Your home is one of the most important investments you will make. It should provide you with a place where you feel comfortable and secure; it is where you celebrate life. So, when it comes to building a new home or renovating your existing home no one likes surprises.
When you make the decision to build or renovate you want to create a document that spells out the detail and sets the expectations for both you and your contractor. Think of the contract as your map to the final destination, your finished home.
Contracts are a two-way street that can provide a peace-of-mind to both you and to the contractor. It is organized into a number of sections, including information about the project location (address, lot number, etc.), permits, contractor insurance and licensing, project timetables, and payment schedules. It should be crafted to lay out all the details of the project.
Scope of the work – You want to layout as specifically as possible the tasks you are asking your contractor to complete. Include plans, drawings or specs that specify exactly what is to be completed.
Who will be providing the materials? Will your contractor be required to clean up each day before he leaves? Will your contractor be required to coordinate his schedule with other contractors? Whatever it is, make it clear in the contract.
Compensation – The contract should define how much and when your contractor will get paid. Perhaps the contractor will get paid based on milestones he surpasses (ie 25% complete, 50% complete, etc). Or perhaps the contractor will get paid upon completion of specific tasks (i.e., 50% upon completion of exterior work.) However you plan to pay your contractor, spell it out clearly in the contract so that there is no confusion once the project has started.
Discretionary funds – Allowances cover parts of the job that haven’t been fully specified yet, such as when you have yet to decide on the flooring or faucet fixtures. The contract should specify when the decision is needed.
The contract should also clearly explain the contractors change-order policy, including what types of changes can be made at each stage of the project, who can sign off on changes (the owner and builder reps), and the administrative cost for preparing change orders. It’s in everyone’s interest for even small changes to be documented in writing.
Who will make the decisions – It is extremely important to indicate who will be the decision maker. This should be one person — for instance the husband or wife, but not both — who will act as the contractor’s main contact for approvals, changes, and questions. Having one decision maker will eliminate any confusion and make communication more efficient. On the flip side it should also define one person on the contractors team that is the decision maker and can sign off on any changes.
Insurance Requirement – Require your contractor to carry insurance – both general liability insurance and workman’s comp insurance. All HBA members will be able to provide you with proof on insurance prior to commencing work.
Deadlines and Penalties – If your project is time sensitive you will want to include your deadlines and what the penalty is for the work not completed on schedule.
A contract that clearly defines the who, what, and how of the project will help you avoid the most common issues that crop up during construction or renovation. This will help ensure that you get the home you want, on the timetable and for the price you were expecting.