Before You Sign That Construction Contract in Colorado

Brian K. Stutheit's Construction Law Legal Blogs

Licensed for 39 years

Attorney in Littleton, CO

Contracts for new home construction are full of dangers for the homebuyer. Typical clauses slipped into long, detailed contracts by big home building companies include these clauses:

The homebuyer waives the right to sue. Instead, the clauses require the unhappy homebuyer to engage in binding arbitration. Frequently, the arbitrator is picked by the builder. We have even seen clauses in contracts which require the homebuyer to pay all the arbitrator’s fees.

The homebuyer agrees to close on the sale by a date certain, or forfeit her downpayment. This clause is then used by the builder to force the homebuyer to close on a home that is not even finished.

The contract has a clause that no verbal promises have been made. It is our experience that sales people often tell a prospect what great upgrades the prospect will get, what great warrainties are available, or how esily problems will be taken care of. When problems arise, the sales person seems to forget all about those promises, and the builder says, “look in your contract where you agreed there were no oral representations.” 

A worthless warranty. The warranty might say the builder gets to decide what is a reasonable defect repair. It is more limited in time than the law would allow. For example, a Colorado homebuyer may sue for breach of contract for 3 years. The warranty probably limits all rights to 2 years or less. It does not cover any defect which has not caused actual damage to the home, so a bad paint job would be excluded. Somewhere in the fine print the warranty says your only rights to repair are whatever the warranty provides; you have no right to sue for breach of contract, negligence or any other reason.
The builder does not actually show the homebuyer the warranty, or warranty booklet, until closing, so the buyer has no time actually read it and to ask questions.

The contract might provide that in the event of a dispute the builder may recover its attorney fees, without giving the buyer the same right.

Before you sign that new home contract, see a lawyer. You will be well informed, even shocked, by what the builder is doing in that fine print. The lawyer may not be able to negotiate each and every one-sided clauses out of the contract. The builder will not give you all that seems fair.  But you will go into the construction with your eyes open, and have a better deal than you would have otherwise. 

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