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Information on Contracts (By
ServiceMagic)
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| A contract is a
legally binding document that details the expectations and
responsibilities of all parties involved in a home
improvement project. It clarifies the goals of both
homeowner and contractor, and it protects each party's
rights regarding the project. |
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CONTACT
INFORMATION
It seems obvious, but make sure that you include in the
contract the contractor's name, physical address, phone
number, insurance company and account and license
numbers. If there is a dispute, you need to know where
the company is located (you can't serve a subpoena if
you don't have a physical address - a post office box
number won't do!), the company owner, the name of the
insurance and bonding carriers and the way by which you
can reach all involved parties.
SCOPE OF WORK
Require a complete description of the work to be done.
This includes the overall scope of the work as well as
individual aspects of the project; from foundation and
framing to all finish work required. The type and
quality of all materials should be spelled out,
including manufacturers, brand name, quantity, weight,
color, style, and size. Be sure allowances for fixtures,
floor coverings, etc. are sufficient to provide you with
the level of quality you require. In addition, indicate
all equipment, such as scaffolding or cement mixers,
which will be used over the course of the project. If
you have architectural plans, include them in this
section as well.
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| If you decide
to change the scope of the work during the job by either
adding or subtracting items, you should make sure there
is a written change order, with project cost and timing
changes signed off on by both the contactor and
homeowner. |
PROJECT
SCHEDULE
Clearly define the project's start date, and secure from
your contractor the approximate length of time it will
take to complete the project. At the outset, ask that
your contractor convey all potential conflicts that
might arise due to other projects with which he or she
is concurrently involved. You will find that most
contractors are reluctant to sign a contract that
includes late penalty clauses, but it still may be an
item that you care to pursue. Finally, specify the time
that workers will arrive and depart each day, and
mention the days, if any, that they are not to work. |
SCHEDULE OF PAYMENTS
There are no hard and fast rules as to how a
contractor collects his or her fees. Some don't
collect until the work is completed, while others
ask for 50% up front. The average is three payments;
the first when the bulk of materials are delivered
or when a foundation is poured; a second payment
when the job is half complete; and 20% when the job
is essentially complete. A holdback of 10% is normal
until the job has been inspected and the paperwork
is complete. There are two customary ways of paying
for a large job: |
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a. |
Cost plus flat fee:
usually there will be draws set up with the
homeowner. The contractor uses the draw to pay
actual versus estimated costs, and submits all
receipts and accounting on a regular basis. Flat
fees average 13% to 20% and are usually paid, along
with the draws, as the job progresses. This method
allows great flexibility to make changes as the job
proceeds, but it is more difficult to estimate the
final cost. |
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b. |
Bid basis. Your
contractor estimates the job, and provides a
contract with all materials and fees included. You
and your contractor agree on a payment schedule,
referencing stages of completion in the work. |
In both cases above,
it is up to you to be certain that each stage is
indeed completed before handing over a check. If
you're not familiar enough with electrical or
plumbing work, for example, to know if the proper
stage has been completed to make the payment, you
might consider hiring a consultant to advise you.
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| Note:
If financing is necessary, be certain that a clause is
added stating that the contract is void unless and until
financing is obtained. |
BUILDING
PLANS & PERMITS
Be sure the contractor states in writing that he/she
will submit any building plans needed to the city code
compliance department, obtain all necessary permits and
arrange for all inspections required. If the work does
not pass inspection, the contractor must bear the cost
of corrections. |
LICENSING &
INSURANCE
Make sure to do your homework on your contractor's
licensing and insurance. Contractor licensing
requirements vary by state. Research these regulations
prior to beginning your project, and require that your
contractor provide proof of current licensing if
relevant.
Mandate in your contract that the contractor provide
proof of all required insurance. This should include,
but may not be limited to, general liability and
worker's compensation for his or her employees. |
CONTRACT
CANCELLATION
In nearly all cases, a contract may be canceled within
three days after you've signed it - simply send written
notice by registered mail and request a signed receipt
from your contractor. |
CONFLICT
RESOLUTION
In order to prepare for conflicts between homeowner and
contractor that cannot be resolved, all contracts should
include clauses specifying what forms of arbitration
should be conducted and by whom. |
MECHANIC'S
LIENS
It is not unusual for contractors to place a mechanic's
lien on a homeowner's property at the time of contract
signing. This is a legal claim to real property until a
debt is paid. If you aren't comfortable with this, make
sure the appropriate language is in the contract
forbidding it. Subcontractors may also place liens on a
property in the event that the contractor fails to pay
them. Make sure that you get waivers signed by all
subcontractors as they complete their work. Before
making final payments to your contractor, have him or
her provide you with a final release and waiver of any
mechanic's liens. These come in two forms: conditional
and unconditional. A contractor will give you a
conditional release in exchange for payment in full by
personal check. Once the check has been cashed, the
release becomes unconditional. An unconditional release
can be immediately secured by paying in full with a
certified check. |
WARRANTIES
Make sure the written guarantee on both labor and
materials is included. This warranty should include the
name and address of the party who will honor the
guarantee. Also, the contract should stipulate if it is
either a "full" or "limited" warranty. An average
warranty for labor is for a minimum of one year. Require
that you be given all written warranties provided with
any appliances, materials or equipment used in the
project. |
PUNCH LISTS
A punch list is a running tally of all outstanding items
related to the project that the contractor must address.
Include in the contract a clause stating that both the
homeowner and the contractor must sign off on all items
detailed on the punch list before the project can be
deemed complete. |
THE BRASS TACKS
The brass tacks, so to speak, are those little
details that can make the difference between a
positive experience and a homeowner's nightmare.
While there are innumerable things that you could
address, here are some specific issues worth
mentioning: |
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Project clean up:
Will workers clean up everything at the end of each
day? Will clean up require special effort, and at
additional cost? Which party is responsible for
additional cost incurred? |
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Equipment on the
property: Will heavy machinery damage pavement,
patios, the lawn, etc.? |
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Debris removal:
Who is responsible for removing project-related
debris from the site, and what is considered
removal? Is the curb or alley sufficient? |
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| And don't
forget the smallest of details: |
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Toilets: Can
workers use your home's toilets, or will you require
portable toilets? |
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Telephone: Can
workers use your home phones? |
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And there
are plenty of others - think through and address
every way in which your life and home could be
affected by a major project prior to signing a
contract.
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