Getting your developer to finish your punch list

By Teri Karush Rogers | February 15, 2010 - 6:00AM 

We’ve written before about how to motivate your contractor to finish your punch list:  Make the final 10-15 percent of the contract price contingent on punch list satisfaction.

Similarly, when it comes to completing a new-construction punch list, it’s best if the developer’s money is on the line, not yours.  

“The purchase agreement should provide that the closing is contingent upon completion of any punch-list issues, or that the developer will be obligated to escrow 125% of the reasonable estimate to complete any punch list work,” advises real estate attorney Jeffrey Reich.  

In other words: Deal with the punch list at contract time, even if it’s months before you know what actually needs to be fixed.

The developer should also agree in writing to pay your legal fees if you have to sue to enforce the punch-list agreement.

During the real estate boom, of course, most developers balked at attempts to nail down punch lists, and today some still do.

“On a recent closing I asked the sponsor’s attorney to make the punchlist an attachment to the contract of sale,” says real estate lawyer C. Jaye Berger.  “I was told, ‘That’s never done.’ Needless to say, I got them to agree to do that and all of the work was done by the closing.”

For buyers who don’t negotiate a punch-list escrow, the motivational options are sparse, says Reich.

“The most direct route would be for the unit owner to sue the sponsor for breach of contract,” he explains. “However, the cost of litigating a punch-list can often exceed the cost of the work at issue.”

You can also find out from your condo board (if it is independent of the sponsor) whether it's pursuing any collective actions against the sponsor on behalf of the unit owners, says Reich.

Alternatively, you could contact the Attorney General’s office to “report this fraudulent sales process—whereby the sponsor committed to complete punch-list work with no real intent to do so--to see if the Attorney General’s office would be willing to intervene,” says Reich.

Related links:

Happy Endings: Finishing the punch list without coming to blows

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