All construction contracts must have a termination clause otherwise when one party whats to terminate the contract (and it might be you) no one will know how to resolve the outstanding issues without going to court which will benefit no one. Don't let the contractor make up a one sided contract; get a professionally prepared contract and use it or copy the relevant portions of it. Here is the termination section of an AIA 107 Cost of the Work contract: "ARTICLE 19 TERMINATION OF THE CONTRACT 19.1 TERMINATION BY THE CONTRACTOR If the Owner fails to make payment to the Contractor for a period of 30 days, the Contractor may, upon seven additional days' written notice to the Owner, terminate the Contract and recover from the Owner payment for Work executed and for proven loss with respect to materials, equipment, tools, and construction equipment and machinery, including reasonable overhead, profit and damages applicable to the Project. 19.2 TERMINATION BY THE OWNER 19.2.1 The Owner may terminate the Contract if the Contractor: .1 persistently or repeatedly refuses or fails to supply enough properly skilled workers or proper materials; .2 fails to make payment to Subcontractors for materials or labor in accordance with the respective agreements between the Contractor and the Subcontractors; .3 persistently disregards laws, ordinances, or rules, regulations or orders of a public authority having jurisdiction; or .4 otherwise is guilty of substantial breach of a provision of the Contract Documents. 19.2.2 When any of the above reasons exists, the Owner may, without prejudice to any other remedy the Owner may have and after giving the Contractor seven days’ written notice, terminate the Contract and take possession of the site and of all materials, equipment, tools, and construction equipment and machinery thereon owned by the Contractor and may finish the Work by whatever reasonable method the Owner may deem expedient. Upon request of the Contractor, the Owner shall furnish to the Contractor a detailed accounting of the costs incurred by the Owner in finishing the Work. 19.2.3 When the Owner terminates the Contract for one of the reasons stated in Subparagraph 19.2.1, the Contractor shall not be entitled to receive further payment until the Work is finished. 19.2.4 If the unpaid balance of the Contract Sum exceeds costs of finishing the Work, including compensation for the Architect's services and expenses made necessary thereby, and other damages incurred by the Owner and not expressly waived, such excess shall be paid to the Contractor. If such costs and damages exceed the unpaid balance, the Contractor shall pay the difference to the Owner. The amount to be paid to the Contractor or Owner, as the case may be, shall survive termination of the Contract." --------- In a Cost of the Work contract, the contractor's proposed cause about cost increases makes no sense and makes me wonder if the contractor understands how a Cost of the Work contract works. Perhaps the contractor means that when costs are greater than the "Budget Estimate" the owner pays the up charge but that is the definition of a cost of the Work contract. Or there might be a Guaranteed Maximum Price that he hasn't told us about. If both parties do not know how to structure a contract (and this appears to be the case) I suggest hiring a design professional or lawyer to advise you in order to avoid unnecessary costly disputes later. This post was edited by Renovator8 on Wed, May 28, 14 at 9:18

This has come up many times. Seems like you get as low as 8% and up to 20%. It depends greatly on your local market. I personally think that builders at 8 and 10% are probably making some extra money elsewhere. I've also seen builders have a fixed fee or %age plus and then charge an hourly rate for their supervisor. Total crap but I've seen it and that was on top of an 18% fee. I paid 80k with a 540k cost on a 4000+unfinished basement. The problem with using that as a comparison is that in some markets that might be a basic house and in some it might be completely custom with far more complexity than a basic house. I am getting ready to pay a higher percentage to build in a more challenging area. In my mind I can justify that because it is a smaller house but more complicated at the same time.

Thanks luckymom23 & juniork! We are building in VA. We are talking to the builder today and have a list of questions to ask. The main one (after we hammer out a fixed price contract for the bank) will be adding and addendum that spells out the terms of the cost plus idea. The bank is fine with an Addendum, or at least the VP said as much by e-mail last night, so long as it's clear that the bank funds are separate. We can deposit our own money with the bank and they will release it along with the bank draws. It's not really cost plus 10%. It's cost plus 10% plus the fixed fee which is allegedly an incentive for the GC to not shop for high bids to charge the 10% on those high bids. But if the GC normally uses the same subs all the time then they know how much all of this stuff will cost....or at least they can project pretty close except if materials sky rocket again. The cost plus builder wants to make sure they are covered, which we understand. They don't want to do a true fixed price in case costs change dramatically like they did with hurricane Katrina. Looks like we will do a hybrid contract if they go for it, fixed price but with us getting receipts and requesting draws based on those receipts + 10%. The budget will already include the 10% so i.e., it's $16K for sheetrock, insulation and labor and the budget says $20K then the draw will only be for $17,600 (cost +10%). The budgets are all being projected based on bids from the usual subs. I know that the painter for the GC we prefer charges $3.25 psf and he does not spray but uses rollers. That is because if the GC has to touch up then it won't look horrible with their brush marks over a sprayed wall. The $3.25 psf includes labor so we don't need to worry if it takes him and his crew 2 weeks to paint our house. We will not need to be involved in selecting the subs. The GC's all use the same subs for every job. The GC we like best has used the same subs for about 7 years and the finished (and under construction) houses we saw all used basically the same subs. The trim work was AMAZING!! I wish I had taken photos. Our builder friend was very impressed - especially with the california closets (varnished bars) and the trim work behind the toilets (molding around the toilet valve instead of just sheetrock and paint). They just seem to do the little extras and that is why we like them best. We do count the garage when calculating the price per square foot, right? If we count the garage then we are paying (depending on which builder) $123 - $130 psf for 3705 sq ft assuming the cost plus contract comes in at budget and not one penny over. This does not include the payment for the lot though. Builder # 2 gave us a fixed price contract estimate that includes a $40,000 GC fee. And the 3rd builder wants a $24,000 GC fee with a fixed price contract. So yes, the builder we like is in line with all the others - right in the middle in fact as far as final price (assuming the estimates are dead on). Another thing we are requesting is that certain items NOT be on the budget. We see no reason to pay 10% extra for an appliance since the whole point in buying it on our own is to save money. I found a great deal on a 36" gas cooktop and it would defeat the purpose of me getting the deal on it if I pay the GC 10% of my cost in addition to the labor I know we need to pay for the install. I also plan to get my own kitchen cabinet hardware so we plan to ask that those items not be on the budget. I'm not sure if that will fly but we are asking. Thanks so much for the advice!!

helenill: May I play devil's advocate here for a moment? Keep in mind that I am totally on YOUR side, but maybe I can help you develop a strategy. You earlier posted this: "But I am still thinking that we need an accounting. I'm drafting an e-mail asking in a very polite way because we need to be able to show what we have in our house if we ever want to sell." Is that the rationale you're going to present to him for why you want an accounting now? Because it's not true and he will know it. The market and a willing buyer will establish the selling price of your home. How many houses are bought without the buyer knowing the price the owner paid for it? A LOT, especially if time has passed and especially if no realtor researches it for the buyer. You do not need an accounting to sell your house; that is NOT a believable rationale. Further, you have all the proof from your cancelled check records of what you paid for the house. Few buyers would ask to see how much you were charged for the nails, the paint, etc. Your GC knows that too. Again, it's a BAD rationale because you already have a summary record sufficient to prove to a future buyer how much you have in the house. Answer the question to yourself: why do YOU want an accounting? (Yes you may be "entitled" to one; yes, most GCs will provide one; that's not why you want one.) Now, separate that answer out and look at it critically. Is it a good rationale in your GCs eyes for giving you one? What you want to find is the rationale that he might be able to accept. And you might not be able to find a good one. You might end up saying just because we'd like to look at a breakdown of what everything cost. It would just be interesting to us to do that. (Do bear in mind that he might be feeling cautious about somehow indicting himself if he's done anything he shouldn't have.) Now, the other part of your strategy is timing. It is everything. Given that you two had words on Friday, an email he gets on this touchy subject of an accounting right now will NOT be well received. He will read into it vindictiveness or anger on your part. So, today/tomorrow is NOT a good time. What is? The point at which you owe him a lot of money. So much money that he won't want to walk away from it. That's the point at which you delay payment and tell him that, just like a bank, you want to get an accounting to date so you can "see where you are" before making any more payments. Be careful with this because absent any provision in your contract, you don't have a legal leg to stand on. And he knows that. But he might, out of some good will or whatever, be willing to cooperate. Myself, before I had any communication with him about this, or paid him anything more, I would talk with an attorney. I don't know what the laws are in your jurisdiction or how case law has been interpreted. Maybe there's a legal argument to be made that he has some obligation even outside of such a provision in your contract. I don't know and you don't know. But even aside from the law, simply as a personal business strategy, this is the point at which I always hire an attorney and tell her what I'm trying to accomplish and discuss strategies that might work, as well as find out exactly where I stand legally. Just to keep myself out of trouble. I've had attys sit down with me and compose an email for me to send and help me make it sound "civilian" rather than "attorney-like." In this case, an attorney can be a valuable consultant as a strategist, even aside from any strictly legal aspects. Holding the money, making a reasonable request (asking him to do you a favor, actually, if it's not provided for in your contract), being polite, controlling your anger, watching your timing. Hiring an attorney. That's about all the materials you have to work with in developing a strategy. But you need one. An email now from an angry customer is not likely to produce the results you want. If you're just angry, and that's your real answer to my earlier question, I'd just try to let it go.