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Advice from Angie’s List: 10 rules for a home improvement contract

Angie Hicks co-founded Angie's List, which provides user-generated reviews of service companies.
CREATORS.COM

Angie Hicks co-founded Angie's List, which provides user-generated reviews of service companies. CREATORS.COM Purchase photo reprints »

Having a contract that clearly spells out the details of the job is crucial for both the homeowner and contractor doing the work for any major home improvement project.

“It’s protection for both the consumer and the contractor,” says Becky Watson, co-owner of Agape Home Services. “If you don’t have a contract, either party can be unprotected.”

A solid contract will spell out the goals, responsibilities, payment terms and penalties if the contract details are not met. Contracts should include the job description, start and completion dates, payment terms, licensing, insurance and permit requirements, details on material and labor costs, change order procedures, penalties for missed completion dates, and a termination clause, which spells out reasons the homeowner or the contractor can end the job without penalty.

“The more information that is in the contract the more the homeowner understands what’s to be expected of them and what’s to be expected of the contractors,” says G. Paternostro, owner of GianFranco Contracting Service. “It’s a clear outline stating the scope of work, the materials to be used, the amount of manpower, the number of days. It’s just giving a general idea of what the homeowner should expect from hiring that particular contractor. There’s no gray area. Everybody knows their responsibility.”

A contract can offer a homeowner protection if fully read and understood, but it can also contain clauses that could lock unsuspecting homeowners in to an agreement they didn’t plan for. According to a nationwide Angie’s List poll, nearly one-third of the respondents admitted they don’t read contracts thoroughly.

Walker says her company requires customers to initial each page, showing they’ve read it, and encourages them to ask questions if there are provisions they don’t understand. Homeowners are not at the mercy of the contractor when it comes to what is or isn’t included in the contract. Both parties should discuss and agree upon the terms before beginning any project.

“The more details in the contract the better,” Walker says. “If there’s any doubt or anything they don’t understand in their contract, I think it’s really important they be able to call their contractor and go over it with them.”

Here are 10 rules for a home improvement contract:

1) Job description. It spells out the project and who is responsible for what.

2) Start and completion dates. They set dates to give a framework of time the project should take and outline how and when contractors can access your home. Be prepared to amend completion for good cause, but don’t accept unreasonable, unnecessary delays.

3) Payment terms. Tie payment dates to job completion. Most contractors will ask for at least 30 percent down. Some state laws establish down payment limits, so determine your state requirements. Hold back at least 10 percent until the job is completed to your satisfaction.

4) Local authorization. Specify that your contractor is responsible for securing necessary regulatory permits for your project. Walk away from a contractor who can’t or won’t approach local licensing or permitting agencies.

5) Penalties for missed completion dates. Give yourself options to deduct or delay payment if completion dates are missed to encourage the contractor to meet your time frame. Be specific about amounts, and clearly define terms.

6) Procedure for work orders/changes to initial agreement. Outline a process to follow for project changes or additions. Large-scale projects often uncover hidden problems that must be addressed before work can continue, so change orders are not uncommon; but a well-defined project should not have several of them. Be wary if your contractor routinely seeks changes.

7) Detailed outline of costs and materials. Require an itemized list of materials, labor and any other costs you will incur. Spell out whether you want specific materials, brands, colors, etc.

8) Proof of licensure, insurance and bonding. Ask for proof of licensure if applicable, worker’s compensation insurance, liability insurance and bonding to protect you from liability for property or job-related injuries.

9) Termination clause. Spell out reasons you or the contractor can leave the job without penalty (e.g., failure to pay the contractor, no reasonable explanation for delay, poor work quality or failure to adequately communicate).

10) Other protection. Ask the contractor to provide a lien release, which protects you from liability should the contractor fail to pay his or her subcontractors who worked on your project.

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