I talked with the guys at Habitat ADU about taking the next step but first had them send me their Letter of Intent and Contract. After reading both, here's the email I sent them regarding my concerns:
Letter Of Intent (LOI)
1. What is the name of your company? The LOI says Habitat, your emails are using the habitatadu.com domain and your website shows the domain name as aduhabitat.com. Pick a name and stick to it across all platforms. Since you're in the ADU business, I think either ADU Habitat or Habitat ADU since using just Habitat makes me think of Habitat for Humanity.
2. LOI: Under Payment And Deliverable, per your presentation (slide 8) the property owner puts down a $1000 deposit but if the project isn't feasible the property owner gets his deposit back. That's not what the LOI says. The LOI states, "If Property Owner cancels this LOI or elects not to continue this LOI with Habitat, then Habitat will keep the Proposal Fee and there will be no further obligations." The LOI needs to state if the project isn't feasible then the Property Owner will receive his deposit back with no further obligations.
3. The LOI needs to state what is feasible and what is not. The feasibility has to be from the perspective of Habitat ADU and the Property Owner. Basically their needs to be a checkoff list. In my case, it would be removing/trimming of trees and the distance of the ADU from said trees. My experience in the residential solar PV business tells me you're going to have to come up with a more detailed LOI that addresses the infeasibility of building an ADU.
Contract:
1. The contract uses the word "assist" as in "in order to assist Customer". Note, I as the Customer am assisting Habitat ADU and vice versa in the completion of building an ADU on my property. Given the Property Owner is required to deposit the Payment less the Feasibility Deposit into an escrow account the Contract needs to be amended to call out who is assisting whom and not put the onus entirely on the Customer.
2. Under Recitals, Number 2. Project, Project Proposal, and Payment. The contract needs to state, based on a procedural timeline and milestones, the estimated amount which will be withdrawn through the course of the project. Granted the way the contract is written now there has to be an agreement between Habitat ADU and the Property Owner for the amount withdrawn, but that leaves an opening for Habitat ADU to say they need 90% of the escrow funds on day one. The Contract needs to incorporate the estimated budget Habitat ADU has shown on page 6 of the presentation and correlate those individual costs to a timeline.
3. Page 2 number 3. Project Proposal is Estimate Only: Customer acknowledges and agrees that the Project Proposal is only an estimate of the total cost of the Project, including without limitation the cost of the manufactured home, construction costs, design costs, and permit fees and etcetera, etcetera, etcetera.
There's no way I'm signing any contract that includes the words, without limitations. And I willing to bet no one else will either. If Habitat ADU can't build an ADU within a certain percentage of the given estimate then you're in the wrong business. And I think this certainly can be done and should become a selling point.
The reason I say that is your typical contractor is notorious for their adders. Here's an example, a person on the San Jose ADU Facebook page said their contractor wanted to run their ADU sewer line out to the street instead of tieing into their homes sewer line. Well, that added and encroachment permit fee and an additional $15K to their ADU budget. This shouldn't happen and if it does it's on the builder, not the property owner. That should have been vetted during the project's design phase.
The rest of the contract is what it is, meaning there's a reason Shakespeare wrote, "The first thing we do, let's kill all the lawyers." Henry VI, Part 2, Act IV, Scene 2.
Habitat ADU agreed that the LOI needed to be amended to take into account the refundable deposit fee if the project is deemed infeasible. But they said my concerns about the contract would need to be looked at by their lawyers.
Then we had a short discussion about the next steps which for them was talking to a crane company to see if it's possible to lift a prefab home into my backyard and onto a foundation. For me, it's having my trees pruned to see it that will meet the drip line requirement (trees dripline can't hang over the roof).
But Habitat ADU's LOI and Contract brought of a few concerns and limitations of going the prefab route.
Financing
According to Habitat ADU's contract, I have to pay the total cost upfront. Granted the payment is held in escrow and distributed on an as-needed basis with consent required by both parties.
But this all in one payment is going to make it difficult either to come up with the cash or to finance the purchase, especially if there's no milestone to payment schedule called out in the contract.
Lot Limitations
Not every lot will be able to accommodate a modular home. In my case, my lot has overhead utilities in the rear of the yard along with three 30 old ash trees. The end result is my lot may not accommodate the crane used to place the prefab modules in my backyard.
Customizing Limitations
One of the major limitations I've found with prefab homes is their footprint. All the plans I've seen are wide and narrow. When you look at the typical urban and suburban backyard there's not a lot of width available. Most prefabs come in widths greater than 30 ft. and depths typically in the 11" 1/2" range.
What the prefabs companies need to offer is an L shaped unit that can snuggly fit in the rear corner of one's back yard. Architectural firms offer L shaped ADUs, why not prefab?
Something to think about!
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