What’s in a Remodeling Contract?
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.
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.
9 Contract Terms designed to Protect Consumers:
- Job description: Spell out the project and the responsible parties’ roles (e.g. homeowner will provide payment, access to the home, name those authorized to sign and amend contract etc… contractor will provide necessary tools, materials, expertise.)
- Start and completion dates: Set dates to give a framework of time the project should take. Be prepared to amend completion for good cause, but don’t accept unreasonable, unnecessary delays.
- Payment terms: Tie payment dates to job completion. Expect to put at least 30 percent down, but hold back at least 10 percent until the job is completed to your satisfaction.
- 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.
- Procedure for work orders/changes to initial agreement: Outline a process to follow for project changes or additions (i.e. require written sign-off on changes sought by the owners or the contractors so you don’t have to accept unauthorized changes.) Be prepared for change orders, though. Large-scale projects often uncover hidden problems that must be addressed before work can continue. It’s also not uncommon for homeowners to change their mind and deviate from the original project plans.
- Detailed outline of costs and materials: Require an itemized list of materials, labor and any other costs you will incur. If you want specific materials and brands, spell them out or agree to rely on your contractor to find the right materials. Include warranty information as appropriate.
- Proof of licensure, insurance and bonding: Find out what 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.)
- Lien waiver: Ask the contractor to provide a lien waiver to protect 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 as 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.