Home Economics: Contract is smart precaution for home improvements

Chicago Tribune illustration
Chicago Tribune illustration
Posted: May 27, 2011

May is typically designated Home Improvement Month, though houses require improving - maintenance and repairs and upgrades - the 11 other months, as well.

Spending on home remodeling peaked nationally at $362 billion in 2007 and has declined since then in the face of high unemployment, tighter credit, and record foreclosures.

Yet homeowners are still spending big bucks: Harvard University's Joint Center for Housing Studies has projected the figure for 2011's second quarter alone at $130 billion.

With all that money involved, homeowners' chief concern is getting everything they've paid for, when they want it.

That goal is more easily achieved, the experts say, if everything is set down on paper, in the form of a contract, with all the i's dotted and t's crossed.

"It's amazing the number of major remodeling agreements that are based only on a one-page bid sheet or a handshake," said Bruce Hahn, president of the American Homeowners Foundation in Arlington, Va.

"No one- or two-page document can cover all elements of a good agreement, or hope to prevent even most of the potential problems," he said.

To reduce the likelihood of disputes, a homeowner needs "to have a meeting of the minds" with the contractor on every possible aspect of the contract and their relationship, Hahn said.

The Remodelers Council of the National Association of Home Builders cautions that no work should start until the customer reviews and signs an agreement spelling out in detail "the what, where, how, time span, and cost of the project."

In other words, if the contractor says, "Don't worry about it, we don't need a contract," the homeowner should insist on one - or start looking for another remodeler.

The Remodelers Council, the American Homeowners Foundation, and the National Association of the Remodeling Industry appear to be on the same page regarding the contents of a standard contract.

Hahn's group offers an eight-page contract designed with the assistance of homeowners, remodelers, architects, and lawyers. It is available, for a small charge, at www.americanhomeowners.org

Any agreement should start with the contractor's name, address, telephone number, and license number.

Pennsylvania law requires that all contractors who perform at least $5,000 worth of home improvements a year register with the Attorney General's Office. To check whether your contractor is registered, call 1-888-520-6680.

In New Jersey, contractors are licensed (https://newjersey.mylicense.com/verification/); information is available at the Consumer Service Center, 973-504-6200.

Contracts should include blueprints, a floor plan or sketches, and a timetable including approximate start and completion dates. (Weather, of course, is a major variable in completion-date deadlines, as are material-delivery dates beyond the contractor's control.)

The contract should include a price and payment schedule, according to Hahn and the Remodelers Council.

Also included should be detailed specifications for all products and materials. The description of each item should provide enough detail to clearly identify it: brand name, model number, color, size. This section of the contract may also describe any materials to be selected later, who will choose them, and the amount of money set aside to pay for each item.

A major cause of conflict is the "change order" resulting in unexpected costs.

Jay Cipriani of Cipriani Builders in Woodbury recommends that homeowners ask a contractor this before signing the final agreement: "What unforeseen costs could we run into, so we can put money to cover it into our budget?"

When a contractor discovers a change order is necessary, activity is typically halted, adjustments are made, and the arrival of new materials is awaited. Change orders should be written up separately with details including price, then appended, bearing the signatures of homeowner and contractor, to the original agreement.

Among other points that industry observers recommend the contract should cover:

Information on who will obtain and pay for necessary permits and other approvals. No matter who gets the permit, the remodeler is responsible for making sure the work is done correctly.

  • Insurance details.
  • Lien releases to ensure that the homeowner is not held liable for any third-party claims of nonpayment.
  • Provisions for conflict resolution in the event of a contract dispute.
  • Notice of the right under the Federal Trade Commission's "cooling-off rule" to cancel the contract within three days if it was signed someplace other than the remodeler's place of business.
  • Details concerning access to the home, care of the premises, phone and bathroom use, and cleanup and trash removal.

If you need help writing a contract, or you want to be sure that the one you are about to sign offers you the most protection, hire a lawyer. And make sure the lawyer is willing to assume responsibility for your case if a problem requiring litigation arises during or after the job.

"Getting it all in writing won't guarantee smooth sailing," Hahn said, "but it puts the homeowner in better shape to avoid crashing on the rocks."


Contact real estate writer Alan J. Heavens at 215-854-2472, aheavens@phillynews.com, or @alheavens on Twitter.

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