They sometimes go by different names, but draw schedules are the detailed payment plan agreed to by the construction project owner, builder, and contractor. It will specify when specific payment allotments will be paid to the contractor and lay out the requirements for exchanging the scheduled funds. If the owner is being funded by a bank or other lending institution, the draw schedule will be put forth by that financial institution.
Common Draw Points
No two construction projects are the same, and so goes draw schedules. The size, type of funding entity, location, and desired timetable for completion are all factors to consider when drafting a draw schedule. Common sense would tell you that a draw schedule for a one-story house would be much simpler than a transnational corporation’s new headquarters.
A typical draw schedule for a custom-built house will usually have 5-7 points of draw throughout construction. The different points could be at benchmarks such as having 20 percent of the project completed, then 40 percent, then 60 percent, and so on. The other common way to distribute points is to place them at intervals that a significant feature is completed, like HVAC installation, water and sewer connections, laying the foundation, etc.
Who Should Look at a Draw Schedule
The more parties involved in a construction project, the more people you will have negotiating the draw schedule. Except in cases in which a bank wants to propose its own standard draw schedule, the contractor will usually be the first to propose the draw schedule. After that, the relevant parties will negotiate until an agreement has been made. The owner or developer will usually send an independent appraiser to look over the proposal. Unless you have complete faith in the contractor you are working with, a third party should always scrutinize the proposed draw schedule.
Importance of Draw Schedules
Draw schedules are designed to ease the tension between construction project owners and the contractors doing the actual work. A contractor’s worst nightmare is completing an entire project and then getting stiffed when the invoice is finally sent. On the other hand, owners are wary of shelling out money for work that may turn out to be incorrect or incomplete, or not done at all.
Draw schedules and other legally binding documents that are considered at the outset of a project can make all the difference between successful construction and a disaster. If you are embarking on a project and want assurance that it is on solid ground, give us a call today at (305) 227-4030.