Contracts & Legal Issues

Contracts & Changes

Remodeling contracts and paperwork don't need to be a mystery. All you need is a little patience, common sense and organizational skills combined with some basic knowledge.

The information below is meant to assist you in dealing with your contractor; however, it is not intended to replace the advice of your attorney. NARI recommends that you consult your personal advisor if you have questions or concerns about your remodeling contract.

Contracts are the most critical step in any remodeling project. This is the one item that holds the job together and ensures that all parties involved agree to the same vision and scope for the project. You should be aware of all the details in your remodeling contract before you sign. Here are some key areas you should look for:

Be sure the contract includes the contractor's name, address, telephone and license number (if applicable).
Details of what the contractor will and will not do should be outlined-such as protection of personal property surrounding the job site, and daily cleanup or cleanup upon completion of the job. (Since clean up is an additional labor cost for the contractor, it may slightly raise the cost of the job, but it is often well worth the price).
All materials should be specified. The contractor should include a detailed list of all materials for the project in the contract, including size, color, model, brand name and product.
The contract should include the approximate start date and substantial completion dates.
You should study all required plans carefully before you approve them. Your contract should require your signature on all plans before work begins.
Federal law requires a contractor to give homeowners written notice of their right to, without penalty, cancel a contract within three business days of signing it, provided it was solicited at some place other that the contractor's place of business or appropriate trade premises-the homeowner's residence, for instance. This is your Right of Recision.
Make sure the financial terms are spelled out in the contract and that you understand them. The total price, payment schedule and any cancellation penalty should be clear.
The contract should include procedures for handling change orders during the course of the project.
A warranty covering materials and workmanship for a minimum of one year should be written into the contract. The warranty must be identified as either "full" or "limited." If it is a "full warranty," faulty products must be repaired or replaced, or the homeowner's money returned. A "limited warranty" indicates that replacements and refunds of damaged products are limited in some regard. The name and address of the party who will honor the warranty (contractor, distributor or manufacturer) must be identified. Make sure the time period for which the warranty is offered is clearly specified.
A binding arbitration clause is also a good inclusion in the event a disagreement occurs. Arbitration enables both parties to resolve disputes more quickly and effectively without costly litigation.
Request a contractor's Affidavit of Final Release be provided to you at the time you make final payment, or obtain final lien waivers from all subcontractors and suppliers. These are your assurances that you will not be liable for any third-party claims for nonpayment of materials or subcontractors.
Thoroughly review the contract and be certain you fully understand it before signing. Consider the scope of the project and make sure all items you have requested are included. If you do not see a specific item in the contract, ask about it-otherwise, assume it is not included.
Never sign an incomplete contract and always be sure to keep a copy of the final document, including signatures, for your records.
Remember: If it is not in the contract, legally it doesn't exist.

Change Orders are routine on most remodeling jobs. In fact, it is rare that a project will proceed without any changes to the original contract. A "change order" is a written document detailing any requests to alter, change, or remove any items found in the contract or project. Most change orders come with an added cost to the project total. There are three origins of change orders: 1) you initiate one because you have changed your mind about the design or a specific product, 2) the contractor recommends changing some aspect of the design, or 3) a change is required because unexpected damage was found (termites, for example), or there is a code violation affecting the project. Here are some tips to making changes:

Make sure all changes to the project are made in writing and signed by all parties before the new work begins.
Change orders should be priced prior to acceptance-many will change the overall budget.
You should ask about the added time the change will take in the overall timetable for the project.
Both you and the contractor should retain signed copies of the change order in your files.

A written change order protects both you and the contractor from misunderstandings.