Construction Agreements: What Every Developer and Builder Should Know

When it comes to building a custom home, the final product is only as solid as the foundation it’s built on—and we’re not just talking about concrete. Before the first brick is laid or the first trench is dug, a well-structured Development and Construction Agreement ensures that everyone involved knows who’s doing what, when, and how.

One of our development clients recently hired us to draft their construction management agreement for a custom residential build in Ontario. The agreement was designed to outline responsibilities clearly, manage risk, and align everyone involved around shared goals.

Here are some of the key features that made this agreement a strong foundation for the project:

1. Clear Roles from Day One

The property owner retains full ownership and decision-making authority but delegates all construction management to a designated manager. That means while the manager oversees the day-to-day operations—like hiring trades, monitoring schedules, and keeping the site safe—big decisions still need the owner’s green light.

2. Defined Project Scope

By clearly stating which tasks the construction firm is responsible for—such as excavation, framing, and mechanical systems—and which are not, like furniture selection or interior decorating, the agreement ensures the project stays focused and within scope..

3. Budgeting and Scheduling Safeguards

The manager is responsible for developing and updating the project schedule, budget, and construction plans, but all key milestones and expenditures must be approved by the owner. This keeps control of the purse strings in the owner’s hands while allowing the manager to act efficiently on the ground.

4. Fees That Reflect the Work

The manager receives a monthly fee for the anticipated project duration, plus additional compensation for any owner-caused delays or approved changes. Each change order includes a 10% management fee to cover the added coordination and oversight.

5. Checks and Balances on Spending

The agreement places a cap on spending authority—any changes over $1,000 must be approved. It also includes clear procedures for submitting cost estimates, invoices, and reimbursement requests, helping the owner manage cash flow and avoid surprises.

6. Exit Clauses and Dispute Resolution

If either party fails to meet their obligations, the agreement includes a defined process for termination. Disputes are resolved through arbitration, avoiding drawn-out legal battles and keeping the project focused.

7. Photography and Portfolio Use

Once the project is complete, the manager has the right to photograph and showcase the home in their marketing and portfolio. It’s a mutually beneficial clause that encourages quality finishes and helps the manager build their brand.

What This Means for Your Construction Project

A well-drafted construction management agreement protects both sides—it gives the owner oversight and control, while giving the manager the clarity and structure needed to execute efficiently. If you’re thinking about building a custom home, a carefully tailored agreement is one of the smartest investments you can make before the first shovel hits the ground.

Need help drafting or reviewing your construction agreement?

Our business lawyers have extensive experience with construction and development agreements, bringing practical, hands-on insight to every project. Whether you need a construction contract, an employment agreement for your team, or a contractor agreement that protects your interests, we’re here to help. We’ve worked with developers and property owners to structure projects with clarity and confidence—get in touch with our team to get started. Book a consultation or call us today.