Once you’ve performed due diligence in Choosing The Right Remodeling Contractor, it’s critical that you sign a written home improvement contract. No matter how small the home improvement project might be, a written contract will go far in establishing an understanding between you and the contractor you chose. In the event something goes wrong with the project, the home improvement contract will help to protect your rights.
Taking the time to compose a solid contract is just as important as hiring a good contractor. Here’s what to include:
- Contractor’s business information – The contract should include the contractor’s name, business name, business address, business telephone number, email address, and contractor’s license number. If a salesperson for the company negotiated the construction contract, the contract should also include that person’s name.
- Work schedule – Include the agreed upon dates that the project will start and end. Also include the days of the week and times during each day that workers will show up.
- Description of project – It is important that the contract contains a detailed description of all work to be performed. Include drawings, dimensions, and other project details. Specify that the contractor is responsible for cleanup and obtaining required building permits.
- Description of materials – Include a detailed description of all materials to be installed — including colors, sizes, model numbers and brand names.
- Total price – Include the total cost for each component of the project.
- Down payment – Include the amount of any down payment and when the initial payment is due.
- Payment schedule – Condition each payment upon completion of a specific portion of the project. The contract should state the amount of each payment and what work must be performed in order for the payment to become due.
- Protections against mechanic’s liens – A subcontractor or materials supplier can levy a mechanic’s lien against your property if the contractor does not pay them for work completed or materials supplied for your project. Subcontractors and suppliers can do this even if you paid the contractor in full. In due course, a lien holder that hasn’t been paid can force the sale of your home.
There are several ways you can protect yourself against mechanic’s lien problems:
1. Include a “retention of funds” clause specifying that a certain percentage of the project price (say 10%) will not be due until a number of days after completion of the entire project (the number should correspond to when the right to file a mechanic’s lien expires, which is often shortened if you file a Notice of Completion). This ensures that you do not make final payment until the mechanic’s lien rights of subcontractors and suppliers expire.
2. Include a clause in the contract requiring the contractor to obtain lien releases from all subcontractors and materials suppliers before you make the final payment.
3. Include a requirement that the contractor obtain a payment bond. This is similar to an insurance policy — it requires that the bonding company pay all mechanic’s liens recorded against your property.
4. Make checks out jointly to the contractor and subcontractor. The idea is that the subcontractor won’t sign off on the check until having been paid.
- Warranties, guarantees and assurances – The contract should include all warranties, guarantees and assurances from the contractor, subcontractor, and material suppliers.
- Notice of right to cancel – According to federal law, if the home improvement contract was signed at your home or at a location other than the seller’s permanent place of business, you have the right to cancel the contract within three days. The contract should include this notice.
- Special instructions – Include anything that you may be concerned about — such as where materials and tools will be stored during the project or special instructions regarding pets or children.
- Arbitration clause – Typical home improvement contracts contain a mandatory binding arbitration clause. This means that if you have a dispute with the contractor, you give up your right to go to court. Instead, you agree to submit the dispute to binding arbitration. There are advantages and disadvantages to arbitration. Before you sign a contract with such a clause, make sure you understand arbitration and its pros and cons.
Following these tips can help keep your home improvement project on track. When in doubt, consider consulting with an attorney.