[fourcol_three] Once you have settled on the contractor you want to hire, the next step involves developing and executing a solid contract. Many of the problems that arise during a project, can be avoided at the outset. At a minimum, a comprehensive contract will ensure that if problems do arise, you’re protected.
In most cases, the contractor will have a standard agreement they will adapt to meet the needs of your specific project. At a high level, your responsibility should be to make sure it contains a detailed explanation of the scope of work to be performed, standard consumer protections and a clear explanation of the process.
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Describing the work
The project should be broken down into individual components and explained in detail. For example, if you are hiring a contractor to remodel your bathroom, this would be an example of a bad description:
[box]Bathroom remodel [/box]
A good description would look more like this:
[box]Bathroom remodel to include the following:
- Vanity installation – Remove and dispose of existing vanity. Install Fairmont Designs Rustic Chic 48″ Vanity to plan.
- Bath replacement – Remove and dispose of current bath. Install American Standard Cambridge 5 ft. Americast Bathtub with Right-Hand Drain in White to plan.
- Etc.[/box]
A good rule of thumb for breaking a project down into components is based on major groupings of materials (e.g. vanity, bath, paint).
As projects get larger in scope, the accuracy of initial plans can decline. It is definitely normal to have additional components pop-up along the way, regardless of how experienced or skilled your contractor is. The contract should define how additional components will be outlined in subsequent change orders, which must be written and signed.
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The Timeline
At a minimum, the contract should stipulate when the work should commence and end. Ideally, the different components of the project should be affixed to a timeline but with larger projects, that can be asking a bit much. In addition to the estimated start and end dates, the contract should outline the cases where delays will be permitted to extend the timeline (for example, if permitting takes longer than originally anticipated).
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Regulatory Issues
Most large remodeling projects will require a certain amount of interaction with your local permit and inspection boards. The work agreement should include these regulatory components and stipulate who will be responsible for them.
[box]Each county or incorporated city has different permit regulations. Check with your local building authority to better understand the regulations in your area.[/box]
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Pricing
The contract must include the agreed-upon total price. It should be itemized based on the components noted in the description of work and costs for labor and materials should be segmented.
The contract should explain the process through which payments are made. Payments are typically triggered by time events (e.g. monthly) or upon completion of different stages of the project. We’ve generally found that the latter case, referred to as progress payments, is preferable because the contractor is incentivized to work more efficiently. If progress payments are used, then each payment should be associated with a grouping of the project’s components (e.g. payment 1 will be made upon completion of the vanity installation and bath installation components as defined in the description of work).
If a down payment is included in the contract, its amount should be justified by the contractor. Some states regulate the size of a down payment. In California, a down payment can not exceed $1,000 or 10% of the contract price (whichever is less).
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Subcontractors
If subcontractors are going to be brought into a project, they should be defined in the agreement and associated with the project components they are involved with.
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Mechanic’s Liens
Many states allow anyone who helps improve a property when not paid, to place a mechanic’s lien on the property. Liens are government enforced claims that can result in you paying more than the original contract price and negatively impact your credit.
It should be noted that a subcontractor brought in by your contractor has the right to file a lien. This is part of the reason it is important to ensure your contract stipulates who any relevant subcontractors will be.
Most states that support mechanics liens require the potential lien claimant to provide you with a Preliminary Notice if there is a chance they may need to file a lien. In California for example, if they do not provide you with Notice, they lose the right to file a lien.
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Your right to cancel
The contract should define the terms under which you have the right to cancel the contract. Keep in mind that in many states, you have additional rights to cancel within a certain grace period. In California, you have three business days to cancel if you signed the contract outside of the contractor’s place of business (under the Home Solicitation Sales Act). Make sure to familiarize yourself with your state rights early in the process.
If you’d like to ask a specific question about contracts in your state, please visit BuildZoom Answers.
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