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12 Key Points for a Remodeling Contract

by Don Vandervort, © HomeTips

There are two types of remodeling contract: fixed-price and the so-called time-and-materials.

With a fixed-price contract, you and your contractor agree on a flat fee for the entire scope of work. This is the most commonly used construction contract because it leaves open less possibility for expensive surprises. The only way the fee can be altered is by a change order.

With a time-and-materials contract, you pay for the cost of materials plus an hourly rate for labor. Of course, the contractor will mark up both labor and materials, usually 15% to 25%, to realize a profit. The pitfalls of this arrangement are obvious—if the work drags on, the time charges can go through the roof. On the other hand, there is a possibility of saving money if the project requires less time than anticipated.

Whichever type of contract you choose, here are a dozen items to have in writing to ensure a happy outcome:

1) Names and all contact information for both you and the contractor. While this may seem self-evident, it is important that both of you be able to reach each other at any time, preferably by more than one means. In addition to home, business, fax, and cell phone numbers and email addresses, also have the contractor include his license number.

2) A detailed accounting of all the work to be done—from demolition to completion—and who will be responsible for each phase, including pulling permits. Include a full set of plans with the contract and reference the plans in the contract. Any work that is not indicated in the plans makes you vulnerable to change orders and/or increased labor costs and is the surest way to have your budget spiral out of control.

3) The process for submitting change orders. Most often the contractor will draw up a change order, specifying in detail how the material or product and/or labor cost will differ from those in the original contract. Work on that phase or area of the project should not be continued until both you and the contractor sign the change order.

4) Start and completion dates for the entire project, as well as completion dates for various phases of the project, such as plumbing, electrical, and so forth. You might also want to agree on a contingency clause if work is delayed due to inclement weather, delays in delivery of materials, or other circumstances that would be no fault of the contractor.

5) Payment schedule. It is common to pay a contractor 10% of the entire cost of the project, or $1,000, whichever is less, upfront. Payments are generally made after each specified phase of the project is completed. Never make a payment until that phase meets with your approval and, most importantly, passes inspection. By the same token, do not make the final payment until absolutely every aspect of the project is completed satisfactorily.

6) A detailed listing of materials and products, with costs. This should be as thorough as possible. For example, it should specify not only the quantity but also the grade and quality of lumber and include the make, model, and serial number of any appliances. If there are materials and products you have not chosen upon signing of the contract, budget for them so the eventual cost will be more than covered. Also, do not allow the term “or equal” to creep in after any item because it will allow the contractor to purchase an item different than the one specified without your approval.

7) Matters related to the actual work site. Will there be a dumpster and/or portable toilet? Is there ample room for parking? When will the workday begin and end? What provisions will be made to ensure the site is as safe as possible (which also means it is cleaned up every day)? Will there be a secure area for storing materials and other products awaiting installation? 

8) Copies of the contractor’s proof of insurance, including coverage for personal liability, damage to your property, and worker’s compensation.

9) Lien releases, which protect you from being sued by any subcontractors in the event the contractor fails to pay them.

10) A hazardous-waste-removal provision. If, during the demolition phase, asbestos or lead is discovered, specify who will be responsible for safe removal or abatement. Usually it is the homeowner, who also absorbs the extra cost.

11) Warranties for all work performed. This should include not only the quality of the workmanship but also any defects in materials. Commonly, warranties for workmanship are for one year. Many products and all appliances are subject to their own warranties.

12) The procedure for resolving disputes. A detailed contract usually saves the homeowner-contractor relationship from becoming seriously contentious, but, if it does, you both need to have agreed on how the dispute-resolution process will go. Typically, disputes go to arbitration before any kind of legal action is taken.

To get free recommendations for top-rated local contractors, call the most reliable and comprehensive referral service, HomeAdvisor, at 866-350-2983 (toll free).

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