The days of handshake contracts are over… unfortunately. Nowadays, a contractor isn’t a contractor without an actual contract.
Let’s get right to it. Before hiring a contractor, review their proposal and quote. They should include everything concerning the job and contact information. If anything is vague or unclear, it’s never a good sign. It’s best to move onto another contractor.
Did You Know?
Most contracts don’t allow for extra costs without prior approval. Contractors cannot charge more than 15% above the original quote without being liable to the homeowner (depending on the contract). A good contractor knows ahead of time of any changes to your renovation and makes sure YOU approve them.
A Contractor Needs a Proper Contract
A contract should be typed, legible, easy to read and ALWAYS reviewed by a legal representative. There should be no fine print. And remember – trust your instincts. If it smells fishy, it probably is.
Terms
Include some terms in the contract, such as the times the property is available to contractors and that they agree to clean up at the end of each work day. This establishes clear lines of communication and expectations.
Building Permits For Renovations
Municipal governments issue permits for renovations, electrical work, plumbing, heating and cooling jobs.
Unless stated otherwise in the contract, it is the homeowner’s responsibility – not the contractor’s – to obtain all of the proper permits for work completed on their property. Some contractors, such as High Class Builders, can help you with the process of getting permits at no additional charge.
Schedule Payments In Your Contract
Before any work begins, a contractor will ask a homeowner to secure the job with a down payment. It shouldn’t be more than 10-20% of the total cost of the job. Never pay a contractor more than 10-20% before they’ve even stepped foot in your home.
There are exceptions to the rule but they need a good reason, such as pre-ordering custom specialized materials.
Remember!
Construction scheduling isn’t perfect and sometimes delays happen. If a delay does come up in the work schedule, a good contractor will set up a change order, sign off on it, then ask the homeowner to sign off on it and then provide the homeowner with a revised construction schedule, along with a revised bill.
Payment Should Be Tied to Milestones
Homeowners should avoid payment schedules based on time. The best renovations are the ones that move forward at a good steady pace – conditions permitting – and the best payment schedules are tied to work completed.
That means that any payment made to the contractor after the initial deposit must be for how much work is completed. Always make sure you “hold back” 10% on invoices to be paid at the very end of the job when all items are complete.
Of course, sometimes a contractor will need extra funds for unexpected material shortages, etc. but make sure you get a detailed explanation of why your contractor needs those funds ahead of schedule.
Move Mountains With Milestones
Payment schedules tied to specific milestones keep jobs moving forward. The most common milestones or stages are: Rough-in, drywall and completed.
- Rough-in Stage:
The rough-in stage refers to the point in a home renovation when anything that has to do with the foundation, subfloor, framing, sheathing and roof are done, and all the electrical and plumbing has been “roughed-in.”
- Drywall Stage:
The drywall stage is the point in the renovation when the drywall can go up and the contractor can start closing in on the job – that means all electrical, plumbing and HVAC is done.
- Project Completion:
The last stage is usually called completed, but the project isn’t exactly 100 percent complete – it’s more like 90 percent. That’s why only 90% of the total budget should be in the contractor’s possession at this point.
Hold The Payment
It’s a good idea for homeowners to hold onto the last 10% of the total budget to make sure everything has been completed properly – you are permitted to do this by law. Once you know it is – usually no more than 30 days after the contractor has finished working on the job – you can deliver the final payment.
It’s important that homeowners do not make a payment until each stage or milestone is complete. Contractors will work more efficiently if it means they will get paid sooner. If they have already been paid for work they haven’t done, they are less likely to make it a top priority.
A Fair Exchange Of Power
A contractor’s power is their work and skill. A homeowner’s power is “money.” A contract that ties payments to completed project milestones sets out all the rules for the fair exchange of these two powers.
If a homeowner hands over more money than the value of the work completed on their home, they can become vulnerable to the contractor postponing the job. In most cases, the contractor will work on other jobs that they still need to collect on. A good contractor wouldn’t do this, but then again, a good contractor wouldn’t ask for 50% of the budget for 15% of work.
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