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William Severyn, Sr.
June 3, 2022

What is a New Construction “Escalation Clause”?

When you sign a contract with a builder to construct a new home for you your price is set in stone – correct? 


Since the start of 2020 and the onset of the global pandemic many things have changed with regards to the costs of goods and materials that go into a new home. Lumber primarily, and any wood products (cabinets, trim etc.) have increased in cost. In the past, lumber price variances during construction of a new home were minimal and could be absorbed by the builder. Today lumber prices change almost on a daily basis. Also, almost every other product that goes into a new home has seen price increases since early 2020. Drywall, paint, flooring, plumbing fixtures, appliances and others have gone up in price. Also, labor and delivery changes and overall inflation have affected the cost of a new home.

Enter the “Escalation Clause”….

Many builders, large and small, have instituted an escalation clause in their contract with a purchaser. The escalation clause is intended to protect the builder in the event there are large price increases on materials between the time the builder starts the project and completion. What the escalation clause does is have the purchaser agree to cover any increases in cost that may occur during construction.

Now the Good News!

Severyn Development Inc. does not use an “escalation clause” in our contract. We do our best to lock in prices with our vendors and trades and bid many of the scopes of work to insure we are giving you our best price with a guarantee that that price will not change during construction. Please keep in mind, changes orders during construction do occur and we work with our clients to insure they are getting the home of their dreams. In order to do this, these change orders usually come with a cost, but that cost is agreed to both by Severyn Development and our client before moving forward. The base price of the home does not change once the contract is signed. This “price guarantee” is one way we make the process as seamless as possible.

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