Modular Home Legalese

Before buying a modular home you should insist on receiving four things from your dealer:  modular home legalese, drawings, scope of work, and specifications. The details in these documents will protect everyone – you, the dealer, and the factory. It will take a lot of work for your dealer to create the documents for your specific project, and it will take you a lot of time to review the details. But you don’t have a choice if you want to protect yourself.
When the details are unwritten, it is your word against theirs. The only people who win are the lawyers. Let me give you some recommendations that will better protect everyone.

Modular Home Legalese: Cancellation

A man signing the modular home legalese
Have an attorney review the modular home legalese of your contract

You definitely want the contract to state when you are allowed to cancel. The way to do this is with a “contingency” clause that specifies grounds for cancellation. For example, you will certainly want to retain the right to cancel if you don’t obtain financing, a building lot, or a building permit. You may also want that option if you can’t sell your home, your health fails, you lose your job, or you or your partner dies. Make sure the modular home legalese details when you can no longer cancel, as well as how much money the dealer can retain should you exercise your option.
Cancellation clauses are not just advantageous to you. In fact, I included one in my contract within the first month of becoming a modular dealer. What I discovered was that most customers had tasks to complete, obstacles to overcome, or concerns to address about things beyond their control. This made them delay signing a contract and providing a deposit until all their issues were resolved. Adding the contingency clause allowed both of us to move forward more quickly, which reduced the overall construction time by months.

Modular Home Legalese: Payments

Make sure your contract specifies the following payment issues:  (a) the amount and timing of deposits; (b) when price increases are allowed, if at all; (c) whether the modular units will be paid COD or with an assignment of funds by a lender; (d) a disbursement schedule for the contracting work; and (e) a policy for allowable “holdbacks” should some of the work be incomplete or require correction. The modular home legalese should spell out when change orders are allowed, who can authorize them, if additional fees will be incurred, when payment is due, and the effect on the schedule.

Modular Home Legalese: Verbal Discussions

Your contract should exclude any verbal discussions unless they are also incorporated into the written contract. You might think this only benefits the dealer, but in fact neither of you wants to hear, “But I told you!” or “I’m sure you said that!”

Modular Home Legalese: Product Changes

Since product manufacturers often replace their products with new ones that have slightly different specifications, the modular factory and dealer will want to reserve the right to make product changes with reasonable terms. This might happen, for example, with windows, cabinets, shingles, or appliances. From time to time, these product changes will take place after you and the dealer have signed off on the specifications. The fact that you will have to accept a substitute, however, does not mean that you forfeit your right to be notified of these changes. When time allows, you should also be allowed to select a different product than the replacement. Be prepared to pay any increase in cost for selecting an upgrade.

Modular Home Legalese: Insurance

Both you and your dealer need to have insurance. The dealer should be responsible for insuring against any loss until they complete the modular set. To ensure the coverage is sufficient, insist on receiving a “certificate of insurance” directly from the insurance company. In turn, you should have either a “builder’s risk” policy or its equivalent. This will provide better coverage against theft and vandalism than an ordinary homeowner’s policy.

Modular Home Legalese: Warranty

The warranty section of your modular home legalese should include four components: (a) the items covered and not covered, (b) the construction standards that apply to each item, (c) the length of coverage, and (d) the method of dispute resolution. If you have an extended warranty for the modular units, it will cover all four components for the modular home. However, it might not cover the on-site contracting work.
Another source that details warranty coverage and standards is the National Association of Home Builders Guidelines for Professional Builders and Remodelers. I recommend either binding arbitration or mediation for dispute resolution instead of the courts.
For more information about modular home legalese, see Selecting a Modular Home Dealer in my book The Modular Home.

Modular Home Plumbing and Electrical Plans

In addition to floor plans and elevation drawings, you will also receive modular home plumbing and electrical plans. May general contractors and subcontractors have begun their work without first reviewing these plans, much to their regret and their customer’s dismay.

What Can Happen If Your GC and His Subcontractors Do Not Review Your Modular Home Plumbing and Electrical Plans Before Beginning Their Work

Soon after I started offering GC services, I had a serious problem with a plumbing leak in a two-story colonial I built for a young couple. The leak was more like a deluge. The plumber I hired had no previous modular experience, and my supervisor on the job was also quite inexperienced with modular homes.
A month after my customers moved in, the wife invited her parents to stay with them. While my customer bathed her young children in the master bathroom, her father took a shower in the hall bathroom. Both bathrooms were on the second story. A few hours later, my customer found a puddle of water on the kitchen floor. While trying to figure out what caused the leak, the drywall ceiling suddenly let go and water poured down. It turned out that my plumber had not made all the connections for the hall bathroom. The critical one was the waste line in the second floor access area. The water had no place to go but in the bays between floors.

A factory's detailed modular home plumbing and electrical plans
Your general contractor must review your factory’s modular home electrical plans before his electrician begins his hookups. The GC must also review the factory’s plumbing plans before his plumber begins his work.

Make Sure Your Mechanical Contractors Look Closely at the Modular Home Plumbing and Electrical Plans

The plumber missed the connection because my manufacturer had carpeted over the access panel. Neither my supervisor nor my plumber had looked at the plans to identify all of the access points. They also hadn’t completed a pressure test, which would have told them that a connection had been missed. If you hire your own GC, don’t make the mistake I made. Make sure your mechanical contractors (plumber, heating contractor, and electrician) look closely at the modular home plumbing and electrical plans to find every access panel. And make sure your plumber pressure tests his work!
For more information about how to use  modular home plumbing and electrical plans, see The General Contractor’s Responsibilities for Building a Modular Home in my book The Modular Home.

Modular Home Scheduling Delays

Planning a realistic schedule and then maintaining it is one of the most challenging aspects of building a new home. There are just too many steps involving too many people with too little control over what they need to do. Every builder has scores of stories about construction delays. Because I’m no exception, I will post several stories about the causes of delays. But in my first post I want to talk about everyone’s tendency to believe in the “accordion solution” to modular home scheduling delays.

The Appeal of the “Accordion Solution” to Modular Home Scheduling Delays

One of my very first sales was to customers who were in a huge rush. This was one reason they wanted a modular home, since modulars are faster to build. We verbally agreed to a time line that included reasonable milestones for each of us. The most critical milestones for my customers involved making final decisions on their house plans and building specifications. This proved quite difficult for them.

A young man playing an accordion
There’s no accordion solution to modular home scheduling delays

Every time my customers requested another revision to their plans or needed another quotation for a different special order product, I informed them that we were falling behind schedule. They nodded in understanding. What I didn’t do was specify how much we were falling behind. I assumed they would recognize that since each revision of the plans always added ten days (sending it to the factory, waiting for the factory to draw it, getting it back to my customers, and waiting for them to review the changes) and each special material quote consistently added another four days, that they could do the math as easily as we did. I was sadly mistaken.
This is when I first recognized the allure of the accordion solution to modular home scheduling delays.  Over time I’ve come to appreciate that this “solution” is shared by most of our customers. The accordion solution assumes that a delay to a schedule milestone doesn’t add time to the end of the schedule. Instead the entire schedule gets compressed just like an accordion. The miraculous, expected outcome is that the milestones that follow will happen as previously scheduled – without any delays.
If you think about this, it really doesn’t make sense. But who am I to criticize, since I’ve found myself using the same accordion logic with my subcontractors and material suppliers. “What do you mean you can’t make up the week we lost due to the snow storm?” “I know it took me an extra week to make a selection, but I still need those cabinets on the date we first discussed.”  It’s just human nature for us to want what we want when we want it.

Modular Home Scheduling Delays Are Inevitable Because Stuff Happens

Do yourself, your modular dealer, and your general contractor a favor and work with them to set a realistic schedule. More importantly – given that “stuff happens” – be honest to yourself about the effect of delays on the initial schedule. Even more importantly, try to take the inevitable changes with patience and acceptance. Getting upset at your dealer, general contractor, family, or yourself won’t undo the delays any more than playing the accordion.
For more information about modular home scheduling delays, see Building a Modular Home on Schedule in my book The Modular Home.

Keep Your Modular Home General Contractor Informed

Many customers forget to inform their modular home general contractor (GC) of important changes to their specifications and plans. A few expensive examples from my experience include adding a walk-out bay that required a full foundation; moving the fireplace or a slider to where the bulkhead was going; or reversing the orientation of the house. Serious and costly mistakes are more likely to occur with changes made later in the process. It is easy to let down your guard while catching your breath.

Forgetting to Inform Your Modular Home General Contractor of Changes

Modular general contractor turnkey tasks before home is delivered
Modular general contractor turnkey tasks before home is delivered

One of my customers forgot to tell their modular home general contractor that they reversed the house plan so that left was right and right was left. They had a good reason for the reversal, since they wanted the living area to receive sunlight rather than the garage. But they had not yet made that decision when they gave their three GC candidates copies of their proposed plans. Their selection of a GC was then delayed six months by several time-consuming problems with getting a building permit.
When their modular home general contractor was given the revised plans, he asked the customers if the plans had changed much. The customers said they had changed the kitchen around, but that was about it, completely forgetting they once had drawn the plan with the opposite orientation.
Modular general contractor turnkey tasks after home is set
Modular general contractor turnkey tasks after home is set

You would think that the GC would have looked at the plans for himself. But here’s what happened. He told his project supervisor to schedule the excavation and foundation subcontractors; they had been awarded the job many months earlier. He then went on vacation the week the work was done. The two subcontractors showed up with the old copies of the drawings they had received when bidding for the work; the GC’s supervisor showed up with none. The foundation was poured, incorrectly, with the foundation for the garage on the left rather than the right, and the foundation for the chimney and walkout bay on the right rather than the left. The lally-column pads were also spaced incorrectly. My customers discovered the mistake when they visited the site while the foundation was being backfilled. The GC blamed the customers for not telling him about the reversal, and the customers blamed the GC for not looking at the revised plans. In the end, the GC relented, as he should have. But for the remainder of the project they both suffered through a very trying relationship.

Give the Modular Home General Contractor Final Plans and Specifications

It is critical that you provide your modular home general contractor with any changes to your modular plans and specifications. Better yet, provide him with a copy of the final draft of your modular plans and specifications, and have a meeting with the GC to review them.
For more information about why you should keep your modular home general contractor informed, see Selecting a General Contractor and The General Contractor’s Responsibilities for Building a Modular Home in my book The Modular Home.

Complete a Title Search Before Building Your Modular Home

Whenever you purchase land, make sure you complete a title search before building your modular home. If you finance the purchase, your lender will automatically require this. Although it will cost you several hundred dollars to have the title checked, don’t skip this task when you inherit or are gifted land. Having it done early on will protect you from moving forward with other steps that can’t be completed until the title is cleared.

Failing to Complete a Title Search Before Building Your Modular Home

A For Sale sign on an empty lot still requires that you complete a title search before purchasing a building lot
Complete a title search before purchasing a building lot

In our first year of selling modular homes, one of my salespeople sold a ranch to a woman who was going to build a home on a lot she was being given by her mother. When her attorney did a title search the day before the closing, he found a title flaw with the property. It turned out that when her mother had inherited the land from her own mother (my customer’s grandmother), the grandmother had actually given the land to both of her children, not just her daughter. So the land was really owned by my customer’s mother and her brother. No one had paid attention to this because the brother had died many years ago, and he didn’t have any children or a will stating what should happen to his share of the land. My customer’s mother falsely assumed she automatically inherited her brother’s share of the property. My customer had to cancel purchasing her modular home when she was told it could take over two years to resolve this matter in court. A couple of years later I noticed in the local paper that she had cleared up the problem. Since she had already bought an existing home, however, she sold the lot.For more information about why you should complete a title search before building your modular home, see Finding and Preparing a Building Lot for a Modular Home in my book The Modular Home.