Costa Rica Real Estate Building Contract – A document with caution

The building of a house by an investor or the owner, and the services of a responsible professional or company to execute the work, both need the signature on a vital document: the building contract.

Sometimes welcomed, sometimes feared, the building contract is the document where two parts agree on a series of items, which will eventually lead to the fulfillment of the project.

According to engineer Rolando Coto, the rules to draw up a building contract are simple:

• First, the mutual consent of both endorsing parties has to be free and clearly stated, and…
• Second, any proposals made in the course of drafting the contract, can be retracted if the either party does not agree to them.

“Building contracts are documents which are binding for both parties by law“, affirmed Mr. Coto.

Types of contracts:

A variety of building contracts exist. Those with a limited or partial extent of the building, those between client and building company, those between the foreman and the client, or the building company and the foreman.

The following forms may also apply:

1) Global contract: it is used when the exact estimate of the work is exactly known beforehand. The basis is the building plans and the specifications about the finish of the building. The client and the contractor agree on a fixed amount, which covers all the work and detailed services in the plans and technical elements.

2) Contract by units: the project is divided into successive parts. These parts are individually calculated and programmed for completion. The payments usually are upon receiving a finished part of the project.

3) Administrative or “turnkey ready” contract: here the client deposits all the confidence in the contractor or professional in charge (architect, engineer, company) for the comprehensive administration and execution of the project until it is handed over to the client. Generally informative and technical meetings are planned along the way, and payment options established.

4) Contract for professional services: these are usually signed between a client and a professional in the areas of architecture or engineering to attain a specific service. These contracts are of vital importance for the legal clearing of a project. The contracts are controlled by the Ley orgánica del Colegio Federado de Ingenieros y Arquitectos (Regulations of the Federation of Engineers and Architects), which points out the services and their corresponding fees.

Key aspects: there are many facets involving a building contract that have to be considered at the time of signing it (see Note). The fundamental parts of any contract are the building plans, being those that graphically identify the dimensions and extent of a project.

The building plans have to be in accord with the regulations of the Federation of Engineers and Architects, the municipality, and other governmental institutions that control various public services.

Mr. Coto points out that “building a house is an art by itself”, due to transparency and precision required to attend unexpected situations and their solutions, or establish, at least, the procedures to follow in such cases.

He adds: “at the time of drafting a building contract many elements have to be included, such as the comprehensive identification of the participating parties (c
édula, physical address, position), the objective of the project, the amount to be paid, and key documents like the plans, estimates, and scheduling.”

In the technical specifications a series of clauses have to be established, which describe in detail the qualities of surfaces, accepted tolerance limits, transport and storing of building materials, and finally the handing over of the completed work, including its function control.

Other aspects to be considered are the identification of the materials to be used, labor force, equipment and tools, transport, insurance and social protection of the workers, security, etc..

The scheduling of payments and its modes has to be included in the contract: if by check, deposit, or bank transfer, and the proof of payment.

Nobody said that building a house is an easy task, but if you take into consideration all the above, your money and your project will be safe.

Note: Contract details

1. Exact location of the property and its neighboring details.
2. Forms of payment, advances, withholdings, fines.
3. Unforeseen costs and taking care of the same.
4. Extra features: specify which parts of the construction will be considered as extras – usually by the building plans – and their completion.
5. Cancellation of the contract: specify the conditions under which the contract is broken or annulled.
6. Time schedule and handing over of the finished building. Acceptance of the same.
7. Independent of the type of contract that you may choose, it is important to specify the type of construction and its boundaries according the property registry (Registro Nacional).

Sources: Ing. Rolando Coto and the books “Construya Su casa” and “Lo barato sale caro” by Rodrigo Bermúdez.

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Andrew Makarik

to@welovecostarica.com

Andrew Makarik is the main editor of WeLoveCostaRica, a fan of this sunny country. He is also a loving husband and a has a lovely daughter. By being a devoted family man and the biggest Costa Rica fan, he wants to make more people feel at home there. WeLoveCostaRica unites people and helps them find new home or a new travel destination. This website is a friendly community where everyone can find not only information, but also new friends and travel pals. Andrew is also passionate about IT and programming, so he himself maintains a friendly atmosphere in this cozy environment of WeLoveCostaRica.com.