What Should a Home Improvement Contract Include?
Homeowners usually 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 the work to be done, the estimated cost, timeframes, permit and zoning requirements, rules pertaining to the property (such as parking and storage), work to be done by subcontractors, and other vital information.
See Construction Defect FAQs and Construction Defect Basics for related articles, and 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, the following elements are relatively common in home improvement contracts:
Introduction or Preamble
This is an introduction which 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.) and 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). Finally, the preamble should include the contractor's federal tax ID number and the total amount the homeowner is expected to pay.
Overview of Work to be Done
This is generally the scope of what the contract covers, which should be broad enough to cover minor changes in plans without being too vague. Remember, anything not covered by the contract may incur an extra charge.
Establishing a start and finish date is crucial. You may also want to add completion targets for important phases of the job; include exceptions for contingencies such as bad weather; and a penalty for late completion, if getting it done on time is important.
Be as specific as possible, including product ID numbers and brands.
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 (e.g. where trash, dirt, etc. will be deposited); where equipment and materials will be stored between workdays; available parking; and neighborhood limits on noise levels and any applicable quiet times.
Materials & Equipment: Damage or Theft
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). Also, 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.
It is not uncommon for a building project to take on a life of its own, necessitating changes to the underlying contract. But 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
What guarantees does the contractor make regarding the integrity of the job? Also, this section should state that all materials have been purchased new and include all applicable manufacturer warranties.
Decide on payment terms up front and include the specifics in the home improvement contract. It is normal to pay one-third to one-half of the total bill at the time the contract is signed. This serves as a deposit, but is also for the purchase of materials, with the balance due at completion. For larger projects, you may be able to divide it into several, smaller payments. The ability to pay for the work may hinge on whether or not you are able to secure financing. If this is the case, add a clause indicating that the contract is binding only if you are able to get the funding.
Subcontractors and Suppliers
The principal contractor manages and pays the subcontractors, but subcontractors may be able to put a lien on your property if they are not paid. Ask for the names and contact information (including Social Security numbers) of subcontractors, as well as for suppliers. Additionally, you may include a clause specifying separate payment of contractors, subcontractors, and suppliers.
In case the contractor violates his or her 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.