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Signing a Renovation Contract

In the previous article we talked about how you can find a reliable contractor. Once you have found the right contractor for your renovation project, and reached an agreement with him, it is time to make it official by signing a contract.

Every renovation project must be based on a written and signed contract. Without a contract you wouldn’t have the legal power to enforce what has been verbally agreed upon. Unforeseen events could make a 2 week bathroom renovation last 2 months, and without a contract that clearly states a deadline for the project, you would be completely powerless in preventing such inconveniences.

In order for you to be protected if something goes wrong, the contract should be as detailed as possible. It should clearly state what will be done, what materials will be used, what time schedule is to be respected and when the payments are progressed. If the contractor does not provide a detailed contract, you can always add your own addendum to it. Also any potential changes or extensions to the project along the way, should be based on additional written change orders which indicate the required changes in detail. The following is a list of items that should be included in the renovation contract:

• Clear identification of the client and the contractor;
• A description of the provided services and materials;
• The responsible party in acquiring the required regulatory permits;
• A time frame for different phases of the projects and a completion date;
• The consequences of not meeting the deadline by the contractor;
• The cost and payment terms and schedule, such as down payment and installments;
• The contractor’s guarantee for the work;
• The contractor’s business liability insurance;
• The contractor’s obligations in terms of safety and cleanliness of the premises;
• A procedure for changes to the initial agreement;
• Provision of lien releases by the contractor;
• Terms for the termination of the contract.

Here are a few things that you should know before signing the contract:

Obtaining a Permit

Almost all renovations require a permit and the contractor is responsible for obtaining it. Some contractors might suggest doing the construction work without a permit to save money. But you must keep in mind that not only this is illegal, but you might also get into trouble when selling your property, because of that unpermitted work. Furthermore, without a permit, your project would not be inspected to make sure it is up to code.

Upfront Payment

Don’t pay more than 10 percent of the total amount before the contractor starts the project. The usual norm is to pay 10 percent upfront, then three 25 percent payments over the duration of the renovation, and 15 percent upon completion of the project.

Preparation for Surprises

No matter how precise you and your contractor try to be in planning the work and forecasting the expenses, more often than not, unforeseeable surprises present themselves in the middle of the project. These surprises will usually require extra funds to be dealt with. So, you should always expect to spend 10-20 percent more than what you had initially planned.

Lien Waivers

Even if you have paid your contractor in full, if he fails to pay the subcontractors, they could put a lien on your property, claiming that they have not been paid for their services. For this reason, it is important to ask your contractor to provide lien waivers, before making payments.

Working Guidelines

The contractor needs to know what their limits are. If you don’t want the workers to work on certain week days, or before or past a certain hour, or if for example you don’t want them to use your bathroom, you need to inform the contractor prior to signing the contract. These requirements might affect the completion time as well as the cost of your renovation project and therefore should be agreed upon in advance.

Your Responsibilities

Most contractors don’t want to be responsible for unfortunate accidents while moving your furniture, TV and other valuable items. In that case, it would fall under your responsibility to remove all the items from a room that is to be painted for instance. Therefore, it is best if you have a meeting with the contractor, and set all the expectations in writing.