What is a Home Improvement Contract and When Do I Need One?
A home improvement contract is an agreement between a contractor and a property owner or between a contractor and a tenant and includes in its description all labor, services, and materials to be furnished and performed. A home improvement contract also can mean an agreement between a salesperson and property/homeowner or tenant.
This contract is the most important communication tool between you and your contractor; it should identify all project expectations to help avoid misunderstandings.
3 TERMS OF AGREEMENT
Contract details are who will do the work, what materials will be used, where the work will be done, when it will be done, and how much it will cost.
Your home improvement contract always should be in writing, legible, easy to understand and inform you of the right to cancel or rescind the contract. If you are promised something verbally, make sure that it also is included in writing. Any changes to the contract need to be in writing, as well. These “change orders” should be kept with your other project paperwork.
1. Anatomy of a Contract
A contract should contain all project details agreed upon by you and your contractor. Among the details should be a description of the work, price, payment schedule, who will pull necessary building department permits, and when the job will begin and end. The contractor’s state license number, address, and phone number(s) also should be listed.
Don’t sign anything until you understand the contract and agree to the terms.
2. The Sign of a Well-Built Contract – Describe Everything
The best way to avoid disputes over what is or isn’t expected from a home improvement job is to include all of the details into a written, signed contract.
The contract should be as specific as possible regarding all materials to be used, such as the style, brand, model, quality, quantity, weight, color, size, or any other description that may apply.
For example: “Install upper and lower maple kitchen cabinets, manufactured by Company XYZ, model 01381A, style/color 0123, hinge and hardware selection, as per the plan dimensions and diagram,” not just “install kitchen cabinets.”
A CONSUMER GUIDE TO HOME IMPROVEMENT CONTRACTS – GOOD, BAD, UGLY
Example 1:
GOOD – Install xx (quantity) Company XYZ upper/ lower maple kitchen cabinets, model ABC, style/color 0123, European hinges, hardware model 1000, per plan dimensions and diagram.
BAD – Install maple kitchen cabinets.
UGLY – Install some cabinets.
Example 2:
GOOD – Paint indoor entry (per plan) using Brand X paint, color 567, two coats, with preparation and taping described in next paragraph.
BAD – Prep and paint entryway with blue paint.
UGLY – Paint the entry.
Example 3:
GOOD – Install Brand X kitchen faucet in style ABC and color BCS.
BAD – Replace kitchen faucet, if necessary.
UGLY – Replace kitchen fixtures.
Make sure the home improvement contract includes everything that is agreed to, up to and including complete cleanup and removal of debris and materials, and special requests like saving lumber for firewood or saving certain materials or appliances.
3. Complaints and Warranties
If the contractor offers a warranty for labor and/or materials, be sure to get that in writing. It should specify which parts of the work are covered and the duration of the warranty. You also should request any written warranties offered by the manufacturers of materials or appliances that are installed by the contractor.
Consumers usually have time to file a complaint with your State and Local governments about a faulty project. That deadline can be extended if additional warranties are written into the contract. Consult your government for exact timeframes.
TERMS OF AGREEMENT
Money – The Bottom Line
Price – All home improvement contracts must include the agreed-to price. Any job costing $500 or more (combined material and labor) needs a written home improvement contract. By law, the job must be completed for the agreed-upon contract price.
If the contract price needs to be changed, it MUST be done with a written change order that becomes a part of the contract.
Down Payment – If the home improvement contract calls for a down payment before work starts, the down payment cannot be more than $1,000 or 10 percent of the contract price, whichever is less, for a home improvement job or swimming pool, excluding finance charges. There are no exceptions for special order materials.
Schedule of Payments – A home improvement contract must include a payment schedule. It should show the amount of each payment and explain what work, materials or services are to be performed for that particular payment. Payments to the contractor cannot exceed the value of the performed work.
Swimming Pools – A final swimming pool contract payment may be made at the completion of the final plastering phase of construction (provided that any installation of equipment, decking, or fencing required by the contract also is completed).
Finance Charges – If applicable, finance charges must be calculated and laid out in detail, separate from the contract amount.
Sales Commission – If the home improvement contract provides for payment of a salesperson’s commission as part of the contract price, that payment must be made on a pro rata basis in proportion to the schedule of payments made to the contractor.
Salespersons – A salesperson cannot legally sign a home improvement contract for the contractor unless he or she is a valid, registered home improvement salesperson in some states.
***Basic disclaimer – I have stayed at a Holiday Inn Express but I am not a lawyer nor do I pretend to be one. Always consult with your legal professionals for exact state and local guidelines.