A commercial construction contract is not just paperwork. It is the document that determines who pays when something goes wrong, who absorbs delays, and who walks away whole if the project falls apart. Most tenants sign these contracts after a quick skim. That is a mistake. Here are five red flags we see in commercial construction contracts that cost tenants real money in Colorado.
1. Vague Change Order Language
Change orders are where contracts either protect you or bleed you. A well-written contract defines exactly how changes are requested, priced, approved, and documented before any additional work begins. A bad one says something like "changes will be handled as they arise" or gives the contractor unilateral authority to proceed with extras and bill you later.
We have seen projects where a lazy scope breakdown in the subcontract made it impossible to determine what was included in the original price and what was extra. When that happens, the tenant is stuck in a "who said what" argument with no paper trail.
If your contract does not require written approval of every change order before the work starts, you are giving the contractor a blank check. No exceptions.
Every change order should reference the original scope, identify what changed, state the cost impact, and require your written sign-off. If the contract skips any of those steps, push back before you sign.
2. Ambiguous Scope of Work
The scope of work is the most important section of any construction contract. It defines what you are paying for. When the language is generic ("contractor shall complete the buildout as agreed" or "per plans and specifications"), you are setting yourself up for disputes.
Good contracts break scope down to a level where there is no room for interpretation. Which specific plans? Which revision? What finish selections are included? What happens if a selection is not made by a certain date?
One of the biggest red flags we see is a contractor who does not ask about your selections before signing. If nobody is asking what flooring, fixtures, or finishes you want, the number in the contract is a guess. And guesses become change orders. We covered the full commercial TI process in an earlier post, and scope definition is where the entire project is won or lost.
3. No-Damages-for-Delay Clauses
This one catches tenants off guard. A no-damages-for-delay clause means that if the contractor is late, your only remedy is a time extension. Not a dollar of compensation for the rent you paid on an empty space, the revenue you lost, or the employees you had sitting in temporary offices.
In Colorado, these clauses are generally enforceable in commercial contracts. Contractors include them to limit their exposure. But as a tenant, you should negotiate exceptions for delays caused by the contractor's own negligence, failure to staff the project, or material procurement errors.
At minimum, your contract should include a substantial completion date with defined consequences if that date slips for reasons within the contractor's control. If the permit takes longer than expected, that is one thing. If the crew just does not show up, that is a different conversation.
4. Retainage Terms That Favor the Contractor
Retainage is the percentage of each payment you hold back until the project is complete. Standard retainage in Colorado commercial construction is 5% to 10%. It exists to give you leverage to ensure the contractor finishes punch list items and delivers closeout documents.
The red flag is when the contract allows the contractor to invoice for retainage release before the work is actually done, or when the retainage release is tied to a vague milestone like "substantial completion" without defining what that means. Some contracts also reduce retainage to zero at 50% completion, which removes your leverage for the entire back half of the project.
Your contract should define substantial completion clearly, tie retainage release to final inspection and punch list completion, and give you a reasonable window (30 to 60 days) to verify the work before releasing the final payment.
5. Missing Lien Waiver Requirements
This is the one most tenants have never heard of, and it can be the most expensive. On a commercial TI, the general contractor hires subcontractors. If the GC does not pay those subs, the subs can file a mechanic's lien against the property. In some cases, you can pay the GC in full and still end up with a lien on your space because a sub was not paid.
A good contract requires the GC to provide unconditional lien waivers from every subcontractor upon each payment. Not conditional waivers. Unconditional. That means the sub confirms they were paid, period.
If the general contractor you hired is not collecting unconditional lien waivers for every single person on the site that they subcontract to, you are opening yourself up to problems.
We collect unconditional lien waivers on every project, from every sub, at every payment cycle. It protects our clients and it is standard practice for any GC who takes your construction budget seriously. If your contractor cannot explain their lien waiver process in one sentence, that is a red flag.
How to Protect Yourself Before Signing
You do not need to be a construction attorney to catch these issues. But you do need to read the contract. Here is the short list.
- Read the change order section. If it does not require your written approval before work starts, flag it.
- Check that the scope of work references specific plans, revisions, and selections.
- Look for no-damages-for-delay language and negotiate exceptions.
- Verify retainage terms include a clear definition of substantial completion.
- Confirm the contract requires unconditional lien waivers from all subcontractors.
A contractor who pushes back on these protections is telling you something about how they plan to run the project. A contractor who builds them into the contract by default is telling you something too.
Have a contract you want a second set of eyes on? Start a conversation or call 833-SNYDER-9 (833-769-3379). We review contracts with our clients before anything gets signed, because the best time to fix a bad clause is before the first nail goes in.
Next read: What to Expect During a Commercial Tenant Improvement