Issues with building contracts

Industry type domestic contracts are prepared by industry bodies for the benefit of the builders. This means that if you are the owner watch out.

One of the points is Provisional Sums. Provisional Sums are not builder's money to claim unless there is expenditure and the builder has accounted for it.

It is therefore plainly wrong not to separate provisional sums from the contract sum available for progress claims because the builder should not be able to claim sums of money reserved for Provisional Sums that have not been spent. What should happen is this:

Original contract sum, less provisional sums, less contingency (if any)= adjusted contract sum.

Adjusted contract sum is what should be available for progress claims.

Some time ago one of my clients (on a large and expensive house) had 200k in provisional sums, almost all drawn down by the builders progress claims (with no substsntial PS work done) and then the builder conveniently went bust at lock up stage where he not only had 200k but also 65% of the contract amount. Imagine trying to finish that house on what's left.

Another issue is that external works, services and landscaping is a substantial expenditure and should be a separate item in progress claim schedule, but who cares? No one, until builder goes bust and there are insufficient funds to finish. Too late.

I have had countless clients who did not understand that PS was not builders money to have unless properly expended, so they just gifted it to the builders when it wasn't, through their ignorance.Just another way to be father Xmas without dressing up.

A proper pre contract review should alert you to your rights not just about PS but also many other things.