10 things every remodeling contract should contain
Contractors routinely battle a perception that home improvement projects drag on beyond their expected completion dates and, in worst-case scenarios, require a second contractor to come in to finish what the first one started.
But that’s a situation that can be avoided – or at least minimized – with a simple contract provision, says Angie Hicks, founder of Angie’s List.
“It’s not the contractor’s job to protect your interests,” Hicks said. “That’s your job.”
Unfortunately, too many consumers don’t pay enough attention to contract terms and don’t negotiate for better ones. Angie’s List surveyed more than 500 contractors nationwide in August 2011 to gauge their priority list for contract provisions.
- 70 percent of the contractors never include provisions that tie payment to completion.
- 45 percent don’t include termination clauses that allow either party to walk away without penalty should the contract be violated.
- 24 percent don’t even require contracts before they start on a project.
In a March 2011 nationwide consumer survey, Angie’s List found that 16 percent of the respondents don’t fully read contracts before they sign them. Hicks said reading the contract is mandatory, and negotiating its terms is just plain smart.
“There are a ton of great contractors out there who will do their best to deliver jobs on time, on budget and at a high quality of workmanship,” Hicks said. “You have every right to negotiate your remodeling contract. If a contractor won’t work with you on reasonable requests, find one who will.”
10 Contract Terms designed to Protect Consumers
- Job description: Spell out the project and who is responsible for what. For example, the homeowner agrees to provide payment, access to the home, names those authorized to sign and amend contract and the contractor will provide necessary tools, materials, expertise.
- Start and completion dates: Set dates to give a framework of time the project should take and outlines how and when contractors can access your home. Be prepared to amend completion for good cause, but don’t accept unreasonable, unnecessary delays.
- Payment terms: Tie payment dates to job completion. Most contractors will ask for at least 30 percent down. California law sets down payment limits, so determine your state requirements. Hold back at least 10 percent until the job is completed to your satisfaction.
- Local authorization: Specify that your contractor is responsible for securing necessary regulatory permits for your project – walk away from a contractor who can’t or won’t approach local licensing or permitting agencies.
- Penalties for missed completion dates: Give yourself options to deduct or delay payment if completion dates are missed to encourage the contractor to meet your time frame. Be specific about amounts and clearly define terms.
- Procedure for work orders/changes to initial agreement: Outline a process to follow for project changes or additions. For example, require written sign-off on changes sought by the owners or the contractors so you don’t have to accept unauthorized changes. Change orders are not uncommon, but a well defined project should not have several of them. Large-scale projects often uncover hidden problems that must be addressed before work can continue. Be wary if your contractor routinely seeks changes. Be prepared to amend the contract terms and payment schedule if you are the one who wants to deviate from the original plans.
- Detailed outline of costs and materials: Contractors should provide this in their estimates, but attach the details to your contract. Require an itemized list of materials, labor and any other costs you will incur. Spell out whether you want specific materials, brands, colors, etc… or if you will rely on your contractor to find the right materials. Include warranty information as appropriate.
- Proof of licensure, insurance and bonding: Find out what, if any, trade licenses your community requires and don’t hire anyone who fails to meet them. If something goes wrong you may be forfeiting state or local enforcement assistance if you hire someone who isn’t licensed. Ask for proof of insurance and bonding to protect you from liability for property or job-related injuries.
- Termination clause: Spell out reasons the homeowner or contractor can leave the job without penalty (e.g. if the homeowner doesn’t pay him or her or if the job drags on without reasonable explanation for delay, poor quality work or failure to adequately communicate.)
- Other protection: Ask the contractor to provide a lien release, which protects you from liability should the contractor fail to pay his or her subcontractors who worked on your project.
If you run into problems
- Review your contract to determine if it’s been violated. Let the contractor know you’re unhappy and talk with him or her about your concerns. Ask for specific actions to remedy the situation and amend the contract to reflect changes, if necessary.
- Follow up with a letter. Keep records of all written correspondence, as well as receipts, canceled checks and credit card statements. If a business requests documents, send a copy, never the original. Keep a log of all conversations, including the date and time of the call, what was said and whom you spoke with.
- Call on the Angie’s List Complaint Resolution Service if need be. It’s a service offered to every member.
- Report suspected unethical or illegal behavior to the proper authorities. Take pictures of work you consider to be shoddy or below the quality you expected.