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Home Improvement Contracts

Homeowners hire building contractors when making major renovations or upgrades. The best way for both parties to protect their interests is to sign a home improvement contract, which details:

  • Timeframes, the scope of work, and the estimated cost
  • Permit and zoning requirements for residential real estate
  • Work to be done by subcontractors and other vital additional information

See Construction Defect FAQ and Construction Defect Basics for related articles. Check out FindLaw's Contract Law subsection to learn more about how to enforce the terms of a contract.

While contracts all differ according to the type of work being done and other factors, some elements are relatively common in home improvement contracts. Home improvement contract requirements vary by state law. 

Even if your state does not require a written agreement for a residential property construction project, ask for one. A contract spells out the who, what, where, when, and cost of your project. The agreement should be clear, concise, and complete.

Keeping Records, Including Change Orders

Keep all paperwork related to your project in one place. This includes:

  • Copies of the home improvement contract
  • Change orders (detailing how a job might be changed from its original terms)
  • Correspondence with your home improvement professionals

Try to take notes on verbal encounters as well. Keep a log or journal of all phone calls, conversations, and activities. You also might want to take photographs as the job progresses. 

These records are important if you have problems with your project during or after construction.

Completing the Job: A Checklist

Before you start, make sure that the agreement contains:

  • The home improvement contractor's address, name, telephone number, and license number
  • Payment schedules for suppliers, the contractor, and subcontractors
  • An estimated start date and completion date 
  • The contractor's obligation to obtain all required permits
  • The way change orders will be managed. A change order is common in most remodeling jobs. It directs the contractor to change or add to the work. This could affect scheduling and costs. Remodelers often require payment for change orders before work begins.
  • A description of all supplies to be used, including size, brand name, model, product, and color
  • Warranty policy for service and supplies. The addresses and names of the parties honoring the warranties -- manufacturers, contractors, distributors -- must be identified.
  • What the home improvement contractor will and will not do. For example, is cleaning part of the contract price? If not, you may need to ask for it to be included in the contract.
  • Oral promises also should be added to the written contract.
  • A disclosure of your right to cancel the contract within three business days. This is known as a written notice of cancellation. During the sales transaction, the salesperson (contractor) must give you a cancellation form and a copy of the contract. The contract must be dated, show the name and address of the seller, and explain your right to cancel.

Before your final payment, use this checklist to make sure the job is complete under the home improvement contract. Check that:

  • You've inspected the work performed, and it reflects what is in the contract.
  • You've received proof that everyone, including suppliers and subcontractors, has received payment.
  • The project site has been left clean and safe.
  • You've received warranties for the service and products you received.

In-Depth: What Should a Home Improvement Contract Include?

Introduction or Preamble

This is an introduction that includes the names and contact information of the parties involved in the project, as well as the date on which the contract becomes active. In addition, this portion of the contract lists the legal structure of the entity doing the work (corporation, sole proprietorship, etc.). 

It should explicitly state that the party doing the work is not your employee but rather an independent contractor, which will help shield you from certain liabilities. The preamble should include the contractor's license and the total amount the homeowner is expected to pay.

Overview of Scope of Work To Be Done

This is the scope of what the contract covers, which should be broad enough to cover minor changes in plans without being too vague. Anything not covered by the contract may incur an extra charge. For example, if a pool project includes landscaping around the driveway, the contract needs to spell it out. This helps to avoid extra charges later.

Time Period

Establishing a start and finish date is crucial. You may also want to add completion targets for important phases of the job. Include exceptions (“Acts of God" clauses) for contingencies such as bad weather. Consider a penalty for late completion, if getting it done on time is important. A “time is of the essence" clause could be helpful too.

Regulatory Requirements

State the contractor's responsibility for securing any licenses or permits, while respecting all codes and zoning laws in a way that shields you from liability.

Use of Premises During Construction

Outline the rules for maintaining the construction premises. Examples include:

  • Where trash, dirt, etc. will be deposited
  • Where equipment and materials will be stored between workdays
  • Available parking
  • Neighborhood limits on noise levels and any applicable quiet times

Materials & Equipment: Damage or Theft

Be as specific as possible about the materials supplied, including product ID numbers and brands.

State whether equipment and material theft or damage is the responsibility of the homeowner or the contractor. Theft is an unfortunate reality at many construction sites, whether by employees or outside parties. 

Sometimes even the most careful contractors can cause damage to property features or the property of adjacent neighbors. This part of the home improvement contract explains whether it is the contractor's or the homeowner's responsibility to pay for any such damage or theft.

Contract Amendments and Change Orders

It is not uncommon for a building project to take on a life of its own, necessitating changes to the underlying contract. The contract itself must include a provision to allow such changes to be made, usually as separate write-ups that are signed by both parties and attached to the original contract.

Guarantees and Warranties

It is not unusual for contractors to provide one-year workmanship warranties for most jobs. Some states may even require it. Guarantees from the contractor ensure the integrity of the job. This section should also state that all materials have been purchased new and include all applicable manufacturer warranties.

Contract Price, Downpayment, and Payment Terms

Decide on payment terms up front and include the specifics in the home improvement contract. In some states, contractors aren't allowed to ask for more than a small percentage or flat dollar figure as an initial downpayment. In others, it may be normal to pay a larger portion of the total bill at the time the contract is signed.

The down payment serves as a deposit but is also for the purchase of materials, with the balance due at intervals. For larger projects, you may be able to divide it into several, smaller progress payments. 

The ability to pay for the work may hinge on whether or not you can secure financing. If this is the case, add a clause indicating that the contract is binding only if you can get the funding. If the contractor is letting you finance the project with them, make sure the finance charges are spelled out in the contract.

Subcontractors and Suppliers

The principal contractor manages and pays the subcontractors, but subcontractors may be able to put a mechanic's lien on your property if they are not paid. Ask for the names and contact information of subcontractors, as well as for suppliers. In addition, you may include a clause specifying separate payments of contractors, subcontractors, and suppliers.

General contractor and subcontractor information should include licensure and building permit documents. Avoid working with people who are not licensed contractors. Not only might they be breaking the law, but you'll have less protection to seek recourse against their mistakes. Make sure to obtain information about the contractor's license ahead of time.

Liability Insurance Information

It may not be enough that your contractor is licensed and bonded. Some states require that your home improvement contractor provide you with a copy of their liability insurance policy. Others also require disclosures for workers' compensation, in case the contractor's employees are hurt on the job. 

Since construction is dangerous by nature, make sure your home improvement contractor has good insurance coverage. Some states may have guaranty funds that are designed to protect consumers against poor workmanship by licensed contractors.

Disputes and Arbitration

In case the contractor violates their contractual obligations, you may want to include a provision for the recovery of lawyer's fees. If you would rather resolve disputes through mediation or arbitration, make sure that is spelled out in the home improvement contract, too. These mechanisms allow resolution of your case without having to file a lawsuit in court.

Reviewing the Construction Contract With an Attorney

The home improvement work agreement is a legal document with many important disclaimers. That's why it's important to review a copy of the contract with an attorney before signing it. You might not want to get a lawyer involved if no dispute has occurred yet. If you don't understand what you're signing, it's time to get legal advice.

A lawyer can help with a contract dispute or violation. On top of reviewing your contract, they can talk to your contractor and file complaints, if needed. If your home improvement project isn't going the way you expected, consider legal representation. Our directory of real estate lawyers can point you in the right direction.

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