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Wednesday, February 1, 2012

What Your Remodeling Contract Should Say

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

Set a payment schedule

The contract is your summary of how much and when you should pay for completed work. Payments should be linked to work milestones, such as when the foundation, rough plumbing, and electricity are completed. Here are some general guidelines:
·         First payment should be no more than 10% of the total job.
·         Final payment should be enough money--at least a few thousand dollars--to make sure the contractor returns to correct niggling details.
·         Keep back enough money to hire someone else to finish the work if things go south with your contractor.

Schedule start and end dates

A boilerplate contract rarely says when the job will begin and end, so make sure you add those details to the document. 

Look at these dates as a timeframe, not a minute-by-minute promise:
 Delays happen and an eight-week job wraps up in nine. But if the project drags on for months, written start and end dates will help make--or defend--your case in court.

Address change orders

Make sure the contract states that any changes that will affect the cost of the job must be priced in writing and countersigned by both the contractor and home owner before that work commences. This line ensures that offhand discussions don’t result in unforeseen additional costs. 

Written change orders also help you update your budget and resist the frequent urge to expand the job.

Research your arbitration options

Many remodel contracts contain a clause that stipulates that an arbitrator, rather than a judge, will resolve disputes. This clause can save you time and money because a court fight is expensive, even if you win.
Problems arise, however, when the contractor names a specific arbitrator.
“There are some big, national, well-respected arbitrators, like the American Arbitration Association,” says Tampa, Fla., attorney George Meyer, chairman of the American Bar Association’s Forum on the Construction Industry. “And there are other questionable arbitrators that always side with the contractor.”

Before you sign the contract, research the arbitrator named. If you don’t like what you find out, insist on another.

Turn down contractor’s warranty

Agreeing to a warranty may limit your contractor’s liability and cost you money in the end.
Warranties often are loaded with exclusions and time limits that favor the contractor, not you. Frequently, state statues provide better protection, which you forfeit if you accept less from the contractor. Unless a lawyer reviews the contract, strike the warranty clause
clear skies,
Doug Reynolds

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