Penalty clauses in building contracts

Post by **2dandan** » Tue May 09, 2006 2:11 am

I'm buying from a developer.

I've waited long enough for the house, so I don't see that causing a big stink or falling out with the developer or builder will get me my house any quicker. It might cause more trouble than it's worth.

In any event, I'm only here for 2 weeks and the house will be finished in my absence anyway.

The developer and builder have generally been very helpful and obliging, except for an accurate completion date.

This seems to be a problem for the whole development, which has about 30 or more houses under construction.

Many of the houses are at roughly the same stage of completion.

It may well be that they will complete a large number of the houses at the same time, before they open the site up for occupancy or maybe it's cheaper to have the electric supply connected to a number of houses at the same time. I don't know.

Post by **igor1** » Tue May 09, 2006 10:33 am

True, its much better to maintain good relations.

Many times thai contractors are having trouble in completely finishing a job, or finishing 100 % as they say.

I think this is both because their view of what constitutes a finished product is different from most westeners, but also because that part of the job does not carry a large economical incentive for the construction company..

That is, in the beginning of a project a contractor needs to incurr high expences - expensive mashinery, set up camps etc.. In the end of the project the contractor only has a small team - a finishing crew on site, walking around doing small touch ups.. The contractor has at this stage been paid most of the moneys owed anyways so finishing a month of so later does not realy bother the company

The owner/developer has at this stage paid up 85% or so of the capital but until the house is ready built can not use it for its intended purposes and therefore looses out on the ability to use the house or rent it to someone else. Therefore every day matters.

In short, the contracor incurrs high capital costs in the beginning whereas the capital costs for the developer are high in the end (heavy bank loans and no revenue). Unless this is reflected in the contract (it is not in the standard contract, LD of 0,1 % is far lower than the cost of delay to the developer), one is opening a door for contractor developer problems.

That said,
The rains last year lasted far longer (in bangkok at least) than they usually do. Even if it might seem like an excuse, truth is that work will be delayed in heavy rains - if rains last two months longer than they
should, the project will be delayed.

In your case I would have a reasonable discussion with the developer, ask the company only to pay for the expences you actually incurred as a result of the delay (if you had so stay in a hotel as you could not access your house after the said completion date this would be a proper thing to claim for).

Post by **lomuamart** » Tue May 09, 2006 7:16 pm

Surely some of the point is that the developer takes some of the risk. That's what they're developing for anyway, isn't it?
So, that a developer has not done his/her sums right is hardly the buyer's problem.
Quite where a contractor fits into the equation, I'm not sure. They're hired by the developer, aren't they?
If so, why does the purchaser always have to pay? Seems messed up to me.

Post by **igor1** » Wed May 10, 2006 9:02 am

the question ow who hires who is also an interesting one..

Many developers do the contracts in a way that they sell the land to a buyer - and later words the contracts so that the buyer actualy employs the contractor - and the developer only "assists"

Post by **Burger** » Wed May 10, 2006 10:15 am

Exactly right egor, there's two contracts. One you enter into with the developer to buy the land and their 'overseeing' of the building work. One you enter into with the developer's proposed contractor, and that is purely a contract between you and the contractor to build your house on the land.
Some times though, the developer with offer full guarantees regarding the contractor and building works, therefore you are in no different a position as if the developer was building the house for you.
That's why I have said on here many many times, get a good solicitor, check the contract word for word and ask for any changes to contract BEFORE signing or paying deposits, you are in the driving seat more then.

I have known customers to sign contracts within a minute of being handed them and then have not even turned the front page over to read the next

Burger

Post by **igor1** » Thu May 11, 2006 12:02 am

I believe there are some benefits in officially building ones own house so it is not a complete scam.

There is some form of tax that one does not have to pay tax when selling a house one has built for the first time.

Do not know the details about this though

Post by **malcolminthemiddle** » Fri Nov 17, 2006 3:10 pm

Some outstanding answers to some old questions.

So what do we do when the developer finishes the house 25 days late and says that delay was due to:
a) 15 days lost due to those 5 no. terrible storms we had (beyond my reasonable control dear customer)

If the storms were exceptional then the Contractor should be allowed more time, exceptional can be determined by past weather records.

b) 5 days were due to faulty re-inforcing steels that I had to return and wait for replacements (beyond my reasonable control dear customer)

The Contractor is contracted to supply new materials without defects and within the time specified to complete the works, this should be expressly stated within the contract. Defective rebar is the Contractors problem and not beyond his reasonable control, he can always accelerate to catch up the delay. No extra time.

c) 5 days were due to my labour force striking due to their dissatisfaction at how many public holidays we receive in Thailand (beyond my reasonable control dear customer)

The Contractor is responsible for supplying adequate, suitably skilled workers to complete the works within the specified time. Labour discontent is the Contractorâ€™s problem not the Buyerâ€™s, he can always accelerate to catch up the delay by increasing the workforce. No extra time.

What do we say ? What can we say ?
Take them to court and look over your shoulder for the next year or so ?

No that would not be wise. But having some financial leverage when the Contractor comes for his final payment including all those extras you asked for, would be.

If you want to challenge the wording/phrasing of contract conditions, do it BEFORE you sign it, then you have leverage.

Agreed, look look for "show stoppers".

Post by **Burger** » Fri Nov 17, 2006 4:33 pm

All nice ideas in theory Malc, and applicable in the 'Western World', but in the reality of dealing with small to medium sized Thai contractors, they do not seem to hold much sway, unfortunately.

Burger

Post by **lomuamart** » Fri Nov 17, 2006 5:38 pm

My property in the UK has lost 20k (Baht) this month because the works weren't completed on time. But I will be trying to claim compensation when the time is right.
Try it in England. I'll write chapter and verse.

Post by **malcolminthemiddle** » Fri Nov 17, 2006 5:54 pm

Hi Burger,

Couldn't agree with you there more.

One of the benefits of having a Developer in between the Buyer and the Contractor.

Post by **PeteC** » Fri Nov 17, 2006 6:57 pm

malcolminthemiddle wrote:Hi Burger,

Couldn't agree with you there more.

One of the benefits of having a Developer in between the Buyer and the Contractor.

I think there's an alternative. Perhaps a Thai male member of the family who has a good education who can put the fear of God into them. Alternatively, a bettle nut chewing grandmom or mom with a stick in her hand when she realizes her favorite child is getting ripped off.

I've actually seen the latter work and an entire load of crap floor granite and bathroom fixtures put back onto the truck. Pete

Post by **Burger** » Sat Nov 18, 2006 3:10 am

Couldn't agree with you there more.
One of the benefits of having a Developer in between the Buyer and the Contractor.

Unfortunately many people here do not have developers and are using contractors directly to build a house on the land plot they bought.

Also many developers enter into a contract with you to sell you their land, they set you up with a seperate contract with the building contractor to build your house, but the developer is not part of this contract.

As I said 6 months ago on this thread, check the contract and add/ammend it BEFORE you sign it.

Cheers,

Burger

Post by **STEVE G** » Sat Nov 18, 2006 5:51 am

Prcscct wrote:

Perhaps a Thai male member of the family who has a good education who can put the fear of God into them. Alternatively, a bettle nut chewing grandmom or mom with a stick in her hand when she realizes her favorite child is getting ripped off.

Iâ€™m going along with Peteâ€™s idea, I reckon our place up in the NE was built well because the family was around to sort out all the problems.
When I build in Hua Hin, I will get some of them down to encourage things; two of my partnerâ€™s brothers are Bangkok police, so either both of them armed, or the mother-in-law un-armed, should do the trick!