The Importance of a Good Building Remodeling Contract
There are many excellent remodeling contractors that do superior workmanship and make a home remodeling experience both effortless and enjoyable. These contractors generally belong to the Builder’s Contractor Association, are licensed, have a list of happy customers and know the importance of a good contract.
Some states however, do not require remodeling contractors to be licensed or bonded, and consumers are at risk for fraud or inferior workmanship. For those times especially, a solid remodeling contract is critical.
When we hired a remodeling contractor to refurbish a rental property, we let our friendship get in the way of preparing a proper agreement. 14 months later, our rental house is still under construction, and looks to be heading into yet a second winter without walls and a roof.
We hope that perhaps it will be finished by next spring, although we’re not sure. Foolish us, we are remodeling this thing with a loosy goosy contract that isn’t worth the paper it was written on. In the meantime, we’re making payments on a property that is not generating any income, and is draining us financially with repairs that are far in excess of what we were told.
The components of a good contract
Through our experience, we’ve learned a few things when it comes to what makes for a good contract or not.
A good remodeling contract should have a beginning date and a stop date with the total cash price clearly listed. It should also include a clause which addresses any delay caused by labor shortages, lack of materials, or inclement weather. These delays can and do happen, and are often out of the contractor’s control. However to protect the homeowner, the circumstances of these delays should be spelled out in such a way that the owner can terminate the contract if the delays continue indefinitely.
A good remodeling contract should also include a detailed description of the work that will be done including line item prices and how much is being allocated for specific items, such as carpet, light fixtures, hardware, floors, appliances, tile, and so forth. The contract should also clearly state which items are the responsibility of the contractor, and which items will be handled by the property owner.
These items include such things such as survey and utility costs, hook up fees, temporary power poles, insurance, port-a-potties, workman’s comp, lien releases, and dumpster fees. There should also be some provision to protect both the contractor and the owner in the event of unforeseen problems such as asbestos or other hazardous materials found within the house.
How and when the money is to be distributed should also be detailed in the contract. In some states, 10% down is typical with periodic draws throughout the process. In our state, 1/3 down seems to be the standard with the remaining 2/3 distributed upon completion. Spelling out the terms and conditions of payment is critical to deterring a contractor from taking a scamper without finishing the job.
A good set of floor plans should be included with the contract along with what I call a “quality” clause. We discovered the hard way that it’s not enough to merely indicate that the work should be of quality construction. The contract should include a clause that the remodeling must be sound and meet with the homeowners approval, or that funds will be withheld until the work has been redone to the owner’s satisfaction. This will protect the homeowner from shoddy workmanship which can compromise even the most dynamic floor plan and ruin expensive building materials.
These tips are not intended to be a substitute for legal advice, but merely point out the importance of a good remodeling contract which leaves nothing to chance. The best advice of all, of course, is that before entering into any contract with a general building or remodeling contractor, is to consult a contract attorney. A contract attorney will make sure that the remodeling contract is sound, covers all the bases, and gives direction to the remodeling process in a way that is fair to everyone involved.
