General contractor and architect mandates

Author : Kristen

General contractor and architect mandates

There are several possible partners to build a property with. Therefore, it is important to understand the main differences between them and to choose the solution that best suits your needs.

General contractors

The concept is very simple. A contracting company is responsible for constructing a house from A to Z for a fixed price agreed upon beforehand. Depending on the selected model and modifications to the baseline design (capital gains and losses),  one great advantage to contractors is having a precise budget with no surprises.

In this regard, it is the home-builder who decides about all interior design (kitchen, tiling/parquet/carpeting, bathrooms, painting, colouring, etc.) However, when it comes to construction, it is the general contractor who will handle all works, and may even hire subcontractors for various jobs (but always assuming their own responsibility). Therefore, the client is not free to choose other partners. The desired goal is to simplify the project and to standardise it as much as possible in order to save time and reduce costs.

The standard price is paid according to a predefined scheme, that is, in instalments at certain stages of the construction process (for example: 10% when signing the contract, 10% at the start of construction, 20% when the basement slab is completed, 20% after the framework has been erected, 20% when the roof goes up, 10% when the interior is finished and finally, 10% when the keys are handed over). In the general contractor contract, you can find a detailed description of the construction project along with pricing for major itens (e.g. a budget of CHF 20,000 for the kitchen). Every change to the baseline design involves capital gains and losses. You should be aware that some amounts have to be paid before the works can be carried out, so make sure you have confidence in your contractor!

Now, from a financing point of view, the bank (seeing as insurance companies can not finance construction loans under the directive of the Federal Office of Private Insurance) also plays a large role because it will also verify the credit standing of the general contractor (the company's books, balance sheets, and history). In fact, the main risk that remains is that the contractor will go bankrupt. Since advance payments are generally made before the actual work is under way, a large portion of the last advance payment would be lost if the contracter were to go bankrupt, not to mention the costs of finding another company to finish the project. Therefore it is essential to have a serious partner. Subsequently, the general contractor will have to open a bank account with the same financial insitution as the customer. All advance payments will be made this parallel account. Afterwards, it is the bank who acts. The bank controls how the funds are used by the general contractor and approves each of their capital movements into this account. It is essential that the funds are used as part of the construction, but not to finance another housing. For these various reasons, the banker is an asset to the operation.

Architect mandates

Appointing an architect is different. You can choose each contractor based on the submissions of various entrepreneurs (in the region or as recommended by the architect). A budget is drawn up by each trade. A relationship of real confidence and trust with the architect is imperative, because he or she is the key to the project's success.

Consequently, the final price may slightly differ from the initial plan, as the plan is worked out depending on the invitation to tender. Nevertheless, each invoice is going to be paid directly to the company concerned, so it will be possible to control it. It goes without saying perhaps that the payments are made upon the work completion, except in some specific cases (for example, an advance to order a kitchen). This helps to monitor them. The project can be easily adjusted along the way; however, the more changes requested, the higher the final cost.

The financing is also simplified in this case. The financial institution will analyse the project on the basis of a detailed financial plan using the CFC (a list of various building trades and their respective budgets). No particular inspection is needed as with the general contractor, although before transferring each "payment voucher" to various entrepreneurs, the bank verifies the compliance of invoices with a pre-established financial plan. The purpose of this inspection is to be able to be able to respond right away should any of the construction items produce extra cost and take the necessary measures to compensate for it (reducing another trade, increasing funding, etc.) Again we see the banker's "hidden" work.

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