Remodeling and the Law
What should the contract include?
A complete home improvement contract should address the following:
Preamble. An introduction that states names, addresses, phone numbers, and the date the contract is executed. It should specify whether the contractor's business is a sole proprietorship, partnership, or corporation. (If it is a partnership or corporation, make sure the person who signs is an authorized representative.) The preamble should also state that the remodeler is an independent contractor, not your employee. Otherwise, you might be responsible if the builder injures someone. For another layer of financial accountability, add the contractor's social security number. The contract price should state the total dollar amount, including sales tax, to be paid by the homeowner for services agreed to in the contract.
Starting and completion dates. No contractor is likely to begin until after your right to rescission has safely passed. Specify an end-date, stating exceptions such as weather, strikes, etc. You may want to add a bonus-penalty clause if the date is critical. Specify a daily starting time if that matters to you. Consider interim completion dates for key phases of big jobs.
Scope of work. Contractors may shy away from a clause as broad as "all labor, materials, and services necessary to complete the project." But don't allow them to be so specific in the work listed that anything else becomes an "extra" or a "change order," which may be billed separately.
Description of materials. See that complete descriptions of agreed-to products including brand names and order numbers are listed. Plans, bids, estimates, and all other documents relating to the project are part of the scope of work. Make sure that copies of these are attached to all copies of the contract before you sign it.
Permits, licenses, and zoning. Specify that the remodeler will obtain all necessary licenses and permits and satisfy all zoning regulations and building codes, and indemnify the homeowner in case he fails to do so.
Cleanup policy. Will the contractor clean up daily? After each project? Only at the end? Where is refuse to be placed?
Storage. Specify where materials and equipment will be kept. You are probably liable for damage to materials and equipment from fire or accidents, so be sure to check your homeowner's policy and make sure these are covered.
Parking. If it is a problem, arrange for the contractor's vehicle as well as subcontractors'.
Noise. Some is inevitable and may even provide a safety valve for workers, but place limits on time and volume, according to local laws and neighborhood needs.
Theft. Building materials are often stolen. The contract can make either the contractor or the owner responsible.
Damage. What if the retaining wall collapses when they're digging for the new swimming pool? You'll want the contract to state that the contractor is responsible for damage to your property.
Change orders. Very few jobs go exactly as planned, which requires that the contract have a provision that enables it to be amended simply and easily. The contract should provide that change orders can be written up, signed by both parties, and attached to the contract as plans change or delays occur. See the sample for specific wording of this contract clause.
Warranties. The contract should assure that the materials are new, and that you will receive all warranties from manufacturers for appliances and other materials used on the job.
Progress payments. Contractors don't expect to be paid entirely in advance, but they also don't expect to wait until all work has been done. It is customary to pay one-third upon signing a contract to allow the contractor to buy supplies and get started. In smaller projects, two payments may suffice. In larger ones, plan to make payments after completion and approval of major phases of the work. In all cases, make your final payment as large as possible, usually at least 10 percent. DO NOT MAKE FINAL PAYMENT until all work is completed, inspected, and approved; subcontractors are paid and any liens canceled; and warranties are in the proper hands.
Financing contingency. If your ability to proceed with the project depends on securing outside financing, include a contingency clause stating that the contract is not binding if you are unable to secure the needed funds on acceptable terms.
Suppliers and subcontractors. Ask for a list of subcontractors and suppliers and attach it to the contract with their addresses, telephone numbers, and social security numbers. Although you are not their boss, they probably have a right to place a lien on your home if the contractor does not pay them in full. It's only fair that you know who they are, should legal action become necessary.
Your chief protection against a lien is holding back final payment until all work has been completed to your satisfaction and your contractor supplies proof in writing that he has paid everyone who worked for him on your job. A release-of-lien form is useful, because it provides places for all the subcontractors to sign.
If you prefer, arrange to pay suppliers and subcontractors directly.
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