diff --git a/AGENTS.md b/AGENTS.md
index 56fc1c185..ec8734069 100644
--- a/AGENTS.md
+++ b/AGENTS.md
@@ -9,7 +9,7 @@ This guide helps AI agents quickly understand and work productively with the dbt
 - **What**: dbt adapter for Databricks Lakehouse platform
 - **Based on**: dbt-spark adapter with Databricks-specific enhancements
 - **Key Features**: Unity Catalog support, Delta Lake, Python models, streaming tables
-- **Language**: Python 3.9+ with Jinja2 SQL macros
+- **Language**: Python 3.10+ with Jinja2 SQL macros
 - **Architecture**: Inherits from Spark adapter, extends with Databricks-specific functionality
 
 ### Essential Files to Understand
@@ -20,6 +20,7 @@ dbt/adapters/databricks/
 ├── connections.py             # Connection management and SQL execution
 ├── credentials.py             # Authentication (token, OAuth, Azure AD)
 ├── relation.py               # Databricks-specific relation handling
+├── dbr_capabilities.py       # DBR version capability system
 ├── python_models/            # Python model execution on clusters
 ├── relation_configs/         # Table/view configuration management
 └── catalogs/                 # Unity Catalog vs Hive Metastore logic
@@ -33,24 +34,37 @@ dbt/include/databricks/macros/ # Jinja2 SQL templates
 
 ## 🛠 Development Environment
 
-**Prerequisites**: Python 3.9+ installed on your system
+**Prerequisites**: Python 3.10+ installed on your system
 
 **Install Hatch** (recommended):
 
+For Linux:
+
 ```bash
-# Install Hatch globally - see https://hatch.pypa.io/dev/install/
-pip install hatch
+# Download and install standalone binary
+curl -Lo hatch.tar.gz https://github.com/pypa/hatch/releases/latest/download/hatch-x86_64-unknown-linux-gnu.tar.gz
+tar -xzf hatch.tar.gz
+mkdir -p $HOME/bin
+mv hatch $HOME/bin/hatch
+chmod +x $HOME/bin/hatch
+echo 'export PATH="$HOME/bin:$PATH"' >> ~/.zshrc
+export PATH="$HOME/bin:$PATH"
 
 # Create default environment (Hatch installs needed Python versions)
 hatch env create
 ```
 
+For other platforms: see https://hatch.pypa.io/latest/install/
+
 **Essential commands**:
 
 ```bash
 hatch run code-quality           # Format, lint, type-check
 hatch run unit                   # Run unit tests
 hatch run cluster-e2e            # Run functional tests
+
+# For specific tests, use pytest directly:
+hatch run pytest path/to/test_file.py::TestClass::test_method -v
 ```
 
 > 📖 **See [Development Guide](docs/dbt-databricks-dev.md)** for comprehensive setup documentation
@@ -113,17 +127,38 @@ class TestCreateTable(MacroTestBase):
 
 #### Functional Test Example
 
+**Important**: SQL models and YAML schemas should be defined in a `fixtures.py` file in the same directory as the test, not inline in the test class. This keeps tests clean and fixtures reusable.
+
+**fixtures.py:**
+
+```python
+my_model_sql = """
+{{ config(materialized='incremental', unique_key='id') }}
+select 1 as id, 'test' as name
+"""
+
+my_schema_yml = """
+version: 2
+models:
+  - name: my_model
+    columns:
+      - name: id
+        description: 'ID column'
+"""
+```
+
+**test_my_feature.py:**
+
 ```python
 from dbt.tests import util
+from tests.functional.adapter.my_feature import fixtures
 
 class TestIncrementalModel:
     @pytest.fixture(scope="class")
     def models(self):
         return {
-            "my_model.sql": """
-                {{ config(materialized='incremental', unique_key='id') }}
-                select 1 as id, 'test' as name
-            """
+            "my_model.sql": fixtures.my_model_sql,
+            "schema.yml": fixtures.my_schema_yml,
         }
 
     def test_incremental_run(self, project):
@@ -147,6 +182,46 @@ DatabricksAdapter (impl.py)
 
 ### Key Components
 
+#### DBR Capability System (`dbr_capabilities.py`)
+
+- **Purpose**: Centralized management of DBR version-dependent features
+- **Key Features**:
+  - Per-compute caching (different clusters can have different capabilities)
+  - Named capabilities instead of magic version numbers
+  - Automatic detection of DBR version and SQL warehouse environments
+- **Supported Capabilities**:
+  - `TIMESTAMPDIFF` (DBR 10.4+): Advanced date/time functions
+  - `INSERT_BY_NAME` (DBR 12.2+): Name-based column matching in INSERT
+  - `ICEBERG` (DBR 14.3+): Apache Iceberg table format
+  - `COMMENT_ON_COLUMN` (DBR 16.1+): Modern column comment syntax
+  - `JSON_COLUMN_METADATA` (DBR 16.2+): Efficient metadata retrieval
+- **Usage in Code**:
+
+  ```python
+  # In Python code
+  if adapter.has_capability(DBRCapability.ICEBERG):
+      # Use Iceberg features
+
+  # In Jinja macros
+  {% if adapter.has_dbr_capability('comment_on_column') %}
+      COMMENT ON COLUMN ...
+  {% else %}
+      ALTER TABLE ... ALTER COLUMN ...
+  {% endif %}
+
+  {% if adapter.has_dbr_capability('insert_by_name') %}
+      INSERT INTO table BY NAME SELECT ...
+  {% else %}
+      INSERT INTO table SELECT ... -- positional
+  {% endif %}
+  ```
+
+- **Adding New Capabilities**:
+  1. Add to `DBRCapability` enum
+  2. Add `CapabilitySpec` with version requirements
+  3. Use `has_capability()` or `require_capability()` in code
+- **Important**: Each compute resource (identified by `http_path`) maintains its own capability cache
+
 #### Connection Management (`connections.py`)
 
 - Extends Spark connection manager for Databricks
@@ -184,6 +259,42 @@ DatabricksAdapter (impl.py)
 - Override Spark macros with Databricks-specific logic
 - Handle materializations (table, view, incremental, snapshot)
 - Implement Databricks features (liquid clustering, column masks, tags)
+- **Important**: To override a `spark__macro_name` macro, create `databricks__macro_name` (NOT `spark__macro_name`)
+
+#### Multi-Statement SQL Execution
+
+When a macro needs to execute multiple SQL statements (e.g., DELETE followed by INSERT), use the `execute_multiple_statements` helper:
+
+**Pattern for Multi-Statement Strategies:**
+```jinja
+{% macro my_multi_statement_strategy(args) %}
+  {%- set statements = [] -%}
+  
+  {#-- Build first statement --#}
+  {%- set statement1 -%}
+    DELETE FROM {{ target_relation }}
+    WHERE some_condition
+  {%- endset -%}
+  {%- do statements.append(statement1) -%}
+  
+  {#-- Build second statement --#}
+  {%- set statement2 -%}
+    INSERT INTO {{ target_relation }}
+    SELECT * FROM {{ source_relation }}
+  {%- endset -%}
+  {%- do statements.append(statement2) -%}
+  
+  {{- return(statements) -}}
+{% endmacro %}
+```
+
+**How It Works:**
+- Return a **list of SQL strings** from your strategy macro
+- The incremental materialization automatically detects lists and calls `execute_multiple_statements()`
+- Each statement executes separately via `{% call statement('main') %}`
+- Used by: `delete+insert` incremental strategy (DBR < 17.1 fallback), materialized views, streaming tables
+
+**Note:** Databricks SQL connector does NOT support semicolon-separated statements in a single execute call. Always return a list.
 
 ### Configuration System
 
@@ -256,6 +367,7 @@ Models can be configured with Databricks-specific options:
 
 - **Development**: `docs/dbt-databricks-dev.md` - Setup and workflow
 - **Testing**: `docs/testing.md` - Comprehensive testing guide
+- **DBR Capabilities**: `docs/dbr-capability-system.md` - Version-dependent features
 - **Contributing**: `CONTRIBUTING.MD` - Code standards and PR process
 - **User Docs**: [docs.getdbt.com](https://docs.getdbt.com/reference/resource-configs/databricks-configs)
 
@@ -273,6 +385,11 @@ Models can be configured with Databricks-specific options:
 3. **SQL Generation**: Prefer macros over Python string manipulation
 4. **Testing**: Write both unit and functional tests for new features
 5. **Configuration**: Use dataclasses with validation for new config options
+6. **Imports**: Always import at the top of the file, never use local imports within functions or methods
+7. **Version Checks**: Use capability system instead of direct version comparisons:
+   - ❌ `if adapter.compare_dbr_version(16, 1) >= 0:`
+   - ✅ `if adapter.has_capability(DBRCapability.COMMENT_ON_COLUMN):`
+   - ✅ `{% if adapter.has_dbr_capability('comment_on_column') %}`
 
 ## 🚨 Common Pitfalls for Agents
 
@@ -284,12 +401,21 @@ Models can be configured with Databricks-specific options:
 6. **Follow SQL normalization** in test assertions with `assert_sql_equal()`
 7. **Handle Unity Catalog vs HMS differences** in feature implementations
 8. **Consider backward compatibility** when modifying existing behavior
+9. **Use capability system for version checks** - Never add new `compare_dbr_version()` calls
+10. **Remember per-compute caching** - Different clusters may have different capabilities in the same run
+11. **Multi-statement SQL**: Don't use semicolons to separate statements - return a list instead and let `execute_multiple_statements()` handle it
 
 ## 🎯 Success Metrics
 
 When working on this codebase, ensure:
 
 - [ ] All tests pass (`hatch run code-quality && hatch run unit`)
+- [ ] **CRITICAL: Run affected functional tests before declaring success**
+  - If you modified connection/capability logic: Run tests that use multiple computes or check capabilities
+  - If you modified incremental materializations: Run `tests/functional/adapter/incremental/`
+  - If you modified Python models: Run `tests/functional/adapter/python_model/`
+  - If you modified macros: Run tests that use those macros
+  - **NEVER declare "mission accomplished" without running functional tests for affected features**
 - [ ] New features have both unit and functional tests
 - [ ] SQL generation follows Databricks best practices
 - [ ] Changes maintain backward compatibility
diff --git a/CHANGELOG.md b/CHANGELOG.md
index d47730d32..e33afb0f6 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -1,5 +1,9 @@
 ## dbt-databricks 1.10.15 (TBD)
 
+### Fixes
+
+- Switch to a more reliable mechanism for checking schema existence ([1261](https://github.com/databricks/dbt-databricks/pull/1261))
+
 ### Under the hood
 
 - Allow for dbt-core 1.10.15 ([1254](https://github.com/databricks/dbt-databricks/pull/1254))
diff --git a/dbt/adapters/databricks/impl.py b/dbt/adapters/databricks/impl.py
index 2446e559c..42d08cf3e 100644
--- a/dbt/adapters/databricks/impl.py
+++ b/dbt/adapters/databricks/impl.py
@@ -305,9 +305,11 @@ def list_schemas(self, database: Optional[str]) -> list[str]:
 
     def check_schema_exists(self, database: Optional[str], schema: str) -> bool:
         """Check if a schema exists."""
-        return schema.lower() in set(
-            s.lower() for s in self.connections.list_schemas(database or "hive_metastore", schema)
+        results = self.execute_macro(
+            "databricks__check_schema_exists",
+            kwargs={"database": database or "hive_metastore", "schema": schema},
         )
+        return len(results) > 0
 
     def execute(
         self,
diff --git a/dbt/include/databricks/macros/adapters/metadata.sql b/dbt/include/databricks/macros/adapters/metadata.sql
index 0fa19cefc..2072c1e06 100644
--- a/dbt/include/databricks/macros/adapters/metadata.sql
+++ b/dbt/include/databricks/macros/adapters/metadata.sql
@@ -22,7 +22,28 @@ SHOW TABLE EXTENDED IN {{ schema_relation.without_identifier()|lower }} LIKE '{{
   {{ return(run_query_as(show_tables_sql(relation), 'show_tables')) }}
 {% endmacro %}
 
+{% macro databricks__list_schemas(database) -%}
+  {{ return(run_query_as(list_schemas_sql(database), 'list_schemas')) }}
+{% endmacro %}
+
+{% macro list_schemas_sql(database) %}
+{% if database %}
+  SHOW SCHEMAS IN {{ database }}
+{% else %}
+  SHOW SCHEMAS
+{% endif %}
+{% endmacro %}
+
+{% macro databricks__check_schema_exists(database, schema) %}
+  {{ return(run_query_as(check_schema_exists_sql(database, schema), 'check_schema_exists')) }}
+{% endmacro %}
+
+{% macro check_schema_exists_sql(database, schema) %}
+  SHOW SCHEMAS IN {{ database }} LIKE '{{ schema }}'
+{% endmacro %}
+
 {% macro show_tables_sql(relation) %}
+
 SHOW TABLES IN {{ relation.render() }}
 {% endmacro %}
 
diff --git a/pyproject.toml b/pyproject.toml
index 1185c352c..621387bf1 100644
--- a/pyproject.toml
+++ b/pyproject.toml
@@ -63,14 +63,8 @@ check-sdist = [
 ]
 
 [tool.hatch.envs.default]
-pre-install-commands = [
-    "pip install git+https://github.com/dbt-labs/dbt-common.git@1.34.latest",
-    "pip install git+https://github.com/dbt-labs/dbt-adapters.git@dbt-adapters-1.17.latest#subdirectory=dbt-adapters",
-    "pip install git+https://github.com/dbt-labs/dbt-adapters.git@dbt-adapters-1.17.latest#subdirectory=dbt-tests-adapter",
-    "pip install git+https://github.com/dbt-labs/dbt-core.git@1.10.latest#subdirectory=core",
-]
 dependencies = [
-    "dbt-spark @ git+https://github.com/dbt-labs/dbt-adapters.git@dbt-adapters-1.17.latest#subdirectory=dbt-spark",
+    "dbt-tests-adapter",
     "pytest",
     "pytest-xdist",
     "pytest-dotenv",
@@ -83,7 +77,6 @@ dependencies = [
     "pydantic>=1.10.0, <2",
     "pytest-cov",
 ]
-path = ".hatch"
 python = "3.9"
 
 [tool.hatch.envs.default.scripts]
diff --git a/tests/functional/adapter/basic/test_check_schema_exists.py b/tests/functional/adapter/basic/test_check_schema_exists.py
new file mode 100644
index 000000000..e6d8b6acc
--- /dev/null
+++ b/tests/functional/adapter/basic/test_check_schema_exists.py
@@ -0,0 +1,57 @@
+import pytest
+
+
+class TestCheckSchemaExists:
+    """Test the check_schema_exists adapter method."""
+
+    @pytest.fixture(scope="class", autouse=True)
+    def setUp(self, project):
+        """Create a test schema and clean it up after tests."""
+        test_schema = f"{project.test_schema}_check_exists"
+
+        with project.adapter.connection_named("__test"):
+            relation = project.adapter.Relation.create(
+                database=project.database,
+                schema=test_schema,
+            )
+            # Drop if exists from previous run
+            project.adapter.drop_schema(relation)
+            # Create the test schema
+            project.adapter.create_schema(relation)
+
+        yield test_schema
+
+        # Cleanup
+        with project.adapter.connection_named("__test"):
+            project.adapter.drop_schema(relation)
+
+    def test_check_schema_exists(self, project, setUp):
+        """Test that check_schema_exists correctly identifies existing and non-existing schemas."""
+        test_schema = setUp
+
+        with project.adapter.connection_named("__test"):
+            # Test 1: Verify existing schema returns True
+            exists = project.adapter.check_schema_exists(
+                database=project.database, schema=test_schema
+            )
+            assert (
+                exists is True
+            ), f"Expected schema '{test_schema}' to exist but check returned False"
+
+            # Test 2: Verify non-existing schema returns False
+            non_existent_schema = "this_schema_definitely_does_not_exist_12345"
+            exists = project.adapter.check_schema_exists(
+                database=project.database, schema=non_existent_schema
+            )
+            assert (
+                exists is False
+            ), f"Expected schema '{non_existent_schema}' to not exist but check returned True"
+
+            # Test 3: Verify existing default schema returns True (should always exist)
+            exists = project.adapter.check_schema_exists(
+                database=project.database, schema=project.test_schema
+            )
+            assert exists is True, (
+                f"Expected default test schema '{project.test_schema}' "
+                "to exist but check returned False"
+            )