Friday, March 18, 2011

March 19, 2011 - Development Agreement (Example)

Development Agreement (Example)

Class Example


(Subdivision Development and Construction of Improvements)

THIS DEVELOPMENT AND CONSTRUCTION AGREEMENT ("Agreement") is made effective this 11th day of November, 2004, by and between __ (“Owner”) and d/b/a Construction, LLC (“Contractor”).


A. Owner owns that certain real property located in the County of Canyon, State of Idaho, more particularly described on Schedule I attached hereto and incorporated herein (the "Property").

B. Owner desires to enter into an exclusive agreement with Contractor for the purpose of subdividing the Property into individual lots for commercial purposes as shown on the final plat of the Property ("Lots").

C. Owner further desires to enter into an exclusive agreement with Contractor to construct Commercial buildings and other on-site improvements and developments in connection therewith (“Improvements”) on the Property for sale or lease to third parties (the “Project”).


In consideration of the mutual covenants contained herein, and other good and valuable consideration, Owner and Contract hereby agree as follows:

1. Exclusive Land Development. Unless and until this Agreement is terminated as provided herein, Contractor shall have the exclusive right to subdivide the Property and prepare the Lots and Property for development in accordance with the plat therefore.

2. Exclusive Contractor. Unless and until this Agreement is terminated as provided herein, Contractor shall have the exclusive right to construct improvements on the Property and Owner shall enter into no agreements with any person or entity for the construction of improvements on the property other than Contractor, unless required by a third party purchaser or lessee and agreed to by both parties.

3. Third Party Contracts. Owner intends to enter into contracts with third parties for the purchase and sale or lease of the Improvements to be constructed by Contractor, which may include contracts between Owner and one or more members or affiliates of Owner as individuals ("Third Party Contracts"). Owner may request estimates of construction costs from Contractor in connection with Third Party Contracts which may be "fixed price" contracts. Any construction cost estimates provided by Contractor shall be done as an accommodation to Owner and shall not be binding upon Contractor in any manner whatsoever. Prior to commencement of construction of any Improvements, Owner shall furnish Contractor with a copy of the executed Third Party Contract for such Improvements together with a copy of a loan commitment, proof of funds or other evidence reasonably satisfactory to Contractor, evidencing such third parties' ability to perform under such Third Party Contract ("Source of Funds").

4. Construction Documents. As used in this Agreement, the term "Construction Documents" shall mean this Agreement, architectural drawings and specifications, as the case may be, ("Plans") approved in writing by Owner and any third party purchaser thereof, and any modifications or change orders issued after the approval of the Plans. The Construction Documents represent the entire and integrated agreement between the parties and supersede all prior negotiations, representations, or agreements, written or oral with respect to the subject matter contained therein.

5. Work.

5.1. Contractor shall furnish all necessary labor, supplies, tools and equipment (including safety equipment) necessary or required to complete the work described in the Construction Documents and to satisfy the requirements of all appropriate local governmental agencies or entities (the "Work").

5.2. Except as set forth in Section 5.3 hereof, any modifications or change orders to the Construction Documents must be agreed to in writing by the Contractor and Owner or relevant third party purchaser or lessee, and upon such agreement, such modifications or change orders shall become part of the Construction Documents.

5.3. Contractor shall execute any Work in any change orders required to comply with any law, rule, ordinance or regulation of any appropriate governmental agency as a result of field inspections or otherwise ("Required Change Orders") within a reasonable time after Contractor receives notice of additional Work requiring a Required Change Order. Contractor shall deliver a copy of such Required Change Order to Owner for Owner's approval. Upon receipt of a Required Change Order by Owner, Owner may elect to (i) approve the Required Change Order, or (ii) protest the Work required in the Required Change Order directly with the appropriate governmental agency. In the event Owner elects to protest the Work required in the Required Change Order, Owner shall give Contractor notice within two (2) business days after Owner's receipt thereof. Failure of Owner to give Contractor notice of its election to protest the Work required in a Required Change Order shall be conclusively deemed as Owner's approval thereof.

6. Relationship of the Parties.

6.1. This Agreement is not intended by the parties to constitute or create a joint venture, partnership or formal business organization of any kind. The rights and obligations of the parties shall be those expressly set forth herein.

6.2. Contractor accepts the relationship of trust and confidence established by
this Agreement and covenants with Owner to cooperate with Owner; to utilize Contractor's skill and efforts in furthering the interest of Owner; to furnish sufficient business administration and supervision; to use commercially reasonable efforts to furnish, at all times, an adequate supply of workers and materials; and to perform the Work in a commercially reasonable, expeditious and economic manner. Owner agrees to exercise its best efforts to enable Contractor to perform
the Work in the most expeditious and economical manner by furnishing and approving, in a timely manner, information required by Contractor and making payments to Contractor in accordance with the requirements of the Construction Documents.

7. Commencement and Completion. Commencement of construction of each Building shall begin as soon as reasonably practical after (i) the approval of Plans by Owner and the third party purchaser or lessee of the Improvements, and (ii) delivery to Contractor of a copy of the Third Party Contract and Source of Funds as set forth in Section 2 hereof. Prior to the commencement of construction, Contractor shall furnish Owner with a construction schedule setting forth the estimated construction time and completion date and shall use commercially reasonable efforts to comply with such construction schedule subject to adjustments in the construction time as provided in the Construction Documents.

8. Contract Price.

8.1. In consideration of Contractor’s complete performance of this Agreement, Owner agrees to obtain construction financing in an amount sufficient to pay Contractor’s Work Costs (as defined in Section 8.4 below).
8.2. Owner further agrees to pay Contractor a developer’s fee in the amount of eight percent (8%) of the total land development costs incurred in connection with the Project.

8.3. As used in this Agreement, the "Work Costs" shall mean the reasonable costs necessarily incurred by the Contractor in the proper performance of the Work. Such costs shall be at rates not higher than standard rates paid for labor, materials, and equipment at the place of the Project. The Work Costs shall include the following:

(a) Labor Costs. Wages of construction workers directly employed by Contractor to perform the Work.

(b) Subcontract Costs. Payment made by the Contractor to subcontractors in accordance with the requirements of subcontracts reasonable or necessary to perform the Work.

(c) Materials and Equipment Costs. Transportation of materials and equipment incorporated in the Work including reasonable allowance for removal of waste and installation, maintenance, dismantling and removal of materials for temporary facilities provided by Contractor at the Project.

(d) Contractor-owned Equipment Costs. Costs for use of Contractor owned equipment at a commercially reasonable rate on an hourly, daily, weekly or monthly intervals, whichever is the most efficient. In no event shall the rate chargeable for Contractor owned equipment exceed the cost of similar equipment available for rent from equipment rental companies within the area of the Project. Rental charges for temporary facilities, machinery and equipment rented from third parties by Contractor for use at the site plus costs of transportation, minor repairs and replacements.

(e) Miscellaneous costs.

(1) That portion of premiums for insurance and bonds directly attributable to the Project.
(2) Sales, use or similar taxes imposed by a governmental authority which are related to the Work and for which the Contractor is liable.
(3) Fees and assessments for the building permit, utility connection charges, impact fees and all other permits, licenses and inspections required by any and all appropriate local governmental authorities or agencies for the Project.
(4) Fees for testing laboratories for tests required by the Construction Documents, if any.
(5) Costs of removal of debris from the Project.
(6) Other costs incurred in the performance of the Work to the extent approved, in advance, by Owner.

8.4. Work Costs, shall not include, and Owner shall not be obligated to pay, the following general and administrative costs of land development:

(a) Rent, utilities and other occupancy expenses attributable to the general offices of Contractor.

(b) Administrative costs including wages and salaries of contractors, supervisory and administrative personnel, both when stationed at the Project and at Contractor's general office, and related costs paid or incurred by Contractor for employment related taxes, insurance, contributions, assessments, benefits required by law and customary benefits such as sick leave, medical and health benefits, holidays, vacations, and pensions or profit sharing for contractors, supervisory and administrative personnel.

(c) Costs of insurance not directly attributable to the Project.
(d) Office and miscellaneous expenses incurred in the general offices of the Contractor.

9. Payment. Contractor shall be entitled to receive payments under this Agreement pursuant to the terms of Construction financing obtained by Owner.

10. Subcontracts and Other Agreements. Portions of the Work-that the Contractor does not intend to perform with Contractor's own personnel shall be performed under subcontracts or by other appropriate agreements with Contractor. Contractor shall have full right and authority to select subcontractors and suppliers of materials and/or equipment. Subcontractors and suppliers of materials and/or equipment shall be selected on the basis of most economical overall cost to the Owner in the reasonable judgment of Contractor, taking into consideration the actual costs, quality of the subcontractor's work, time in which such work can be completed, and overall scheduling and efficiency of the Project. Subcontracts and other agreements shall incorporate the applicable provisions of the Construction Documents and shall not be awarded on a cost-plus-a-fee basis without the prior written consent of the Owner.

11. Indemnity of Liens. Contractor will promptly discharge any and all liens filed against the Lot and the Project by contractor’s subcontractors or suppliers and agents and persons employed by any of such persons. If liens are filed which, in good faith, contractor disputes, contractor may, in lieu of payment of such liens, furnish title insurance insuring over such liens, or such other indemnity or bond as may reasonably protect the Owner and Lender. In such event, the Owner shall not be entitled to withhold payments due hereunder

12. Accounting Records. Contractor shall keep full and detailed accounts and exercise such control as may be necessary for proper cost management satisfactory to Owner and provider of construction financing. Owner shall be afforded access to Contractor's records, books, correspondence, instructions, drawings, receipts, subcontracts, purchase orders, vouchers, memoranda, and other data related to the Project, and Contractor shall preserve all records for a period of three (3) years after final payment or for such longer period as may be required by law.

13. Liability of Contractor. Contractor shall use reasonable business judgment in performing its duties and obligations under the Construction Documents. Notwithstanding anything to the contrary contained herein or in other Construction Documents, Contractor shall not be liable to Owner except for acts or omissions of gross negligence or in bad faith.

14. Insurance. At all times during construction of the Improvements and prior to delivery of possession of such Improvements to Owner or any third party purchaser or lessee, Contractor shall maintain general liability insurance covering Contractor’s liability with respect to the construction of Improvements on the Property.

15. Default.

15.1. Default of the Contractor shall be defined as the occurrence of any of the following conditions:

(a) Contractor is adjudged bankrupt or makes a general assignment for the benefit of creditors, or a receiver is appointed to take over Contractor's business assets;

(b) Contractor fails to comply with any of the provisions of this Agreement, or fails to perform in accordance with the Construction Documents;

(c) Contractor fails to comply with any project schedule referred to
herein; or

(d) The Contractor becomes insolvent or is unable to, or fails to, pay its obligations as they mature.

15.2. Upon default by Contractor, Owner, upon forty-eight (48) hours written notice, shall have the right to terminate and cancel this Agreement. In that event, Owner may take over the Project and prosecute the same to completion, without liability for doing so, take possession of and utilize in completing the Work such materials, appliances, plans, and equipment and other property belonging to Contractor as may be on the Project site and necessary therefor. Owner may, at its discretion, do whatever is necessary to insure performance of the remaining Work and may take any action reasonably necessary therefor in Contractor's name. In case of default, Contractor shall be liable to Owner for any and all additional costs, expenses, attorney fees, and other damages, both liquidated and unliquidated, which directly or indirectly result from Contractor's default.

16. Attorney Fees and Costs. In the event either party to this Agreement takes legal action to enforce its rights hereunder, the prevailing party shall be entitled to recover its reasonable attorney fees and costs, including attorney fees and costs on any appeal, in addition to any and all other remedies.

17. Assignment. Contractor may, without Owner's consent, assign its right to receive payments under this Agreement for security purposes in connection with any loan or line of credit, the proceeds of which are intended to be used for the Project. Contractor may not delegate its duties or obligations to perform the Work under the Construction Documents without the prior written consent of Owner.
[end of text]

EXECUTED as of the day and year first above written.





Legal Description of Property

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