Contracting with Your Development Team

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  • Before You Start
  • Build it Yourself or Hire a Developer
  • Concept and Planning
  • Creating & Managing Your Team
  • Site Selection
  • Design and Pre-Construction
  • Financing
  • Construction
  • You must enter into a legally binding contract with each development team member prior to the commencement of services. The contract must clearly spell out the scope of, the timeframe for which services will be provided, the respective parties’ rights and responsibilities, and the fee schedule. Form contracts developed by the American Institute of Architects (AIA) are the industry standard in the development process used by architects, general building contractors, construction management firms, and lenders. Building contractors may also use standardized forms provided by the Associated General Contractors of America (AGC), and you’ll need contract modification forms used for “change orders.” In addition, there are contract forms for bonding, insurance, and other legal representations and warranties. Rights, responsibilities, and duties that should also be addressed in the contracts. Your development team must read all contracts closely to understand their key terms and conditions, even if they appear to be a standardized form. Your legal counsel should also review all documents before you sign any contract.

    What Every Contract Should Include

    • The parties to the contract
    • The purpose of the contract (e.g., to retain the services of a project manager)
    • The scope of the agreement (e.g., to assist with site selection, selection of contractors, monitor construction, and oversee move-in)
    • Roles, duties, and responsibilities (examples: attend all project meetings, inspect all construction work, etc.)
    • The time of performance (examples: deadlines, start and end dates)
    • Compensation
    • Termination clauses
    • Cost-savings clause (in case GC finishes the project ahead of schedule and under budget)

    Related link in Essential Resources: Different Bidding Processes and Contract Types

    Legal Disclaimer:

    Nothing in this material should be construed as investment, financial, brokerage, or legal advice. Moreover, the facts and circumstances relating to your particular project may result in material changes in the processes, outcomes, and expenses described herein. Consult with your own professional advisors, including your financial advisors, accountants, and attorneys, before attempting to consummate any transaction described in this material.