Master Builders Contract Subject to Finance Clause: Everything You Need to Know
A master builder contract is a legal agreement between a homeowner and a building contractor for the construction or renovation of a property. It outlines the scope of work, project timeline, payment terms, and other essential details of the project. However, something that many people may not be aware of is that a master builder contract is often subject to a finance clause.
What is a finance clause?
A finance clause is a provision in a contract that makes the agreement conditional on the buyer`s ability to secure financing. Essentially, it provides an « out » for the buyer if they cannot obtain the necessary financing for the project. This clause is particularly important in the context of a master builder contract since construction and renovation projects can be incredibly costly.
What is a master builder contract subject to finance clause?
A master builder contract subject to finance clause is a legal agreement between a homeowner and a building contractor that includes a finance clause. It allows the homeowner to back out of the contract if they are unable to secure financing for the project. This clause protects the homeowner from financial hardship and ensures that the project will only proceed if the necessary funds are available.
Why is a master builder contract subject to finance clause important?
A master builder contract subject to finance clause is important for several reasons. Firstly, it protects the homeowner from financial hardship. If a homeowner were to sign a contract without a finance clause and then find out they cannot secure financing, they would be contractually obligated to pay for the project out of their own pocket or face legal consequences.
Secondly, a finance clause protects the building contractor. If a homeowner is unable to secure financing, the project cannot go ahead, and the contractor may miss out on potential income. A finance clause ensures that the contractor is not left out of pocket if the homeowner cannot fulfill their financial obligations.
Finally, a finance clause provides a level of certainty for both parties. It ensures that the project will only proceed if the necessary funds are available, reducing the risk of disputes down the line.
How does a finance clause work in practice?
When a homeowner signs a master builder contract subject to finance clause, the contract becomes conditional on the homeowner securing financing for the project. The finance clause will outline the terms of the financing that are required for the project to proceed.
If the homeowner is unable to secure financing, they can invoke the finance clause and terminate the contract. The homeowner may be required to provide evidence that they have made reasonable efforts to secure financing before invoking the clause.
If the homeowner is able to secure financing, the project will proceed as planned, and the finance clause will no longer be in effect.
In conclusion, a master builder contract subject to finance clause is an essential provision that provides protection for both homeowners and building contractors. It ensures that the project will only proceed if the necessary funds are available and reduces the risk of disputes and financial hardship. If you are considering a construction or renovation project, it is essential to ensure that your contract includes a finance clause to protect yourself and your contractor.