Risk Disclosure
Important factors to consider when planning your construction project
Please read carefully before engaging our services
Purpose of This Disclosure
Construction projects involve inherent risks that every client should understand before beginning a project. This disclosure is designed to provide transparency about the challenges that may arise during construction. While Ergon Builders employs industry best practices to mitigate these risks, they cannot be entirely eliminated. This document supplements, but does not replace, the terms of your construction contract.
Construction Project Risks
These risks are common to construction projects. We work to minimize their impact but cannot guarantee they will not occur.
Unforeseen Site Conditions
Hidden conditions such as unsuitable soils, underground water, rock formations, buried utilities, or hazardous materials (asbestos, lead paint) may require additional work not included in the original scope and budget.
Our Mitigation: We conduct thorough pre-construction assessments and recommend geotechnical surveys for new construction. Allowances for unknowns may be built into budgets for renovation projects.
Structural Discoveries
Renovation and addition projects may reveal structural deficiencies, code violations, or deterioration not visible during initial inspections. These discoveries can significantly impact scope and cost.
Our Mitigation: We perform non-invasive assessments and recommend exploratory demolition when feasible. Change order procedures address discovered conditions promptly.
Permitting and Regulatory Delays
Building permits, zoning approvals, wetlands permits, and historic district reviews are subject to government agency timelines. Delays, additional requirements, or denials can impact project schedules.
Our Mitigation: We maintain relationships with local building departments and engage early in the permit process. Complex projects may benefit from pre-application meetings.
Weather and Natural Events
Construction is inherently weather-dependent. Extreme temperatures, rain, snow, and storms can cause delays, especially for exterior work. Climate events may also damage work in progress.
Our Mitigation: Project schedules include weather contingency time. We maintain appropriate insurance and take protective measures for work in progress.
Labor and Subcontractor Availability
Skilled trade availability fluctuates with market conditions. Labor shortages, subcontractor scheduling conflicts, or contractor business issues can affect project timelines.
Our Mitigation: We maintain long-term relationships with reliable trade partners and have backup subcontractors. We plan projects with realistic trade availability assessments.
Material Availability and Quality
Specialty materials, imported products, or items with long lead times may experience delays, discontinuation, or quality issues. Supply chain disruptions can impact availability.
Our Mitigation: We identify long-lead items early, recommend ordering critical materials upon contract signing, and maintain relationships with multiple suppliers.
Budget Considerations
Understanding potential cost variations helps set realistic expectations and ensures adequate financial preparation.
Cost Estimation Limitations
5-15%Construction estimates are based on available information at the time of proposal. Actual costs may vary due to market conditions, detailed engineering, or refined specifications.
Typical contingency recommended
Material Price Volatility
10-20%Building material prices fluctuate with commodity markets, tariffs, and supply/demand. Lumber, steel, copper, and specialty materials can experience significant price swings.
Potential annual variation in materials
Design Changes and Scope Creep
15-25%Client-requested changes during construction often cost more than if included in original plans due to demolition, rework, and schedule impacts.
Premium for changes during construction
Allowance Overages
VariableAllowance amounts are estimates for selections not yet made. Actual selections may exceed allowances, especially for fixtures, finishes, and appliances.
Depends on selection choices
Recommendation: Contingency Reserve
We recommend maintaining a contingency reserve of 10-20% beyond your construction budget to address unexpected costs. This is industry standard practice and protects against financial strain during construction. For renovation projects, particularly those involving older structures, a higher contingency (15-25%) is advisable.
Timeline Factors
Construction schedules are estimates based on optimal conditions. Various factors can extend project duration.
Baseline Schedule Assumptions
Project schedules are developed based on typical conditions and assume timely decisions, permit approvals, and deliveries. Deviations from assumptions impact the timeline.
Decision and Selection Delays
Late decisions on materials, fixtures, colors, and design details can cascade into construction delays. Some items have 8-16 week lead times.
Inspection and Approval Timing
Building inspections must be scheduled and passed before work can proceed. Failed inspections or inspector availability can cause delays.
Cumulative Impact
Multiple small delays can compound into significant schedule extensions. A 10-day delay on 5 different trades can extend a project by months if sequential.
Schedule Transparency
Ergon Builders provides detailed project schedules with identified milestones and potential risk points. We provide regular schedule updates and communicate promptly when delays occur. While we cannot guarantee completion dates, we are committed to realistic scheduling and proactive communication.
Investment Disclosures
Important considerations for clients viewing construction as a financial investment, particularly for multifamily and commercial projects.
This is not financial advice. Consult qualified financial and legal professionals for investment decisions.
Return on Investment Uncertainty
While quality construction generally adds property value, specific ROI depends on market conditions, location, and buyer preferences at time of sale. Not all improvements return 100% of cost.
Market Condition Fluctuations
Real estate markets are cyclical. Property values may decrease due to economic factors, interest rate changes, or local market conditions regardless of improvements made.
Multifamily Investment Considerations
Multifamily construction projects involve additional risks including rental market fluctuations, vacancy rates, operating expenses, financing terms, and regulatory changes affecting landlord obligations.
Regulatory and Code Changes
Building codes, zoning regulations, and energy requirements evolve over time. Properties may require future upgrades to meet new standards or maintain certificates of occupancy.
Special Notice: Multifamily Development
Clients considering multifamily residential construction should be aware of additional considerations:
- Rental Income Projections: Projected rental income is not guaranteed. Actual rents depend on market conditions, property management, and economic factors.
- Operating Expenses: Actual operating costs may exceed projections due to maintenance, utilities, insurance, property taxes, and management expenses.
- Regulatory Environment: Rent control, tenant protection laws, and zoning changes can affect investment returns. Connecticut municipalities may implement new regulations.
- Financing Risk: Construction and permanent financing terms may change. Interest rate fluctuations affect project economics.
Your Acknowledgment
By proceeding with a construction project with Ergon Builders, you acknowledge that:
- ✓You have read and understand this Risk Disclosure document.
- ✓You understand that construction projects carry inherent risks that cannot be entirely eliminated.
- ✓You have adequate financial resources, including contingency funds, for your project.
- ✓You understand that project budgets and schedules are estimates that may change.
- ✓You have consulted or will consult appropriate professionals for financial, legal, and insurance advice.
Questions About Project Risks?
We believe in complete transparency. If you have questions about any aspect of this disclosure or your specific project, our team is here to provide honest answers.