Home Remodeling Contract Advice
Use appropriate Contract Documents for the type of project you are considering. Even for small projects, make sure they have the typical clauses that address payments, insurances, job descriptions and specs, penalties and completion. Small jobs can become big headaches also, don’t forget to get Contracts just because it’s a small job. Big projects always need a complete set of Contract Documents that should be reviewed by your attorney.
Home Remodeling Contract Design and Plans
When dealing with any type of Contractor, you must have a set of Plans and Specification attached, as part of the Contract Documents, for any kind of Home Remodeling project. Each page of them must be initialed by all parties.
Larger projects where framing is involved will need construction plans and most likely engineering stamps and reviews.
Home Remodeling Contract Specifications
Make sure you know what you are getting! There should be a list of products selection and specifications that include manufacturers. Even if it’s a HVAC installation you will want to know what type of equipment, ductwork is being used and where supplies and returns are being located, what the SEER rating is, etc…these are the types of things that should have been discussed during the proposal, besides just the price. Many times the price is useless when a system doesn’t work properly. No matter what type of remodeling project, make sure you understand all the options and what you are getting. Any good contractor will be able to walk you thru this and have a proper spec sheet with their contract.
The Contract should always cover the Scope of the Project with a description of what will be done on the project.
Home Remodeling Contract Timeframes
Obviously you should always have some form of Contract or Work Order that is descriptive of what everyone expects. Particularly the time frame of the job. This is especially critical in small jobs since most remodelers, or trades people, use small jobs as “fillers”. By “fillers” we mean that you are not really on the schedule, you are going to be slotted in whenever there is some down time in their schedule between other jobs. This is quite typical, but for your own sanity, you will probably want to have a start and completion date in the contract, otherwise things can really drag out.
Home Remodeling Contract Permits
The Contractor or trades people doing the work must take out permits. Technically, any work done on a home needs a permit. Only when the Owner is acting as the General Contractor the Owner takes out the permit and is liable for all insurance issues, code issues, site reviews, etc…The only permits Contractors are excluded from are Homeowner’s Associations, they usually refuse to get involved in these private organizations.
Home Remodeling Contract Penalties
This is usually reserved for larger jobs, or jobs that have a critical time frame. Owners may ask for a “penalty clause”. This is typically set for a certain dollar amount to be charged against the contractor for every working day the contractor has not completed the project past the agreed completion date. We have accepted this clause only if we include a similar clause that states the Owner has to pay a Bonus for every working day we complete prior to the agreed completion date.
Home Remodeling Contract Money Retention
AIA Docs have a Progress Payment Schedule that makes this pretty easy to set up for larger projects. Generally, whatever percentage is taken as a deposit is usually then reserved as retainage for completion payment. This can be adjusted at any time throughout the project upon agreement by Change Order, usually if there is a major change in the project. In smaller projects, it is usually a set amount.
Home Remodeling Contract Progress Payments
Never, ever, not in a million years, give lump sum payments that are not assigned to any type of work progress. In other words, don’t give your Contractor, (of any type), arbitrary lump, weekly, or monthly payments. You should always have a JOB PROGRESS payment schedule for any job that takes more than two weeks. This is a schedule that summarizes what the Job Items are valued as, deducts your deposit off, then continues to deduct each progress payment as the job continues. It allows for both the Owner and the Contractor to see exactly where the job and money is, and doesn’t allow for either party to get ahead of each other. This complete schedule is typically used for large jobs, but you can certainly scale it down even if you are having a plumber come in do to new work for a Master Bath. Most trades will always ask for a deposit, (if they are buying materials), rough -in payment, trim-out payment, and a final.
Home Remodeling Contract Final Payments
Most Contracts should be set up with a fairly substantial amount as a final payment. The fair way to do it is to make the deposit and final payments equal amounts. There may also be a clause that allows for a certain retainage for “Punchlist” items if any. We always suggest if there is anything larger than the normal “Punchlist” item that is missing from your project, ie., a cabinet door on the vanity base that got damaged, that you may want to withold the price of the cabinet form the final payment. You will have enough money to cover things while your Contractor has enough to pay their people. Of course this is up to you and your agreements.
Home Remodeling Change Orders
We are firm believers that all changes on any size job should have a written Change Order. This is a simple document that states any changes to either the job itself or the contract. A formal Change Order will avoid confusion! There are many discussions between you and your designer and contractor. You will remember some and forget others, the same with the professional you’re working with, except you are not their only client. If it’s not written down and signed, you have no guarantee you are going to get what you want! You will also have the advantage of knowing what the cost is ahead of time before you commit to something. This can avoid hard feelings at the end of a project.
There may be some emergency changes during a project, (something existing rotted, or bad wiring), that your contractor may just call you about and write it up later, that’s very typical in remodeling.
Change orders are also notorious for slowing down jobs. Most Owners don’t realize how much time and money it takes when selections are changed. This is why Change Orders always seem to cost so much. You are looking at extra overhead to cover the cost of paperwork, research, re-ordering, re-stocking, etc. If you want to save yourself time and money, make sure you work closely with your Designer to have all the selections carefully planned out before construction begins.
Home Remodeling Contract Insurance
If you are hiring a contractor of any kind it is your responsibility to make sure they have their insurance company issue you a Certificate of Insurance, (CIS), for General Liability and Workman’s Compensation. Otherwise you are liable, and your insurance may not cover a claim. If you hire a General Contractor, as a practical argument, it is both your responsibilities to have the GC issue you a CIS for General Liability and Work Comp, as well as the GC is responsible for collecting CIS’s from all his subcontractors or the GC has to pay their portion of the insurance. On a larger project, you may also want to talk with your own Homeowners insurance agent to determine what policies are best during construction and a revised policy after completion.
Home Remodeling Lien Waivers
You should get one for any type of work on your home. These are generally used for larger projects. But they have probably become more important recently with the economy. Even large Vendors have gone bankrupt without much notice. You typically have your Contractors/Vendors sign them when they finish their job, but again, if it is any kind of a substantial job, have them sign for each progress payment. They cover your property against anyone attaching a monetary lien that is secondary to your bank note. Even if you have a General Contractor that signs them, you must have each major sub-contractor and vendor sign them also when it comes to large projects. This is usually negotiated within contracts since it is time consuming.
Home Remodeling Contract Arbitration
A lot more Contractors are turning towards Arbitration clauses in their Contracts. Legal fees are far too expensive for most small firms. Arbitration offers an independant and expedited analysis of the situation. Arbitrators are appointed by the Courts, but have knowledge of construction practices. Most Arbitration clauses are binding. Read your Construction Documents carefully.