Monday, May 11, 2009

The Punch List Contract Clause

One of the ways to prevent a "neverending" punch list is to clearly define in your contract what constitutes punch list items and what does not.

Here is one sample clause:

1. PUNCHLIST: Thirty-day break-in period. During the first thirty (30) days after the dates of Substantial Completion, the Owner may note minor malfunctions or defects such as sticking doors, nail pops, etc. The Owner should maintain a list of these malfunctions and defects as they occur, and must submit in writing not later than forty-five (45) days after the date of substantial completion. All defects, which are determined to be covered under this warranty, shall be corrected within sixty (60) days. Any defect or malfunction which occurs after the thirty (30) day break-in period shall be classified as a “Latent Defect.”

2. LATENT DEFECTS: A latent defect is defined as a malfunction or defect in warrantable items, which becomes apparent after the thirty (30) day break-in period, but before the end of the warranty period. The Owner shall notify the Contractor in writing at the address set forth in this agreement of the existence and nature of any latent defects. Such notification shall be within ten (l0) days of the reasonable discovery of such defect. If a warrantable defect exists, it shall be corrected within sixty(60) days after the receipt of written notification by the Contractor.

Here is another option:

It at the time of delivery of the Certificate of Occupancy there are uncompleted items of work, there shall be a specific itemized punch list. Builder will use diligence to complete any such punch list items with in thirty (30) days after closing. Buyer acknowledges that there will not be any “holdbacks” or escrow with the reference to punch list items. The Builder acknowledges that the bank may require funds to be held in escrow for major items such as landscaping. Only items to which the Parties agree to in writing prior to closing will be corrected by Builder under the punch-list, all other corrective action will fall under the Limited Warranty.