More and more home buyers are entering into remodeling contracts for improving and adding onto their personal residence. Selecting a legitimate, licensed contractor is often task and word-of-mouth doesn't always work. Once you find a contractor, asked for references. It's even a good idea to inspect prior jobs of the contractor, to assure yourself that this is the person you want to improve your house.
Once you have selected a contractor, it's is extremely important to enter into a contract selling out, in detail, all of the terms and conditions under which the remodelling job will be done.
Here are a few suggestions for mandatory provisions in any contract that you sign:
- Do not sign the typical one-page proposal submitted by your contractor. This will act as a contract if you do sign it, and it provides very little, if any, real protection for you. The American Institue of Architects (AIA) sells standards from model contracts, which you should use in dealings with the prospective contractor.
- The contract should specifically state that "time as of the essence." One common problem is remodeling contracts occurs when the contractor is unable to complete the job within the estimated time. It is also desirable to provide a daily penalty (liquidated damaged) to the contractor for each day the work is not completed after the time specified in the contract or the completion date. This procedure will give the contractor a real incentive to complete the work within the promised time period. It you do not provide a "time of the essence" clause, or a liquidated damages provision, you may find that the contract drags on too long.
- A payment schedules should be carefully worked out with the contractor, regardless of whether you or your bank will be making the actual payments. It is advisable to provide that at least 10 to 15 percent of the final payment is to be "retained" until final completion of the job. There are too many cases where the contractor has been paid in full, and yet the job was not completed. Your bank or your lawyer will be able to provide a reasonable payment schedule for you.
- Your contractor should provide a bond from a reliable bonding company guaranteeing the performance. Thus, if the contractor does not complete the job, the bonding company will take over to insure completion of the contract.
What kind of warranty is the contractor willing to provide? This should be discussed in detail with the contractor before you sign a contract, and the exact terms of the warranty should be spelled out in writing.
Are you properly insured against possible claims by workmen who may be injured on the job? You should inquire of the contractor whether he is adequately insured, and if not, check with your own insurance company to determine the limits of your liability. Again, your insurance agent or your lawyer should be able to provide you valuable assistance.
Arbitration must be provided for in the contract. You should not have to go to court to resolve disputes that may arise. Legal fees, court costs, and the waiting time are a deterrent to an inexpensive and prompt resolution of disputes. Your contract should provide that all disputes will be resolved through binding arbitration under the rules of the American Arbitration Association.
These are but a few of the many provisions which you should include in any remodeling contract. It should be remembered that early negotiations and a well-drafted contract can save you subsequent headaches, if not litigation.
Benny L. Kass is a Washington attorney.