What Your Remodeling Contract Should Say

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By: Oliver Marks
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Review your remodeling contract carefully and adjust it to make sure it protects you in terms of payments, work schedules, and project specifications.

Effort: Low 3 hrs (review contract)
Investment: Low $0

The contract your general contractor offers is a good starting point—for the contractor. You must edit the document so it also shields you.

Hiring a lawyer to review and make changes to a contract is a good idea, especially since each state has its own construction contract statutes. But an attorney review will cost at least $500, plus $1,000 to $1,500 in additional fees to make wholesale revisions to a flawed contract.

If you’d rather invest your money in Italian tile and other goodies, learn how to read and rejigger construction contracts.

The essential job of a construction contract is to spell out the project’s “scope of work.” This is the document you and your contractor will consult throughout the job, so make sure it’s as detailed as possible.

Some states require the contractor to write his license number on the document and to include a clause that allows you to rescind within a certain time period after signing. Check your state laws to learn what your construction contract should contain.

A thorough contract is filled with numbers and stipulations that will take several hours to review, so leave enough time to review it before signing. The contract should state:

Contractor will secure all necessary permits and approvals

Where and which walls will be moved

Payment schedule

Work hours

The contract needn’t contain product specs on its pages: It may refer to the contractor’s attached, itemized bid.

Next: Set a payment schedule

Oliver Marks

A former carpenter and newspaper reporter, Oliver Marks has been writing about home improvements for 16 years. He’s currently restoring his second fixer-upper with a mix of big hired projects and small do-it-himself jobs.

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Building and remodeling contracts vary based on the homeowner's needs, the contractor's experience, the lawyers' advice, and state laws. This article covers the fundamentals of a contract that will generally apply in most instances. Parties can insert penalties into a contract, which may extract a penalty if the contractor fails to get work done by certain dates. A typical penalty clause may allow the homeowner to delay or deduct payments from the amount owed once the job is done. Depending on the size of the job, deductions may range from $100 to $500 for every day past the contracted completion date. A contract without a penalty clause doesn’t mean that the completion date stated in the contract is meaningless. A homeowner could claim that failure to complete the project by the deadline is a breach and seek or even sue for damages. Some contracts may also include a specified amount of “liquidated damages,” which the homeowner is entitled to in the case of a breach, to avoid the challenge of proving the amount of actual damages. By the way, there’s a flip side to penalties: If you want to include a penalty provision, the contractor may want to include a bonus clause that rewards the contractor with additional compensation for finishing work before the deadline. The bonus might use the same rate as the penalty, or be different. Discuss and negotiate the terms with your contractor. Most important, have any contract reviewed by a reputable attorney who has experience with building and remodeling contracts in your state.
Posted by HouseLogic on May 08, 2013

This page should address the question of whether penalties should be stated in the contract. Instead of just saying the job will finish by June 30 (allowing a lot of leeway for a job that should finish by May 30), shouldn't it state a penalty if it doesn't? Yes? No? So we go to court and win, but shouldn't a penalty be stated, so as to be compensated for the inconvenience, delays and hassle of suing? Isn't an ending date a provision without teeth unless it states a penalty? This should be addressed, one way or another, on this page!
Posted by Johnathan on May 01, 2013