Sweat Equity Agreement

shmealJune 3, 2012

Our builder wants us to sign a sweat equity agreement before we install the radiant heat and the low-voltage wiring in our home. He made it sound like it was a pretty straight-forward agreement and that they do this all the time and they would be very flexible to work with us. Even to the point of answering all of our questions and making suggestions of where to purchase the materials. But when we recieved the document from them yesterday it turned out to be 17 paragraphs of legalese that seems to be specified to buyers who bring in other subs to work on the house, not buyers who are going to be doing the work themselves in cooperation with the builder.

We are wondering how common it is to rewrite these agreements? There are quite a few parts we have issue with but two of the specific items we want changed are being charged $50 a day for every day we don't complete our work given the timeline they decided on. That timeline is based on subs (who have the experience and the tools to do the job quickly). We know we can do the work, but aren't sure we can complete it in five days. They also want us to get $2 MILLION in liability insurance. We aren't worth that. Not even close.

Also, is there is a paragraph that talks about the warranty that makes us really nervous. It seems to say that even though we install the PEX tubing correctly, if one of their subs inadvertently damages the tube (a nail or screw through it - or something like that), it won't be covered under warranty because we were the ones who laid the tubing.

We can take this to a lawyer which would add another week to our already delayed build. But we are just wondering if the builder is trying to force our hand to discourage us from moving forward with the DIY work.

I'm a little frustrated because in talking with the owner of the company we feel like everything is a bed of roses and we are all on the same team and working toward a common goal and he even makes us feel like we are the boss because it's our house and we are the ones who have to be happy. Then we get this document which throws all our good will out the window. DH was fuming and he doesn't show emotion easily. If you were in our shoes... Would you go right to a lawyer? Would you ask for a face to face meeting? Would you send an email stating the issues paragraph by paragraph and wait to hear their response?

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Before talking to a lawyer I would ask for a face to face meeting, there is always the possibility that they just sent you the standard agreement they use for owners hiring out other subs as they didn't have an agreement for owners doing their own work and didn't even realize that it wasn't applicable to your situation.

That is, assuming they have been easy to work with to this point and you don't think they are just trying to pull the wool over your eyes.

    Bookmark   June 3, 2012 at 2:45PM
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Does your contract with them have a completion date? If so, I can understand why they want to recoup $50 per day for everyday you take longer than a hired sub would IF the work that you are doing is going to hold up other subs. The GC is trying to manage a contract schedule based on how long things normally take to get accomplished. The sub that comes in after you are finished needs to know when to start.

    Bookmark   June 3, 2012 at 4:08PM
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Good suggestions Laura12. They have been easy to work with up to this point. I think that's what threw us for such a loop when we started reviewing the addendum. I'm typing up a letter right now requesting a face-to-face meeting asap and am outlining the changes we are requesting and the issues we would like to discuss before signing.

Dekeoboe, we did not put a specific completion date in the contract. Our builder is paying the interest on the construction loan so it is in their best interest to finish sooner rather than later (they told us four months - I'm assuming it will be five months and will be pleasantly surprised if we close earlier). I see your point about the other subs needing to be able to start on schedule so maybe rather than striking that completely we can ask them to rewrite it giving us a couple of days grace before the fines begin. That seems like it might be a fair compromise.

DH is just annoyed that they are already a week and a half behind the schedule they initially gave us so he had to rearrange a business trip once and now it looks like he is going to have to do that again. Since he had to change plane tickets and hotel reservations he was mad that they would try to charge him for causing delays that may be beyond his control. That's the part of it that bothers me the most - being penalized for weather delays or etc.

    Bookmark   June 3, 2012 at 4:26PM
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Sophie Wheeler

I'm not surprised that the builder sent you the standard contract if you are going to put yourself in the shoes of a regular trade. You take on that responsibility, then you take on the WHOLE responsibility. He expects you to behave as a regular trade would do, and do the job competently and on time. If you don't have the tools and can't do the job to the level that a pro would do and in a timely manner, then you have no business doing any of this sweat equity on the home. Any interest paid on this loan by the builder will ultimately be charged to YOU, and if you cause delays, you cost yourself. Don't be penny wise and pound foolish.

And yes, if you are going to act as a trade on the job, you need to make sure that you have insurance that will cover you in that capacity in case you injure yourself or accidentally burn the house down. If your insurance provider will not cover you for that, then stay the heck away from the job site as again, you can cause yourself more problems than you are "saving" yourself money.

    Bookmark   June 4, 2012 at 12:12AM
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Hollysprings, I appreciate your comments. I actually was able to go into the meeting with our builder today a little more level-headed because of what you wrote. DH was still loaded for bear although I was able to talk him down a little bit.

If anyone is interested in the resolution....the builder was very amenable to discuss all our concerns and questions and even made most of the changes we requested. We were able to reach a compromise that we were both happy with on the other points. In fact when we walked in he said, "I bet I can make you 85% happier in less than 5 minutes". And he did.

    Bookmark   June 5, 2012 at 12:53AM
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