10 Items to Include in Your Home Renovation Contract
Hiring a contractor for home renovation services is both exciting and nerve-racking. Taking the steps to improve and update your home can increase its value and allow you to live more comfortably, but it comes with the risk of the work not meeting your expectations.
Home remodeling projects are investments, and you want to make sure your money is spent well and gets a good end result.
The foundation to a smooth home renovation project is a strong contract. This document is agreed upon and signed by both the contractor and the homeowner to set the terms for the project and all of the details.
A home renovation agreement is crucial, but it can be difficult to know what should be included in one. The good news is that you don’t have to have a legal background to create a great home renovation contract.
Here are the 10 items:
Job Description and Scope of Work
The most important part of the contract is the job description, also known as the scope of work. This section describes in great detail exactly what work will and won’t be performed. The scope of work should also include details such as:
- What work will be completed
- What work will not be completed
- What permits and approvals the contractor will get
- What materials will be used
- Where materials will be stored
The scope of work puts the contractor and the homeowner on the same page, so it should be very detailed, down to the specific measurements and brands of products and materials if necessary. Don’t assume anything in this section. The homeowner may have their own understanding of what the kitchen or deck entails, but the contractor may have a different view or use different terms. Spell things out exactly in the scope of work so you know exactly what work will be performed. The scope of work should also include what (if anything) the homeowner is responsible for, such as purchasing specific items or clearing out the space.
The scope of work also acts as a checklist of sorts to show that the job has been completed correctly. Throughout the project, the contractor will refer to the scope of work to ensure the right work is being completed, and the scope of work will also be referenced at the completion of the project to ensure the contractor and homeowner agree that everything has been done. If an aspect of the project isn’t included in the scope of work, there is no legal backing to say it actually has to be done.
Drawings and Renderings
Drawings and renderings of the work that will be done can be included in their own section, as part of the scope of work, or as an amendment to the contract. These detailed drawings act as another reference to show exactly the work that will be done. Detailed drawings and renderings include measurements, designs, and materials and should be agreed on by both the contractor and the homeowner. When the work is complete, it can be checked against the original drawings.
The contractor will also likely need to supply renderings to secure local permits, so including them in the contract ensures homeowners are kept in the loop on exactly what has been approved.
It’s normal and accepted for changes to happen during the project so that the work and details end up being slightly different from the original quote. A change order clause details the process for making changes to the scope of work, including how to communicate with the contractor and how the changes could impact the price and completion schedule. Change orders also cover unexpected expenses, such as if more material is needed or if the price of material changes from what was originally quoted. The change order clause protects both the contractor and homeowner to ensure the right work is performed for the right price.
Most contracts state that change orders must be in writing and that changes over a certain dollar amount must receive signed approval by the homeowner before they can be performed. This ensures that just because a change was discussed casually in conversation doesn’t mean it actually happens and results in huge additional costs. Written and signed change orders protect the contractor and homeowner to ensure the right work gets done and will actually be paid for.
When writing a home renovation contract, be sure to include the start and end date of the project. Depending on the size of the project and other factors like the weather, the completion date could change, but this section should also clearly state how and when the contractor will alert the homeowner of any major scheduling delays or changes. This is also the section to include any penalties for missed deadlines or completion dates if desired.
The contract should also clearly outline the total cost of the project, as well as the payment schedule. Most contractors require partial payment to start the project, as well as payments as various project milestones are completed. Once the project is completed, the remainder of the cost should be paid. This section should include a schedule of exactly when payment is due and how the contractor should be paid.
Depending on the size and scope of your renovation project, the contractor may give work to subcontractors. The subcontractor agreement outlines exactly what work will be performed by subcontractors and their contact information and license numbers.
The contract should also make clear that the contractor is responsible for paying subcontractors and that the homeowner won’t pay them directly to avoid any confusion. This section holds the contractor responsible to use the named subcontractors instead of changing at the last minute.
Most contractors cover their work for a limited amount of time. The warranty terms state what is covered, such as home repairs to certain areas caused by work or material defects but not by accidents or wear and tear from the homeowner. This area should also include who is responsible for covering the cost, such as the contractor, the sub-contractor, or the supplier, as well as how quickly the repairs will be performed.
Depending on the type of year the work is performed, some home renovations may not be able to be tested to ensure they were done correctly. It’s impossible to test a waterproof addition that is built in the summer months and know how it will respond to winter snow.
A warranty guarantees the quality of work for a specific and limited amount of time. Use this section to be clear about exactly what is covered and for how long. Warranty terms can get confusing, so use a contract template here if needed to cover the basics.
In legal terms, indemnification means to hold someone harmless. An indemnification clause essentially holds the homeowner harmless for any accidents. This clause states that the homeowner won’t be held liable for any accidents that may occur and is standard in contracts for home renovation.
License and Insurance Information
Contractors are required to include their license number on all materials, including the contract. This ensures the contractor is actively licensed and can be checked against local records. The contractor should also include proof of liability and workers’ compensation insurance. If a contractor doesn’t have insurance, the homeowner may be held responsible by local laws if anything goes wrong with the project.
Termination and Dispute Resolutions
This clause provides the details for how the homeowner and contractor can walk away from the contract without any penalties. The termination clause hopefully won’t be used, but it’s important to set the ground rules for what allows for termination of the contract, such as if the homeowner doesn’t pay or drags their feet on the project or if the contractor doesn’t do quality work.
Most contracts contain a boilerplate section on dispute resolutions, which protects both parties in case there is a disagreement about the work that is performed. If either the homeowner or contractor believes the other side didn’t uphold their side of the contract, they can take the issue to court and dispute it.
The dispute resolution clause lays out how disputes will be handled. One common option is to state that disputes be handled by an arbitrator or mediator instead of a judge to save time and money. Hopefully, this clause doesn’t need to be used, but it is vital to include it to protect both sides should a dispute occur.
As you embark on a home renovation project, make sure your home renovation contract discusses these things. Taking the time to outline the details and get on the same page with your contractor will help the project go more smoothly and protect you both in case anything happens.