Yes, it depends on the type of contract. What is your concern? Don't expect solutions when you haven't defined the problem.

I received copies of all the invoices. He would send them to my bank for payment, the bank would send me a copy so I could verify them, and they sent their inspector out so they were satisfied. So in the end all invoices were looked at by 3 sets of eyes before they were paid, and they were verified by me ( I was at the site every or every other day) and verified by the bank's inspector to make sure things on the invoices were done.

My bank actually then cut separate checks to each Sub themselves who had invoices submitted and approved. So all the subs were paid directly from my building loan account.

Josie23: Zone 5: WI, that's all well and good but it depends on the type of contract that is signed dealing with how every detail of payment, selection, changes, etc, etc, etc, is handled.

Milworkman Yep it does, as RES mentioned. Joe also asked what is typical/recommended. While I cannot answer what is typical I can share my experience and say that it worked well for me. I had confidence that everyone was getting paid what they were owed, and paid in a timely manner. I did have an invoice from a sub that only completed 1/2 the work because of a weather delay. He received a partial payment on that particular draw, and received the rest when the work was finished.

@User, the reason is that I am getting charged, what I believe, is a high amount for change orders. He said it is because the subcontractor charged him a lot. But I have my doubts.

Joe Macker - what does your contract say about change order pricing? What type of contract do you have (fixed price, cost plus, etc.).

We also see all invoices, but we have a cost plus contract, and my understanding is that is standard with this sort of contract. We have no "change orders" as we pay for the materials purchased and work done (cost) with the builder's percentage on top (the plus).

The fact that you're talking about change orders makes me think you do not have a cost plus contract, in which case the procedure for pricing change orders should be specified in your contract. The norm doesn't matter, what your contract says does.

Change orders can be high. If you didn't ask for the price of the change before you gave the go-ahead, and there is nothing in your contract that says you get to see the invoices, you may be out of luck. But you can always ask! Does you bank get individual invoices so they know what is being paid, maybe they can share with you?

You get zero visibility in a lump sum contract. If the change orders is handled as a lump sum, take it or leave it, then you get zero documents there too. If it’s handled as a cost plus, then you do get some visibility, but you get no control over markup and change order fees, other than not signing the original contract, or not doing the change.

If the contractor says that it’s 14K to “upgrade” from 8’ ceilings to 9’ ceilings, take it or leave it. No documentation given. If you have carpet n the bedrooms as a 4K allowance, and want to do wood instead, then he gives you a bill for 13K, that’s going to need to include 6K of material increase (invoice provided) plus the 3K labor price increase (invoice provided) plus 4K in markups and change order fees.

Even if the standard markup for the rest of the build is 25%, he can do 50% for change orders if he wants to discourage them, and the contract allows. Most builders don’t want a lot of change orders because it slows things down, and costs them more money than they charge you.

This is one difference in a custom build and a tract type build. Custom generally doesn’t penalize changes to the degree that tract does. Because the compensation % as a whole is higher, as is the contract and everything in it. And the builder isn’t carrying the loan to be the one losing the most money on delays.

When I was a licensed builder, contracts were all fixed-price in advance. If you wanted an upgrade during construction, you paid what I thought was fair. My costs were none of the buyer's business. If I messed up and was wrong in my estimates, my problem.

One reason to see the payments to the subs is to ensure they are getting paid.

It really seems to depend on the contract, whether a bank is involved, and, perhaps, local practice. Our experience has been pretty much what Worthy describes: our previous house was custom built, a lump sum contract with allowances, no banks involved. We never saw a bill from the subs, nor any invoices for a couple of upgrades (the builder told us what the cost was going to be, and we accepted it as what seemed to us a reasonable price for what we wanted). We knew what the house was going to cost, we went minimally over that sum because of the upgrades, and we were satisfied the subs got paid. Who got what amounts was up to the GC, not us. Same with our current house, which was a design-build deal. Never saw an invoice.

Changes are expensive and time consuming. Avoid them if possible.

It does depend on the type of contract, from everything to nothing.

@jmm1837 for the upgrades did the GC give you an invoice that split the actual cost and then an additional cost (say 15%) for tax insurance and other overheads? Or was it given as a single line-item inclusive of all costs?

Joe - he didn't give me any invoices at all. I knew what I wanted, knew roughly how much more the actual shelf cost of the items was over what had been provided in the contract, and felt the price he quoted me for the upgrade was reasonable. I assumed/knew he added the cost of the "hassle factor" into his quote but the value to me was worth the price I was paying. As I said, we didn't get into how he came up with his lump sum figure for the project and we didn't get into how he priced the upgrades either. We didn't have that kind of contract.

We didnt see invoices for our build either. It was a lump sum with change orders. however the builder did explain the costs of upgrades to us in detail. We did some upgrades to the kitchen and these were itemized and each item had dollars attached.

most of those costs didn’t have overhead. Most were the cost of items but some did include installation fees which varied quite a bit and were set by the builder.

We had a fair number of subcontractors and vendors. Masonry, framing, painting, cleaning, gutters, demolition, hardwood floors, carpet, tile, kitchen, roofers, siders, plumbers, electricians, drywall, hvac. For me to reconcile all those invoices and verify everyone was paid everything would have been daunting. We trusted our builder and he was great. All those bills were not our problem

If it’s handled as a cost plus, then you do get some visibility, but you get no control over markup and change order fees, other than not signing the original contract, or not doing the change.

If the contractor says that it’s 14K to “upgrade” from 8’ ceilings to 9’ ceilings, take it or leave it. No documentation given.

Typically this is not correct. In fact, it is against the entire spirit of the arrangement. In most states any cost plus portion of a contract is required to have full transparency. I have yet to find a single state where this is not true.

Nor is a contract that is silent on change orders an open invitation to exploit the client. Material omissions in a contract would be decided against the contractor 80% of the time.

The real problem is that too many contractors believe whatever ridiculous thing they want to because no one puts in the effort to stop them. Try some of this stupid crap on a decent commercial contract and they would slap it down pretty fast.

SERIOUSLY????????? When you go to a store to buy something or go buy a SUV.....do you ask the manager what their actual cost is??????????? What world are you living in????

Robin - seriously, it depends on the contract. Cost plus is a different animal than the kind of contract I signed. We don't know what kind of contract the OP signed so no one can say what he should or should not be entitled to see.

"the reason is that I am getting charged, what I believe, is a high amount for change orders."

Horse it out of the barn now. Unless your contract spells out exactly how these changes are to be dealt with you realistically have 2 options. Pay him or don't pay him. That's why these things all need to be dealt with upfront.

It is dependent on your contract. In my custom build, I saw all invoices and change order invoices. But, my contract was cost plus a specified fee for the GC. Change orders were $500 per order plus cost of change. All invoices were provided to me.

I only got those because of the structure of the contract. Many times builders don't want to provide these, either laziness or they want to hide the markup. You get what you negotiate.

This question gets asked on this forum all the time. Folks say it depends on the type of contract and yet the OP never comes back to answer what type of contract, yet still wants to dig into the builders invoices and try to get feedback to support their right to do this. Lack of willingness to answer this basic question which drives the correct answer is telling.

All the OP poster has divulged is that he has change orders, this would lead one to believe he has a fixed price contract, but that probably won't be communicated as OP appears to now want to treat it as cost-plus.

Here is what it says about change order pricing

"ARTICLE 9. NOTE ABOUT EXTRA WORK AND CHANGE ORDERS

Subject to the following conditions, Owner is entitled to order changes to the Project consisting of

alterations, additions, or deletions from the Contractor’s scope of work (“Extra Work or Change Orders”).

Extra Work and Change Orders become part of the contract and are only enforceable against the Owner

once the order is prepared in writing and signed by the parties prior to the commencement of any work

covered by the new change order. The order must describe the scope of the extra work or change, the cost

to be added or subtracted from the contract, and the effect the order will have on the schedule of progress

payments. Owner and Contractor may agree to proceed with Extra Work or Change Orders on a time and

material basis, but Owner may not require Contractor to perform Extra Work or Change Orders without

written authorization. Per Business & Professions Code § 7159(e)(3), Owner and/or Contractor’s failure

to comply with the requirements of this article will not preclude the Contractor from receiving

compensation for Extra Work or Change Orders based on legal or equitable remedies intended to prevent

unjust enrichment."

I'm not a lawyer but here's what it says:

Changes you sign for ahead of time you must pay for. You can always decide not to change.

For other changes made the builder can also collect from you if they choose to follow that practice.

"Reasonable" costs is your issue. It's not hard to justify change costs if needed.

Have you thought about asking the builder for more explaination?

Honey works better.

Did you sign a change order? What was done? Change orders always cost more than if they were in the original contract.

Well, I'm no lawyer but I read that contract as saying that the contractor has to tell you up front what the change order will cost you but is under no obligation to explain how he arrived at that figure. If you sign off, knowing his price, you pay, and invoices or cost breakdowns are irrelevant.

The challenge I have with my GC for changes is that we have a verbal discussion of the change and I do agree with some of the things he presents. However, he starts work immediately without having anything in writing i.e. neither has he presented a written design/plan/estimated-cost, nor have I approved anything in writing. Somewhere along when the change has started, he generates a change order invoice. If I dispute the pricing he says that I had verbally agreed and that he has already completed 40% of the work. If I don't like it then I have to pay for 40% of the work-done and then 30% to demo the work already done. Now you see what my problem is. The invoice lists items as the cost for the work (which he claims is what he paid the subcontractor) and another additional 15% listed as tax, insurance and overheads (for himself). Since these are listed separately, can I request invoices for the amount he is saying that he paid the subcontractors?

You verbally agreed to the change. You have to pay. A verbal agreement is a valid contract for change. If you don’t want to be charged for things, then don’t make changes.

What you cannot do is dig in your heels and stop forward movement of the project. That stop work is yet another change order. And it would be billed to you as lost time.

All I can say is, don't agree to any more changes, orally or in writing, until you have a hard number from the GC. Both of you need to stop this casual approach to changes, and start following the terms of the contract. As to how to deal with the existing situation, I leave it to those with legal training to advise.

You verbally agreed to the change. You have to pay. A verbal agreement is a valid contract for change. If you don’t want to be charged for things, then don’t make changes.

No. Just no...

First, a contract is an agreement for an exchange of consideration. A good rule of thumb is that you don't have a contract without a price, a way to reasonably calculate the price, or a very specific disclaimer. It is most likely your contractor is full of crap and he expects you to do just what everyone else does, and not call his bluff. I am not saying you should call his bluff, but I would be incredibly surprised if what he is saying works in your state. The biggest issue isn't that the contract is verbal, it is that it is not a contract at all.

Next, every state has some version of the statute of frauds. So whether or not a verbal agreement is allowed is something that we can't know without having further information on your location and the specifics of the transaction in question. Generally speaking, if there is a commerce element (materials) in excess of $500 the statute of frauds would kick in and require the contract to be memorialized by the party enforcement is sought against.

Furthermore, you have a contract that looks to have been constructed by an attorney, whether or not your attorney is living up to the contract. I would be very surprised if a contract thorough enough to spell out unjust enrichment (something that is inherent in the contract to begin with) doesn't have an entire agreement clause. Usually it is a clause that reads something like, "this document constitutes the entire agreement of the parties." This is often used to defeat verbal contracts. You are agreeing that the written document is the full contract and change orders would need to be in writing to be an addendum of the contract.

Again, here is the reality. The contractor has you over a barrel. The reality is that some of these charges will very likely not hold up in court, however, there are few painless pathways to court. In the end, getting justice may well cost you more money than simply paying the surcharge. Personally, if I believed the charges were slightly inflated I would just let it go, if I believed they are inflated to levels approaching or exceeding fraud, it would be time to make some changes to what they do. Those changes might be future, or might look for some action on the past problems depending on what I felt was most appropriate. I would shoot for let's keep the relationship good in the future so we don't revisit those past problems.

However, at the end of the day, seeking equity and justice are probably not that useful. Work on getting the best house at a price you can live with. Ask yourself the simple question will this help me 10 years from now or hurt me...

For other changes made the builder can also collect from you if they choose to follow that practice.

"Reasonable" costs is your issue. It's not hard to justify change costs if needed.

Unjust enrichment is a legal precedent that exists in every contract without needing to be stated. I can only assume the builder is stating it because doing so might end a fight that would end up in some legal action.

The idea behind unjust enrichment is that you can't get a benefit at the expense of other people. So cost is generally irrelevant in an unjust enrichment action. If you spend $100,000 on something that you were not contracted to do and it improves my property by $5,000, then the default for unjust enrichment will be $5,000. That can go up or down some depending on circumstances of the misunderstanding, but it would rarely get to your full cost.

I don't see how the builder is getting away from written agreements. His contract would be my first piece of evidence. That is pretty solid requirement that the terms be in writing. I don't see how he is then not putting things in writing and then claiming you have to pay if I can justify the cost somehow. I would laugh if my contractor said that to me.

Bry911 is correct. The requirements outlined in a written agreement supersede a verbal agreement. Scope and cost need to be outlined and agreed up in writing.

As per our contract we saw all invoices. Even then I learned the hard way rather quickly that in order to have full transparency a written record of any discussion was needed. If any change or clarification was done verbally we learned to follow it up with an email summarizing what was said. This has been a god send now as we manage the deficiencies phase of things and can refer back to documentation.

Subs can easily make out 2 invoices, one to the GC and one public. I've seen this numerous times.

Again, the OP has not confirmed this is a fixed price contract, only posted contract language pertaining to change orders. It's like pulling teeth!

Fixed price contracts with changes that occur during the build can handle these changes with a "fixed price" quote outlining the cost to change. These should be provided in writing, signed off on, BEFORE work has started. It may include costs to tear out and re-do, etc. and highly likely to cost more than had changes been incorporated in the build to begin with. If one doesn't like the costs, they don't sign off on the quote, and work proceeds per original scope in the fixed price contract. ALL of this can be done without requirement for a builder to open their books to a home owner. A homeowner doesn't have to pay what they feel is "unfair" costs, but the builder also doesn't have to do work at a price demanded by a homeowner, or to accept what a homeowner "feels is fair" after work is completed.

Costs plus contracts- yes, invoices should be transparent or "builders books should be open".

Can you mix it up and treat is like fixed price or cost plus when it's convenient or benefits you? NO! However, some do try........

So here is another 2 cents from me...

To simplify explanations people here often group contracts as either cost plus or fixed price. In reality that is an oversimplification. The reality is that contracts are more of a sliding scale between arms length transactions and some duty of care. It is fairly common that a fixed price contract have some trust portions that would require partial transparency. Such as limits on what will be included in excavation. So the OP may simply not be able to fully articulate what kind of contract they have. That is not at all unusual. In fact, the contractor might not be able to articulate what kind of contract they have.

I struggle with the idea that a contractor in a fixed price contract can quote any price he wants for anything and you simply have to deal with it. I can think of several precedents of due care that would bar that from happening. If that were the case you could easily develop a contract where the fixed cost was $100,000 and the fixed change order for additional excavation work was $1,000,000. Combined with an exclusive arrangement you could profit from home building and never actually build a home just constantly sue for breach of contract.

So while a fixed price contract has some leeway that a cost plus doesn't, that is not free reign to charge anything you want for change orders. Trying to turn a custom home built on a customer's lot into a full arms length transaction is going to be a struggle.

Furthermore, assuming the OP's description is accurate, it doesn't matter. They are not being given a fixed price before the work begins and thus the builder can't attempt to hold a customer to a portion of a contract that doesn't exist.

If I tell you I would like the roof pitch on my home changed, that means that you go get a price to make that change and send it to me. Or if that price isn't discernible you provide some indication of what you will charge per piece or per hour or whatever. Or if neither of those things are available I can then say I want it done, no matter the cost. However, you don't do it and then tell me I have to pay for it. We should also note that the first method (providing a price) has the least duty of care and the last method (any price) has the highest duty of care. The more trust I put in you, the more duty you owe me.

"Statistics show fixed price contracts largely dominate the residential building market, cost plus is in the minority, and other contracts like time and materials would be a rarity."

I admit being surprised by this. Can you share these statistics?

I am wondering if retail sales are being included as fixed price. Cost Plus is certainly the norm for custom builds in my area as it facilitates building without fully developed plans. I assumed that was the same everywhere.

Lender requirement. Lenders also assume plans are complete.