You need to talk to a lawyer, but it sounds as if you didn't do your due diligence on the contract and may well be liable for the additional money.

It's a lousy situation and I think the builder should have been more forthcoming about the cost of the things you were choosing. On the other hand, if you were choosing high end finishes, you should have realized that they would come at a cost.

It sounds as if you were "overbuilding" your small house. I can't imagine a house with that few sq ft costing that much. And your bank obviously didn't either.

The entire thing is a debacle.

What does the design contract say?

I think that overall you will end up settling to pay the $5K for the second round of design that was going to be rolled into the cost of the house - since the house is not being built, the design work was still done. I'd offer to settle for that, if I were you, and move the heck on.

With all due respect, an online forum is going to give you opinions you may or may not want to hear. Take out your contract and read it.

It is all in the written contract(s) you signed.

It sounds like you are in a INSANE high price range in the country and the GC is trying to rip off all of their customers to make as much profit as possible. Hey.....more profit......more time in the Caribbean...... I hate to say it but 'most' GC's want to rip off as much as they think they can get away with in their area. Ditto on the lawyer.

You need a lawyer. Even if your contract states that you have to pay all that, you still need a lawyer to advise you on whether that's actually enforceable. Just because something is written into a contract does not automatically mean it's enforceable.

Just to give a counter opinion. Hiring a lawyer costs money. Just not paying them anything costs nothing. Now, you mention "province", use dollars, and speak English so I think that limits you to Australia and Canada. Obviously, this non lawyer barely understands my own state's creditor laws let alone another country's. But I think one of your options is to just ignore them. It depends of course on court costs, their ability to assign extra court costs, the financial hurdles to get to court, their ability to damage your credit etc etc.

So time to find a website for credit/legal advice in your jurisdiction.

Components of your scenario happen in the US but not as bad. Appraisals are commonly below custom build costs in most of the country. Overruns are very common. Budgets are blown all the time. I am not sure why designs and budgets get so out of touch but you are not alone. What I've typically done is look at a budget of a similar house and then dissect it before completely design phase. You can then get hit with specific lot costs, inflation or price changes, and more but not 50% overruns.

Seems to me that they could have given you some rough ideas for price reductions without spending another $5k and some better explanation than - "expensive finishes". In the US cost structure getting $300k extra from expensive finishes on a small house is pretty tough without doing some really crazy stuff.

lol, robin0919 are you sure you aren't the OP. Of course it's all a conspiracy for all GC's to rip off the world........................

Seriously C H, you have a contract that is supposed to protect both parties. I would hope your attorney was involved in structuring your contract for potential issues for your protection. You need to read the contract and consult that attorney as no one can tell what is in the contract you both agreed to.

Does your contract specify 22k termination fee or not? If not, I would not be paying one cent.

Does your contract specify when you should start a building process... otherwise it is 25 years from now.

What does it say of conditions... Such as be able to finance the property.. expectations...

Ahh! This is my worst nightmare come true! Can I ask what province you're in?

That's an email I'd be ignoring. The above posters are correct - just because it's in a contract, doesn't mean it's enforceable. Just like when you sign damage or injury liability waivers - they're not worth the paper you write them on if you're actually injured. (This is what I do for a living) However, I will say that you need to consult an attorney. You may pay a few hundred dollars, but that's worth the peace of mind IMO.

Invest in a small chat with an experienced real estate attorney. I'll bet he says to make them sue you.

IF the contract is enforceable, a good attorney would recommend negotiations prior to the actual filing of a suit. Any attorney should tell you that a lawsuit is a really inefficient and expensive way to resolve contract disputes. To really give good advice on this matter, one would need to see the actual contract and then know the applicable state legal requirements - but it sounds like the consideration part of this contract will be where the focus of this dispute will lie.

Just a quick search reveals OP is in Alberta, Canada - which is way out of my realm, but it does appear that there are publications regarding the legal contract dispute process.

Assuming the contract is silent on this, regardless of the local law, you are still dealing with people.

Having been through something "similar", (first project WAY over budget, architects offered a significantly reduced fee for the re-do) I would say that the second design phase actually occurred and had this other opportunity came along, you would have continued. The design folks got paid and there were, in fact, real expenses. The fact that they offered to roll it into the house price was nice, but if you walk away, they will feel cheated.

So - if you offer something that appears to be reasonable (based on what they said their design fee for round 2 was going to be) to "make them whole" and then part company - I think it's going to be hard to argue against that being fair and reasonable.

Alternatively, you could walk away and wait for them to sue you, but that's not something I would be comfortable with.

Janni, they designed a house that was so far out of the OP's budget. And then to bring the cost down, they asked for more money? Why should the OP now have to pay even more for a house they can't still build since it's still way out of their budget. Seems the builder/designer is pulling a fast one in this case.

I completely agree with cpartist.

We may never hear from the op again. Too bad because this kind of thing happens quite a bit. I would like to know how it gets resolved.

I reread the op. The design contract was 15k. They paid it. I think then they all agreed that going back to the drawing board would cost another 5k.

If that is the agreement, then pay the 5k. Then you are done.

My contract with the design/build landscapers states the designers time is billed at xx per hour nor to exceed $xxx. If I choose to have the firm do the job, I get a 30% discount on the design work. If I don't, I pay the full cost of the design work. It's all in the contract.

File suit against him for acting in bad faith. I'm not kidding. It will go away for under $5k.

One other detail: "the purchaser" is named on the contract as legally both myself and my spouse. I never signed the contract, I was out of town. Is that detail relevant?

I never signed the contract, I was out of town. Is that detail relevant?

Could be but again you need to reread the contract and contact your lawyer. Please let us know the outcome after you speak with your legal counsel. Best of luck to you.

mill......GC's(most) lie thru their teeth when it comes to what profit they make. It's sickening!!!! I've seen that for 'decades'!!!! And people actually believe what they say....because they have 'no' clue. They need to shut their (^&%^$# mouths and not say anything!!!! They've convinced the world they don't make 'anything'!!!!! It seems they do it as a hobby. To make as much profit in the current situation is common business sense to a point......(I've got three degrees all business related) I understand that, but GC's (allot of them) push that to the extreme.....to see what they can get away with.

Robin enough already. Not every GC is a crook.

I've got three degrees all business related

What degrees? And where from? Because you very seriously should stop saying that. Either you were not a very good student, or the school was some sort of diploma mill, because many people here have built a house and actually dealt with a contractor so they know very well that you are wrong.

Had you paid more attention in class, you wouldn't make the statements that you are. You would wonder how profit could be so high with such low economic barriers to entry. You might even start looking to see how often contractors declare bankruptcy, and see that it is the highest single profession for bankruptcy risk. You might read reports about how under-capitalized the industry is.

I also have several business degrees, and have written several research articles, I have an advising firm that does work in certain types of capital asset planning, am a college professor at a pretty decent school in a "business related" degree. I also had a successful enough professional career to semi retire and start teaching at age 40.

In my professional opinion the profit made by general contractors is a little low for an industry with low entry barriers, but higher exit barriers. I agree with others who note that the industry is under-capitalized. I agree that this is because the very low entry barriers create an influx of under qualified low price actors that drive down price, largely because consumers can't identify value in the construction industry, and new actors don't identify exit risks.

Tl;dr: robin0919 is dead wrong.

Budgets are a VERY personal thing. We gave our first architect a budget and were similarly surprised when we came in 40+% high at the initial design / budget. When we expressed our disappointment and dismay, they said that it's not really their job to keep reminding people that they are choosing expensive things / upgrades / ways to build, etc. and that while everyone "starts" with a budget, it's almost never where they end. For some it's 20% more, for others it might be double. So they too offered to redesign. We opted to go another route.

And honestly I am pretty sure that EVERY home designed by an architect comes in over budget if it gets executed like it's drawn. I suspect that is mostly an issue of architect designed homes end up with higher end finishes and detail, but the slight disconnect between architects and the true cost to build (especially in a time of rapidly increasing wages and lack of availability in the construction industry) plays into it as well.

Interesting story with parallels to ours. This is not a home designed by an architect. They are not an architectural firm. If we would have walked away from the project at that point, they would have dinged us with similar costs as apparently the trigger for having to pay their full, exorbitant design costs is having them design the plan but not construct the home. I have asked for a copy of that contract they refer to, the build contract we have doesn't appear to contain anything on specific design costs and contingencies.

I find it interesting they would design a contract like this, fail to execute a plan in line with our budget, charge extra for the redesign process offering to "roll it into the cost of the house" and deliver a final plan that appraises $100K over market values. I think we were pretty much doomed to failure from the start, we just didn't realize it. Their design process was incredibly devoid of any direction on costs.

Even if we end up having to pay this extra $22K, we may have spent less in the long run. But what a BAD taste this leaves in our mouth, and there were no warning signs we could have recognized going into this process. I'm wondering how many other people have had this experience with this builder. I guess that doesn't matter, but this sucks.

I'm starting to agree with cpartist more... The vast majority of contractors are not crooks. They are trying to function in our society just like everyone else. But in our society, its not how much you spend on something(at least for the middle class), its how much you saved. Hence all the scrutiny on expenses, charges, and the like.

I think it would awesome to be a builder, because you could point to a building or home and say to someone "I made that". You have something to physically show for your work, and can see how it impacts and affects peoples lives. But it takes alot of coordination, management, social skills, and patience to make that happen. I think I would run out of patience with my clients...

I think it would awesome to be a builder, because you could point to a building or home and say to someone "I made that".

This is so true. My dad is in the construction industry (although not a builder), and I could proudly say, whenever I lived in Phoenix, "You see that huge movie theater? MY DAD wired that whole thing!!!"

:-D

Not that Dad ever said anything, but the rest of the family knew and (especially us girls) spoke up, lol.

Trying to get out of a contract that you were fine to move forward with until this other house came available is a crappy move. Be reasonable.

To the OP -

I would consult an attorney before you do anything else. Even if it is clearly spelled out in the contract that doesn't necessarily mean it is collectible. From your description I believe you are discussing a design-build firm rather than an independent architect. If it is, in fact, an independent architect then their failure to be aware of costs becomes less of a concern for him and a problem for you.

I only understand a small bit of Canadian law, which is to say that I understand that contract law in Canada is pretty similar to contract law in the U.S. and that is the extent of my knowledge.

In every contract there is a requirement that the parties act honestly and in good faith. Your theory seems to be that they didn't act in good faith during the design phase, because there is a reasonable expectation that a design-build firm has enough understanding of costs to keep them reasonable. Instead they acted to increase the cost of the build so that they could profit from the additional revenues, in both the design phase and the build phase.

That is a theory that gets a lot of traction here in the U.S. and no matter the terms of the contract, they can't act in bad faith. Whether or not that this particular situation gets a lot of traction in Canada is something I just don't know, but I suspect it does.

Your best bet is to spend just a little bit on a qualified attorney and get this behind you. I wouldn't advise waiting and doing nothing, although that is also viable, if they do pursue it, waiting will just close several doors that are open to you right now. Personally, I tend to be very aggressive on these things and would communicate to the firm that I will subpoena information on all previous design clients if they want to continue.

This is a good example of why I never felt comfortable with using a design/build company. I prefer to separate the two components.

Whatever it ends up, I would be sure to do reviews, posts, Facebook postings on their wall, google reviews, the whole nine yards. If you went in with a budget, informed them of it along with your expectations and square footage requirements and they can’t deliver, how is that your fault? Sure I can understand that some of it could certainly be your high end finishings, but ultimately they should have been able to produce you something that met your requirements that falls within your budget at some point and time. I would be sure to steer all potential future customers away from them.

cp......I agree, I've never said 'all' GC's are crooks.....not once. I know personally allot of GC's and I hate say it but a majority are crooks. Again, the ordinary person has 'no' clue what a house actually costs to build and they take advantage of that. I know this for a fact.