A homeowner‑friendly guide by Palazzo Construction — models, risk, payments, and tips
Palazzo Construction Ltd. • Vancouver & Lower Mainland • September 2025
This plain‑English overview summarizes common residential contract models used in British Columbia. It is general information, **not legal advice**. For a specific project or dispute, consult a BC construction lawyer.
Common Models at a Glance
| Model | Typical Form | How You Pay | Best When | Watch‑outs |
| Stipulated Price (Fixed/Lump Sum) | CCDC‑2 (owner‑contractor) | Fixed price for defined scope; changes via Change Orders | Design is complete and site risks are known; owner wants price certainty | Scope gaps cause change orders; ensure clear specs and unit prices for unknowns |
| Cost‑Plus | CCDC‑3 | Actual cost of work + agreed fee (fixed or %) | Scope/open‑book collaboration; when scope may evolve | Set allowances, a target price, and audit rights; define what is ‘cost of the Work’ |
| Construction Management (as Agent) | CCDC‑5A | Owner holds trade contracts; CM is paid a fee | Fast‑track with multiple bid packages; owner wants transparency/control | Owner bears more risk; needs experienced team and strong procurement |
| Construction Management (for Services & Construction) | CCDC‑5B | CM holds trades; GMP possible | Fast‑track with single point of responsibility | Define fee, general conditions, and shared savings; clarify contingencies |
| Design‑Build | CCDC‑14 (DB), or custom residential agreements | Single contract for design + construction | Owner wants single point of responsibility and speed | Performance specs must be clear; manage change protocol carefully |
Diagrams (High‑DPI)
Risk & price certainty spectrum across common models (illustrative).
Change‑order process — from issue identification to execution (typical sequence).
Payment/holdback timeline — including 10% statutory holdback under BC Builders Lien Act (illustrative; confirm current law).
Payments, Invoices, and Holdback
- Progress draws: invoices typically monthly against completed work; keep a running schedule of values.
- Statutory holdback: **10%** holdback is commonly retained on each progress draw per the BC **Builders Lien Act** and normally released after the lien period expires (confirm current timelines and any Notice of Certification).
- Deficiency holdback: separate amounts may be held until deficiencies are corrected; define in contract.
- Change orders: written approvals keep the project aligned on cost and time; include unit rates for hidden conditions.
Owner Tips & Pitfalls to Avoid
- Define scope clearly with drawings/specs and allowances (appliances, finishes).
- Confirm insurance: builder’s risk, general liability, and WCB coverage for all contractors.
- Set communication cadence (weekly site meeting notes) and a change‑order threshold (e.g., >$1,000 requires approval).
- Use a defects/deficiency list and close‑out checklist; align with BC’s 2‑5‑10 new home warranty where applicable.
- Keep all notices, lien releases, and inspection approvals organized for occupancy and financing.
Quick FAQs
**Is CCDC‑2 only for commercial work?** No. It’s widely used for residential with appropriate amendments and scopes; consult counsel to tailor to your project.
**Can I cap a Cost‑Plus contract?** Yes—use a Target Price or Guaranteed Maximum Price (GMP) with rules for shared savings and what counts as cost.
**Who owns the design?** Check the agreement. In design‑build or CM, ownership/licensing of design and as‑built documents should be explicit.
References (APA 7th)
Canadian Construction Documents Committee (CCDC). (2023). CCDC‑2, CCDC‑3, CCDC‑5A/5B, and other standard forms. https://www.ccdc.org/
Province of British Columbia. (2024). Builders Lien Act — overview and statutory holdback concepts. https://www2.gov.bc.ca/
BC Housing. (2024). Guide for home construction contracts and 2‑5‑10 warranty basics. https://www.bchousing.org/
Canadian Construction Association. (2023). Owner’s guide to project delivery methods. https://www.cca-acc.com/
Copyright & Editorial Integrity
Original writing and diagrams created for Palazzo Construction. Facts are paraphrased from official sources cited above; no verbatim copying. © Palazzo Construction Ltd. All rights reserved.
This document is informational and not legal advice.
Palazzo Construction Ltd. • Vancouver & Lower Mainland • September 2025