Protecting Yourself and Your Home When You Sign a Home Improvement Contract

A Home Improvement Project can be filled with a variety of problems and headaches. Most people are very trusting individuals and are not aware of the many problems that occur when one attempts a home improvement project. If you choose to embark on a project than you need to protect yourself and your home from common problems that occur BEFORE you sign on the dotted line. Make sure that before you sign a contract with someone to do a project that the following items or clauses are included in that contract:

CONTINUOUS WORK CLAUSE – This clause should detail the minimum number of people working on your home each day, Monday through Friday. If weather is a factor and work cannot take place, you should include in your contract that you will receive a call by 8 a.m. that day, if no one is going to show up because of bad weather. The contractor should agree to 7 hour work days, and work will not run past 5:00 p.m., unless permission is received by you. Reduction of $_________(determine an amount) in total price if project work schedule not continuous, with minimum manpower, for full seven

STARTING DATE CLAUSE – Full refund by contractor if job not started by__________.

COMPLETION DATE CLAUSE – The amount of $_______ will be subtracted per day, for every day project is not completed by________.

WORK SITE CONDITION CLAUSE – All areas to be kept “broom clean” on a daily basis. Define “broom clean”.

WORK STOPPAGE CLAUSE – this gives you the right to cancel the contract if work is deemed unsatisfactory or gets inexplicably delayed.

MATERIAL INSTALLATION CLAUSE – All installations will be done according to manufacturer specifications and local building codes, unless otherwise noted.

ARBITRATION CLAUSE – If unsolvable problem(s) arise both parties agree to arbitration by National Arbitration Board or other. Both parties agree to abide by decision.

WARRANTY CLAUSE – All labor and product warranties will be supplied by contractor before final payment.

MATERIAL DELIVERY AND STORAGE CLAUSE – All deliveries to be accepted by contractor, securing materials will be the responsibility of contractor until installation and materials will be covered and placed _________ on property.

SUBCONTRACTING CLAUSE – Contractor shall not assign this project to any other company or individual, unless they are listed as a subcontractor, without the written consent of the homeowner.

PERMIT AND FEES CLAUSE – Contractor is responsible for all required permits, fees or notices required for the work within.

PROPERTY DAMAGE CLAUSE – Contractor shall be responsible for any damage caused to existing conditions. The contractor is liable for the full cost of the repair. The homeowner will determine who will repair the damage and at what cost.

JOB SITE BEHAVIOR CLAUSE – No loud music, foul language, alcohol or drug consumption, no cigarette butts to be left on property, and workers will wear shirts at all times.

COMMUNICATION CLAUSE – If homeowner needs to clarify a situation and attempts to call contractor or contractor’s office during daytime hours (8 a.m. to 5 p.m.), contractor agrees to return call or contact homeowner within 2 hours of homeowner’s call. If call back or contact is not made within 2 hours, there will be a deduction of $_________ per occurrence from the cost of the project.

SUBCONTRACTOR NAME, ADDRESS AND LICENSE NUMBERS CLAUSE -Names, address and license numbers of all subcontractors to be used on project.

STARTING DATE CLAUSE – Full refund by contractor if job not started by_(Date)__.

COMPLETION DATE CLAUSE – The amount of $_______ will be subtracted per day for every day project is not completed by_(Date)_.

These 17 clauses will protect you and your home from problems that will occur in the completion of your Home Improvement Project. Make sure your contract includes them all.

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What to Know Before Signing a Home Improvement Contract

It is important to be a very careful consumer when it comes to home improvement contractors. For instance, I had a case where my client, an elderly and blind woman, signed a contract and paid $30,000.00 to a home improvement company that disappeared with all of her money! Unfortunately, the company was a scam operation, my client lost her life’s savings and it will take some time in court before my client may ever see her money again however, her mistake will be a lesson to all of you because this article explains how to protect yourself from home improvement fraud.

Before signing any contract with a home improvement company, first ask that company for its license number and check it out with your State or County Consumer Affairs’ Business License Division. Find the License Division on the web or call information and get their number. You want to find out (1) the name and address of the company associated with the license number given to you, (2) if the company is currently licensed and the license expiration date and (3) whether any complaints have been made against that company. The answers to those questions will help you determine if you want to proceed with signing a contract. Make sure both the contractor and the company he works for are licensed to work in your State.

If your going to sign the contract then make sure certain things are included pursuant to your understanding and as required by your State’s Home Improvement Business Law. The contracting company’s name, address and phone number should be printed on the contract. Also, it is important that the contracting company’s home improvement license number is printed on the contract and that it is not different from the number you called and inquired about with Consumer Affairs. Lastly, make sure that all of the work to be performed is listed in the contract and that the approximate start and end dates of work are included. You should put a penalty clause in the contract regarding the contractor’s failure to timely complete the work because contractors are notorious for starting jobs and then leaving for a few days or weeks to do other jobs while you sit and wait in your dismantled kitchen for him to return. Once the contract terms are satisfactory then the contract should be signed by both you and the company’s representative.

An example of a consumer protection law is New York’s General Business Law §771 (“GBL”) requiring all home improvement contracts shall be in writing and contain certain terms of payment, fees for services and materials and start and completion dates, among other terms. GBL §771 is a consumer protection statute to prevent the misunderstandings between contractor had consumer and to protect the consumer from overreaching of the contractor, such as charging for work that was not agreed upon. GBL §771 limits the contractor who disregards its written contract requirements to satisfactorily proving to a court each and every item of work he did and the reasonable value of each item by detailed invoices, timesheets and proof of hourly rates, among other proofs. So, if the contractor who failed to put your home improvement work in writing attempts to collect $20,000.00 from you, he has to prove the value of his services in detail before scaring you into paying an amount you had no idea about. New Jersey’s Consumer Fraud Act and the Home Improvement Act protect the consumer even more by denying the contractor from recovering any monies if he violates any of the consumer laws AND he will pay three times the amount of damages (called treble damages) to the consumer for his failing to obtain proper permits or licenses or any other violation of those laws.

Lastly, protect yourself by not paying 100% upfront. Most contracting companies ask for a deposit upon your signing the contract. I suggest that you put down as little as possible and arrange a payment schedule with the company where you will pay a certain amount as certain work is completed. Of course, always get a receipt, signed by the company and stating the date and amount of any monies paid to the company if you pay anything in cash.

This article is certainly not all inclusive and is intended only as a brief explanation of the legal issue presented. Not all cases are alike and it is strongly recommended that you consult an attorney if you have any questions with respect to any legal matters.

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It’s in the Details – Critical Elements to Have in a Home Improvement Contract

You’ve decided to make some repairs or renovations on your home, and you’ve already done your homework and selected a reputable contractor to do the work. Now you and your contractor need to document the details of your arrangement in a legally binding contract.

Signing a contract can be quite intimidating if you don’t have a lawyer on hand to guide you along. Perhaps it’s this intimidation factor that leads people to not read their contracts thoroughly. They see legalese and their eyes glaze over. They sign the contract without reading it, assuming that the terms are fair.

Not reading a contract in its entirety can be a costly mistake, as you may end up being bound to terms that aren’t in your best interest.

Other homeowners try to be diligent and read the contract, but find that they just don’t understand what it says. The terminology is too technical or the stipulations too vague, so they just sign, hoping that everything will all work out. To avoid getting shafted, make sure that you understand each point in the contract completely. If you don’t understand something, consult a lawyer who can give you unbiased advice.

Home improvement contracts don’t have to be complicated, but they do need to be detailed. Vague contracts are not good, as they leave items open for interpretation. When dealing with such large sums of money you don’t want to take any chances.

The whole purpose of a home improvement contract is to list which tasks each party is responsible for, what consequences there’ll be if someone fails to meet their obligations, how long the job will take, and how much money will be changing hands. A contract protects both parties from being taken advantage of, and ensures that you’re both on the same page.

Some of the most vital components you need in your home improvement contract are as follows:

- The contractor’s mailing as well as physical address, full name, and phone number. Your contact information is required as well.

- A detailed estimate of the work, including cost. You want to list the brand names of all materials to be used, as well as their description. If you neglect to do this, the contractor may instead use poor quality materials that are cheaper to buy. The more detailed your project scope is, the more you’ll be protected.

- Dates for when the work is slated to begin and when it will end. If you’re concerned about the project going overtime, you can include consequences that the contractor will face if the work goes past the projected end date.

- Details about how and when the contractor will be paid. It’s prudent to put down a 10% deposit in the beginning, and then pay as soon as each phase of work is completed. If you pay before the work is done, you risk having the contractor skip town. If you don’t pay quickly enough, the contractor may become annoyed, and take his time completing the job.

- Include detailed warranty information such as the length of the warranty, what it covers, and who you can contact to invoke it.

- A commitment by the contractor to obtain all permits and licenses necessary to complete the job. It’s also a good idea to make sure that the contractor has liability insurance and Workers’ Compensation coverage just in case she gets injured on your property.

- Details about third parties such as subcontractors. You want your contractor to guarantee the workmanship of the people she hires.

- Assign who is responsible for cleaning up the job site, as well as how trash will be stored and removed from the property.

- Determine what happens if there’s a dispute between the two of you. Deciding how to handle a problem before one arises makes it much easier to deal with during a moment of conflict.

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Missing Items From Home Improvement Contracts Render Them Illegal

California imposes very specific requirements on contractors who draft, prepare, and submit home improvement contracts to consumers. If a contractor fails to meet the minimum requirements then their contracts are potentially illegal, unenforceable, and the contractor could lose the benefits the contract was designed to provide them.

Notwithstanding the granite countertops, the cabinets, or the carpet, the contractor you choose is the most important decision in the entire home improvement project. A very easy way to tell if you are dealing with a true professional contractor is by looking at their proposed contract very carefully. When I say carefully I mean to take the document and have a competent attorney review it. The contract will tell you a lot of information about the contractor without even having to speak with them. For example, California Business and Professions Code 7159 et seq. has very specific requirements designed to protect consumers against contractors. If the contract does not have these minimum protections you should be very wary of the contractor whom you are about to do business with. Some of the protections are as follows:

A home improvement contract and any changes to the contract shall be in writing and signed by the parties;

It must include the name, business address, and license number of the Contractor;

“Home Improvement” heading must be on the contract in at least 10-point boldface type;

“Contract Price” heading followed by the amount of the Contract;

“Description of the Project and Materials to be Used” heading

“Down payment” heading that states DOWN PAYMENT MAY NOT EXCEED $1,000 OR 10% OF CONTRACT PRICE”;

“Schedule of Progress Payments” heading with each progress payment stated and specifically referencing the amount of work performed and materials provided;

“Approximate Start Date” heading;

“Approximate Completion Date” heading;

“Note about Extra Work and Change Orders” heading

Commercial general liability insurance notice indicating whether or not the Contractor has insurance;

Workers’ compensation insurance notice indicating whether or not the Contractor has worker’s compensation insurance;

A mechanic’s lien warning notice describing to a consumer the issues of mechanic’s lien rights held by contractors;

Joint Check provisions wherein a consumer can make a check payable to both the contractor and the subcontractor or material supplier to protect them from being double billed;

Information about the Contractors’ State License Board (CSLB);

“Three-Day Right to Cancel” notice that gives a consumer 72 hours to cancel a contract without penalties;

This above list is a few of the common items that contractors fail to include in their contracts. If one or more of these items are missing from your contract please have it thoroughly reviewed before signing it.

Additional common questions to ask the contractor include:

How long has the contractor been in business in the state? Check their license status on the contractor’s state licensing board website.

The contractor should have a business history in your area including a list of references, phone numbers and email addresses. If they can’t provide references consider looking elsewhere. Hiring a contractor to complete a project where another has gone out of business can be costly and disastrous.

Get the names and contact information for everyone, including subcontractors, sub-subcontractors and employees who will be working on your property and insist on a full-time project supervisor.

There are dozens of other questions to ask during the selection process all of which are equally important. There are also other protective clauses that you can request to be included in the contract. For additional information about these areas contact a competent attorney who is familiar with construction contractor, contractors, and the contractors state licensing laws.

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Home Improvement Contracts: The Must Have Elements

The majority of home improvement projects go as planned but the ones that go wrong can reach a level of drama right out of an HGTV horror episode. An important element to the success of most remodeling projects begins with proper planning and clear expectations for the homeowner and contractor. A detailed contract which outlines and governs the relationship between you and your contractor is significant evidence you have considered all the important details of the project and provides protection in the event something goes wrong.

The process of executing the contract shines light on the quality of your project plan because organizing the agreement on paper exemplifies a great deal about the underlying elements of the project.

Most established remodeling contractors have a standard document saved as a word processing file which they modify with specifics of each project. You can also obtain a digital contract from a consumer legal document publisher such as: uslegalforms.com.

Just remember the larger and more complicated the job, the greater the risk of problems arising in the process. Most homeowners should consider requiring a contract for any job over the small claims court threshold of $2500.00.

The following paragraphs list some of the more important clauses of home improvement contracts and describes my reasoning for recommending their inclusion into your agreement. This is not a complete list of all clauses needed in a contract and the information should be used for evaluation and educational purposes.

Start Date- Completion Date- All remodeling contracts should include an expected start and completion date. It is important to specify the agreed upon completion date and any remedies/consequences for failure to perform. Some language should be included describing what constitutes reasonable delay such as weather, shortage of materials, etc…

Description of Work to be Performed- It is imperative to accurately and thoroughly describe the project. Items should be specific in detail to prevent and or eliminate future misrepresentations or claims from either party. Copies of drawings, pictures, and other supplemental descriptions should be referenced in this section.

Materials List- A detailed materials list is imperative. It is your right as the home owner to specify the quality of materials for the job. The list should be as specific as possible listing item description, time number and likely supplier. Copies of supplier quotes detailing material descriptions, model numbers etc, are also recommended to list. There is a great variety in material quality and cost. One of the most frequently used tactics in cheating an unsuspecting homeowner is to substitute quality materials with inferior less costly impostors. Protect yourself from this fraud with a detailed material list.

Project Price- the Final agreed upon project price should be detailed in the contract. The most secure agreements are those which have a cost plus arrangement requiring the contractor to provide copies of all invoices related to the project.

Progress Payment Schedule- All home improvement projects should be paid for under an agreed upon payment schedule which is detailed in the contract. Some standard formulas are 30% upfront, 30% at half completion, 30% at near completion, and final 10% held as retention. I also recommend requiring the protection of a construction escrow service in this clause of the contract.

Retention Agreement- The best contracts include a provision for the home owner to release the final 5-15% of the project balance upon satisfactory completion of the project. The final funds are then released at final sign off of the punch list by all parties.

Provision for Contract Modifications- There are regularly occasions in a project where a homeowner decides to make changes to something related to the project such as adding a new feature or upgrading the quality of material used on the job. It is highly recommended that all agreed upon changes be documented as modifications to the contract. A modification is a simple addendum to document but it can be a big mistake to proceed with any project without documenting the change. There are also some legal risks to modifying a project plan without amending the contract.

Lien Waiver/Release- The contractor should be responsible for collecting properly signed lien releases for all subcontractors who have performed work on the subject property. These signed releases prevent future claims arising out of any disputes that arise after payment. The contract should specify this responsibility and also provide the homeowner the right to withhold payment until the releases are obtained.

Permits- It is fundamental that your contractor apply for and obtain applicable permits for the project with the proper governing entity. Be extra cautious of any contractor who does not want to secure permits and suggests you obtain them or for go them all together..

Termination and Dispute Resolution- This is a clearly specified method for communicating and resolving disputes between both parties. Basically this is the documented steps the homeowner is required to take when he has decided to fire the contractor. The termination clause will protect the homeowner from frivolous future claims from the contractor for improper termination.

Warranty- Most projects will not include a provision for lengthy warranties however it is beneficial to establish an agreed upon time frame the contractor will be responsible to resolve any workmanship or material quality issues. Manufacturers routinely provide some warranty against material defect so your contract should detail any remedy for replacement of defective material such as light fixtures, hardware etc…

Summary

The best home improvement project is the one which comes off as close to planned as possible. Unfortunately, there are many occasions where problems arise when home improvement projects go off track. During my career as a banker, I encountered every issue described in the paragraphs above and many more. An accurately documented contract between you and you contractor with be pivotal in resolving any discrepancies in the project and will by your best recourse in protecting you from any legal disputes that could arise from a project and or contractor gone bad.

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