Before you buy developed lots, consider these tips for home builders to help make sure you aren’t taking on unnecessary risk. After all, no matter how well constructed a house is, it’s only as good as the lot that it’s built on. Issues with the lot could result in costly repairs to the house and those costs may be your responsibility.
Recently, one of our customers purchased a developed lot that had improperly prepared soil. The land had to be filled for levelling and the improper soil compaction caused significant movement in the foundation, resulting in damage to the house. Even though the home builder wasn’t involved in the development of the lot, their contract with the developer said that the developer was not responsible for this type of liability or damage. As a result, the home builder could not pursue the developer for the cost of repairing the house.
Issues like these showcase why it’s important that home builders do their homework before purchasing lots from developers. Following these tips may help you identify potential issues before they arise.
Tips for home builders: before buying developed lots
1. Research the developers you plan to buy from and only purchase building lots from those who have a good track record in the industry.
2. Consider requesting the the following technical reports from the developer:
- Geotechnical evaluation report
- Deep fill report
- Slope stability report
- Material testing reports
3. If geotechnical reports are not available, make sure that these reports are not required by law (for example, if you’re purchasing a lot between two already constructed buildings)
4. Have your geotechnical engineer review the reports to identify any potential problems.
5. If your geotechnical engineer identifies potential problems with the soil conditions, bring them to the attention of the developer. If the developer can’t fix the issue to your satisfaction, consider purchasing a different lot.
6. Discuss the purchase contract and all documentation with your lawyer. Be sure to ask you lawyer about any ‘Hold Harmless’ contracts or sections. If it is included discuss the repercussions with your lawyer to be sure you are aware of all risks, for example if there are geotechnical concerns, the contract may say that you will not be entitled to recover future damages for such liability or damage from the developer.
There are a number of risks that are unique to the home building industry. Being able to identify those risks and following best practices can help you protect your business from unpleasant surprises in the future.
This blog is provided for information only and is not a substitute for professional advice. We make no representations or warranties regarding the accuracy or completeness of the information and will not be responsible for any loss arising out of reliance on the information.
