Bud writes: Our contract is a fixed fee tied to the final cost per square foot, and it provides the builder a bonus for meeting the cost target. Should the bonus be held until the punch list is completed or paid at the final draw before punch list? Second, who typically pays for the punch list, the builder or the owner, if issues arise and the workmanship was not up to par originally?
Steve Bliss, of BuildingAdvisor.com, responds: This sounds like some variation of a cost-plus-fixed-fee contract, but the issues are similar with any contract.
As for when to pay the final check, retainage (or bonus, in this case), this is typically done at “substantial completion” with a hold-back for punch list items. The hold-back should be at least twice the value of the punch list work — the more you can hold back the better in terms of motivating the contractor to finish the job. You should definitely retain enough to pay another contractor to complete the job if necessary. If the hold-back amount is not covered in the contract, then it becomes a matter of negotiation between the owner and contractor.
The general idea is to not pay the contractor for work not yet completed so you have some leverage.
As for who should pay for punch-list items, on a typical fixed-price contract this work is definitely paid for by the contractor since the punch list work is required to fulfill the original scope of work. On a cost-plus job, it’s a little more murky if it is not specifically addressed in the contract. For standard punch-list items like a missing molding, I would expect the owner to pay. If the problems are with the workmanship, it’s a subject for negotiation. As an owner, I would be unhappy about paying a contractor to do something twice — first the wrong way, then the right way. On the other hand, the contractor might argue that the owner’s quality standards are beyond normal construction standards and therefore he should pay to get the work to his personal standards.
Burt K says
Flooring Installed Wrong, But I Signed Punch List
My contractor installed wood floors on top of a concrete slab. The floor is soft when walked on. The contractor said it was a floating floor. I came to find out that the manufacturer’s specs requires that the flooring be glued down directly to the concrete with poly-based adhesive,or it can float over a sound-deadening pad, with tongue-and-groove glue. The contractor did neither. I signed the punch list before learning about the flooring specs, which were not listed on the punch list. Do I have a leg to stand on?
buildingadvisor says
Without knowing a lot of the particulars, like what it says in your contract, what is in the plans and specs, and who said what to whom, I’d say that, in general: Yes you have a pretty good leg to stand on.
The normal standard of care in construction is that contractors should install materials in a “workmanlike manner” and a “according manufacturer’s written instructions.”
It is best to include this language in the contract, but even if it is not spelled out, I think it is a reasonable expectation that that contractor will install the work properly unless you have specifically agreed to an alternative, unconventional approach.
Since the contractor is the expert, and not you, I don’t think it is a reasonable expectation that you should know how this flooring is supposed to be installed. You signed off on the punch list based on your expectation that the floor was installed correctly.
The question now is how you get the contractor to come back and do the job right – that is, either glued to the slab or edge-glued over a pad (one type of floating-floor installation).
If you still own money on the job, you have leverage and should consider withholding final payment (at least enough to get someone else to complete the job), until it is done correctly. If you have paid in full, you will have to negotiate with the contractor. He may want you to pay for the extra cost of the sound- deadening board (assuming that’s what you want) if he did not include this in the original bid.
Some compromise by both parties is usually required to resolve these things without bringing in lawyers, never a good idea unless very large sums of money are involved and all other avenues have been exhausted.
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