Things You Need to Know About Remodeling Contract

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Things You Need to Know About Remodeling Contract

A Brief Introduction About the Remodeling Contract

When you want to make certain structural changes or improvements to your existing home, you need to hire a building contractor for the purpose. Remodelling contracts are used in such situations to ensure that payment is linked to the completion of the job. These contracts should have a termination clause to be effective. Without these contracts, the interest of both parties is not protected, and they can withdraw from the contract without a penalty.

These contracts will have information about the scope of the job in detail and the responsibilities of both parties to the contract. The rules and regulations laid down by the home repair and remodelling act need to be strictly followed by both parties, or the contract will be deemed null and void. It is important to ensure that the contractor that is being engaged for remodelling your home has the required licenses and is authorized to work on such jobs.

Who Takes the Remodeling Contract – People Involved

The parties to a construction remodelling contract are the homeowner and the licensed contractor. The homeowner would require a contractor to make certain structural changes that could be required for changing personal tastes or other reasons. The contractor offers the required services for which a fee is charged. The fee is normally linked to the completion of the task.

Purpose of the Remodeling Contract – Why Do You Need It

If there is no renovations contract in place, then there could be multiple problems that can be faced by both parties. The contractor can drag the work beyond the given deadline, and the homeowner will have no legal recourse. Apart from the money already spent due to the first contractor, the homeowner will have to look for another contractor to complete the job. This would be a time-consuming process, not to mention the additional expenses that would have to be borne by the homeowner.

There are specific licenses or permissions which the contractor must obtain to carry on work of this nature. Without a proper contract where the contractor agrees to secure these permissions, you cannot hire a contractor as this would be illegal and you would have to pay the penalty to the licensing agencies.

You cannot budget the cost of labor or materials if you don’t have a contract. Without a budget, these costs would be prohibitive. If the homeowner either delays in making payments or defaults in payments, the contractor cannot take any legal action against the homeowner. If you don’t have a contract, you might be liable to pay the subcontractors who work for the contractor if the contractor fails to pay them.

Contents of the Remodeling Contract – Inclusions

The contract must be comprehensive and include all the provisions which would protect the interest of both parties.

A residential remodelling contract should include:

  • The parties to the agreement: The names and other contact details of the homeowner and contractor should be provided. If the contractor is a corporation, the person dealing with you should have the authority to enter into a contract
  • Description of the work to be done: It is important to specify the details of the job so that there are no disputes later on. Refer to any blueprints of the apartment or home, use them to give the contractor more information about the job. If there are other tradespeople apart from the contract, mention that including their responsibilities
  • Payment details: If the payment is going to be made according to the stage of completion of the project, then the percentage of payment to be made at various stages needs to be mentioned. You can link performance to work completed in this way. The size of the contract also has a bearing on the payment, with large contracts normally having the homeowner holding back a percentage of the payment till satisfactory completion
  • Important dates: The contract should specify the start and the end dates of the contract along with the intermediary dates according to the stage of completion of the contract
  • Permits and Insurance: There are certain permits required from the local building authority before commencement of work
  • Warranties: The tenure of the warranty and what it covers
  • Change orders: If you would like any changes after the project has started

How to Draft the Remodeling Contract – Points to Consider While Preparing the Agreement

Here are some points to be considered while drafting these contracts:

  • Parties involved in the contract: The parties who are entering into the contract and the relationship between them
  • Nature of the work: You need to determine what kind of remodelling is being carried out by the homeowner
  • Regulations to be followed: Once the job details are available, you need to find out what regulations need to be followed while the job is being executed. If the guidelines laid down by these regulatory bodies are not followed, the contract will be null and void
  • Payment terms: You have to ask what payment terms have been agreed upon by both parties. Is it going to be paid according to the stage of completion? What percentage of payment will be made at various stages? What the penalties for errors made by the contractor? What are the due dates for payment?
  • Tenure of the contract: What is the duration of the contract and what are the starting and ending dates? Is there any provision for extension of the contract? If there are different stages of completion, what are the dates? The homeowner would inspect the project at various stages to ensure the project is on track

Negotiation Strategy

A simple home improvement contract needs careful consideration by the homeowner. The areas where you need to pay attention to our budget, time and quality. Your priority should be workmanship. After that, you should talk to the chosen contractors and find out who will complete your project on time within your budget.

[Also Read: Development and Construction Agreement]

Benefits & Drawbacks of the Remodeling Contract

The benefits of a remodelling contract are as follows:

  • Protection of interest: The interest of both parties to the contract are protected. The homeowner is aware that the remodelling of his or her home will be done according to the specifications mentioned in the contract failing which they are under no obligation to pay the contractor. The contractor is aware that if the project is completed according to the time and quality specifications of the client, they will not be denied payment
  • Change in specifications: The change order clause in this contract ensures that if the homeowner wants to make any changes to the original job specification during the contract, he or she can do so
  • Termination: If the homeowner or contractor is not satisfied with the other party, then the agreement can be terminated without a penalty

The drawbacks of a remodelling contract are as follows:

  • Lack of certainty: The contract cannot force either party to continue with the contract if there are any problems between them. The contract is not assured the full payment mentioned in the contract if the homeowner is not satisfied with their work. Similarly, the homeowner is aware that the contractor may leave midway if they are not satisfied with the payment terms. The homeowner will then have to look for another contractor and exceed his or her original budget by a huge margin

What Happens in Case of Violation of Remodeling Contract?

If there is a violation of the contract, then there are certain steps to be taken to try to resolve the contract. Termination should be the last resort.  You need to review your contract to find out the clauses that have been violated by the contractor. Communicate with the contractor to let them know that you are not satisfied with the quality of the work and the exact nature of your concern. Spell out what are the remedies you are looking for and if required, modify the contract accordingly.

Send a letter to the contractor. Document all communications with the contractor, including receipts, credit card payments, mobile phone call records, and so on. If the matter could not be amicably settled, then all this information will serve as tangible evidence in a court of law.  When all efforts to remedy the situation fails, then legal action has to be taken by the homeowner.

When it comes to the contractor, a similar procedure should be followed. The contractor should discuss with the homeowner if there are payment delays. This should be followed by correspondence along with attachments like bills or invoices raised and so on. It is advisable for both parties to study the terms and conditions carefully before signing the agreement to avoid any disputes.

If you are a homeowner considering remodelling of your home or a contractor who wants to offer your services to a homeowner, it is advisable to have a remodelling contract. Such contracts ensure that the homeowner can specify his or her exact requirements to the contractor and the completion date. The contractor who has the required licenses can study the specifications and offer their services for a mutually agreed fee.

The possibility of disputes is minimised because both the homeowner and the contractor clearly understand each other’s expectations. If the contractor is unable to deliver the project on time, then they will be penalized. If the homeowner does not make payments as promised, he or she will be taken to court. So, the parties to the contract should study all the clauses in the agreement and make any modifications before signing the contract. This will ensure that your home looks the way you want it to and the contractor gets the payment that was agreed in the contract.