Factors to Consider When Signing a Contract with a Nigerian Builder

Hiring a builder in Nigeria is a major investment that requires careful consideration and thorough planning.

A well-structured contract serves as a legal safeguard against potential disputes, ensuring that both parties—homeowners and builders—are clear on their obligations and expectations.

This blog post explores the crucial factors to consider before signing a contract with a Nigerian builder.

1. Builder’s Credentials and Reputation

Before signing any contract, it is essential to verify the builder’s credentials, including:

Registration and Licensing: Ensure the builder is registered with the relevant professional bodies, such as the Council for the Regulation of Engineering in Nigeria (COREN) or the Nigerian Institute of Building (NIOB).
Past Projects and Portfolio: Review completed and ongoing projects to assess the builder’s competence.
Client Testimonials and References: Speak with past clients to gauge their experiences.
Legal Status: Verify that the builder operates a legitimate business with proper registration from the Corporate Affairs Commission (CAC).

2. Scope of Work and Project Details

A well-defined contract should outline the specifics of the project, including:

Design and Architectural Plans: Ensure the contract reflects agreed-upon building designs and structural plans.
Project Timeline: Clearly state the start and completion dates to avoid unnecessary delays.
Materials and Specifications: Define the quality, brand, and type of materials to be used.
Construction Methods: Detail construction techniques, safety standards, and compliance with local building regulations.

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3. Payment Structure and Terms

Discussing financial terms upfront prevents future misunderstandings. The contract should include:

Total Cost Estimate: A breakdown of all expenses, including labor, materials, permits, and miscellaneous costs.
Payment Schedule: Common structures include:
- Lump sum payments
- Installments tied to project milestones
- Retainage (withholding a portion of payment until project completion)
Payment Method: Whether payments will be made via bank transfer, escrow, or other financial arrangements.
Contingency Costs: A budget for unforeseen expenses should be included.

4. Legal Compliance and Permits

Construction in Nigeria requires several approvals. The contract should stipulate:

Building Permits and Approvals: The builder should obtain permits from relevant authorities like the Federal Housing Authority (FHA) and state building agencies.
Environmental Compliance: Ensure adherence to environmental laws to avoid demolition risks.
Local Government Levies: Some regions require payment of development levies and infrastructure fees.

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5. Liability and Insurance Coverage

Construction comes with risks, and it’s crucial to clarify:

Builder’s Liability for Defects: Who is responsible for repairing defects within a warranty period?
Insurance Policies:
- Builder’s Risk Insurance: Covers damage to the project.
- Public Liability Insurance: Covers third-party injury claims.
- Workers’ Compensation: Protects workers in case of injury.

6. Dispute Resolution Mechanism

In the event of disputes, a contract should outline:

Mediation and Arbitration: Alternative dispute resolution (ADR) methods before litigation.
Jurisdiction: Which court or governing body will oversee legal matters?
Termination Clauses: Conditions under which either party can cancel the contract.

7. Quality Assurance and Inspection

To ensure quality, the contract should include:

Supervision and Inspection: Hiring an independent project manager or quantity surveyor to oversee the work.
Compliance with Standards: Ensure the building meets Nigerian Building Code requirements.
Performance Guarantees: Define benchmarks for work quality.

8. Change Orders and Variations

Adjustments to the project should be formally documented in:

Change Order Clauses: Detailing how modifications are approved and priced.
Cost Adjustments: Stipulating price changes due to alterations.
Project Delays: Specifying how delays caused by modifications will be handled.

9. Subcontractors and Workforce Management

Builders often use subcontractors, so the contract should state:

List of Subcontractors: Identify who will be working on the project.
Payment Responsibility: Who pays the subcontractors, the builder or client?
Labor Laws Compliance: Adherence to Nigerian labour laws regarding worker rights and safety.

10. Handover and Post-Construction Obligations

A well-structured contract should cover:

Final Inspection and Snag List: A checklist of final fixes before full payment.
Handover Documents: Including architectural drawings, permits, and maintenance guides.
Defect Liability Period: A timeframe within which the builder must fix issues at no extra cost.

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Conclusion

Signing a contract with a Nigerian builder requires due diligence to avoid disputes and ensure successful project completion.

By carefully considering the factors outlined above, homeowners can safeguard their investments and achieve a high-quality build.

Always consult a legal expert before finalizing any agreement to ensure comprehensive protection.