007ish we paid a lot of attention to the contract, which started with the AIA form. The contractor didn’t pay attention to it and we ended up in a dispute.