Clearing Up the Contract

Remodeling your home can be overwhelming at best. With so many details to address, it may be tempting to avoid giving appropriate attention to one of the most important parts of the remodeling processthe contract. Because of a lack of understanding and experience, homeowners may want to speed through this step, but remodeling contracts dont have to be a mystery. A little knowledge, patience and some common sense will help you navigate this necessary hurdle.

The first step
Contracts are the most critical step in any remodeling project, because they define the job and ensure that all parties involved are in agreement about the scope of the project.

Regardless of the work being done, I always encourage homeowners to get a contract so they will have the agreement with the contractor in writing, says Jesse Morado, president of Renovation Coach Inc., a renovation consulting business in Atlanta. Depending on the extent of your project, the contract can range from a one-page form to a multipage document, but regardless of the length, the contract is often what determines whether the project goes smoothly or not.

Whats in a contract?
Negotiating a contract focuses all the parties involved on a meeting of the minds, says Kevin Veler, an attorney in private practice in Alpharetta. It makes people sit down and agree on what is going to happen, from beginning to end, in regards to the project in question.
At a minimum, a contract should include the following items:

Description of the parties involved:
Make sure the contract states your name and contact information as well as the name, contact information and license number (if applicable) of the contractor.

Specifications of the project:
This section should include where the project is taking place, the timetable for the job, the agreed-upon price for the job, the fee structure (for example, fixed price or cost plus) and the scope of work.

Clear specifications are extremely important and can mean the difference between a successful remodel or a headache, Veler says. Both parties want this part to contain as much detail as possible, from the location of windows and doors, to the brand of appliances that are acceptable, to who is responsible for pulling needed permits. Detailed specifications also are the best way to minimize the chance
for disputes.

The materials list is another important part of this section. This list should include details such as acceptable material grades, manufacturers and brands, as well as the size, color and finishes of materials to be used.

Homeowners shouldnt assume the contractors standard materials are the grade they want, says Karen King, marketing director for Home Rebuilders. Some contractors may use less expensive materials to meet the homeowners budget, and then the homeowner has to spend time and money upgrading because they had assumed the materials would be a certain quality and they were not.

Description of change process:
A good contract will address how project changes are handled and documented. If additional costs are incurred, this section should discuss how they are paid for. If work is eliminated, then it should discuss how money is credited. This section also should discuss change orders, or the written documentation of any changes to the project.

Basically, change orders are like mini-contracts, and they should be written and signed by both the homeowner and the contractor every time a change in the original agreement is made, says Jerome Quinn, president and CEO of SawHorse Inc., an Atlanta-area remodeling firm. However, a solid, detailed contract should almost negate the use of change orders. Changes to a project once construction begins can be expensive, disruptive and confusing for both parties. Thats why it is important to spend adequate time up front working out all the details and putting them in writing.

Discussion of disputes resolution:
The contract needs to include a section on how disputes will be resolved if both parties cannot come to an agreement. For example, will you use arbitration or go to court?

Termination agreement:
The contract should address the issue of how to terminate the project, if either party wishes to do so.

Outline of each partys responsibilities:
This section should spell out the agreed-upon responsibilities of each party. For example, what, if any, materials will the homeowner provide, and when will those materials be available? What protection, if any, will the contractor provide for personal property surrounding the jobsite?

Dealing with mother nature:
Include a clause that addresses what will happen if any problems arise that are outside of the control of the contractor or homeowner, causing either construction damage or delays.

Discussion of lien releases/contractor affidavits:
Each contract should include a statement that protects the homeowner against subcontractors placing a lien on their property if they fail to be paid. This may be a contractors affidavit that says all claims will be against the contractor, or a clause that states that the final payment will not be made until receipt of a lien-release form from the general contractor, all subcontractors and each supplier.

The contractors warranty:
Satisfaction guaranteed or lifetime warranty is not enough detail when it comes to statements about warranties on work completed. This section of the contract should spell out how long the work is under warranty and what the warranty does and does not cover. For example, warranties usually cover the installation of materials, but appliances usually are covered by manufacturers warranties. Also, some contractors may choose not to cover materials provided by the homeowner.

Warranties vary with contractors, so you want to make sure you question the builder about their warranty process, King says. Most contractors will cover what is fair and reasonable, but there are some common construction occurrences, such as minor cracks due to settling, that may not be covered under a warranty.

Detailed financial terms:
There should be clear statements about how the job will be paid for and the payment schedule, Morado says. So that homeowners dont have to pay huge amounts of money at any one time, progress payments, where payments are made at significant milestones throughout the project, are a good option.

Consulting an attorney
If you are signing a contract for a major remodeling project, it is worthwhile to have an attorney review the contract before signing. Use an attorney who works in contract law and, if possible, has experience with building or remodeling contracts.

People worry about budgets, but in the end, it is much less expensive to ensure you have a solid contract than to spend money solving problems that arise from a bad contract, Veler says. After all, your home is your most valuable asset, and if you are investing $30,000 in a remodeling project, is it worth it to save $300 by not having an attorney review your contract for potential problems?

The key to a successful remodel
In the end, a good contract is key to a successful and positive remodeling experience. Remember, reputable contractors will want a solid contract as much as you do, because it protects them as well. Thus, they should be willing to work with you to plan and finalize
the details.

Remodeling is definitely a process that takes timeit is virtually impossible to get instant gratification, Quinn says. Since you have to go through the process, make sure you take the time to negotiate and agree upon a good contract up front, rather than possibly taking the time to fix it later.