I am the director of operations for a general contractor and we have had substantial increases in the cost of building materials after a contract is signed and now asking the homeowners to increase the purchase price to help pay for these increase.
4 replies
May 27, 2021
Whether you can account for cost of material increases and pass those costs onto the homeowner will depend on the terms of your contract. If the contract contemplated the time horizon for the project and specifically allows for such increases, then you probably can. However, based on your question, it is more likely that your contract does not include such a clause. If that is the case, then the only way to increase the cost to the homeowner under the contract would be to come to an agreement with the homeowner and reduce it to writing. You might offer some upgrades that are not very costly, but add good value as consideration for the new agreement. In that way, you can recapture costs of materials and absorb it in labor hours or some other manner.
You should consult with an attorney before moving forward and a making a decision though.
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May 27, 2021
We do have an addendum to the Residential Resale Contract that does state:
Any substantial increase in the cost of materials that the builder incurs after contract acceptance will be the buyer's responsibility.
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May 27, 2021
That's a great clause and would most likely give you the right to increase the price. It would be prudent to write a letter to the buyer which 1) informs the buyers of the amount of the increase in costs, 2) itemizes the increased costs, and 3) cites this clause as both the reason and justification for passing the increased costs onto the buyers.
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May 27, 2021
Thank you for your quick responses, much appreciated.