For contractors, remodeling jobs can be tricky. These projects require you to deal with unique obstacles — ranging from difficult clients to complicated requests. That’s why contracts are essential. While they’re key for legal reasons, you should set up an agreement to help you and your crewmates avoid issues like miscommunication, too. With a contract, you can ensure your business remains protected and your clients are satisfied. These records can often be complicated to draw up, so you may want to consider a few suggestions along the way. Here are six points to include in your remodeling contract.
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1. The scope of work
In a remodeling contract, the scope of work explains exactly what the project will involve. Be sure to insert details about how you’ll complete the work, where you’ll store the materials, and more. It should include who plans to buy what items, as well as their brands and types, so you can avoid confusion about expenses.
Additionally, you should provide explanations and definitions for certain terms. Keep in mind that how your team refers to a part of the house might differ from what the homeowner recognizes. It’s far better to specify each point meticulously than be overly vague, which will cause problems with the client down the line.
Here’s where you should include 3D mockups, property layouts, and other images and plans. Each point related to where the job will happen should exist under the “scope of work.” Feel free to include before-and-after photos so the homeowner has them on record.
Overall, your scope of work section in the contract needs to point out all aspects related to the project goals from beginning to end.
2. A payment schedule
It’s crucial for remodeling contractors to be clear about payment terms in the contract. Here’s where specific issues can arise, especially with homeowners who have a strict budget. This section will outline how and when your crew receives compensation for their services during and after the project’s completion.
There are a few common billing methods to consider, like invoicing based on established milestones, a percentage basis, or lump sum. Pick the one that works best for you and the client. Don’t forget to include how much you’ve agreed to be paid, as well. Note the specific agreed-upon rates in the contract so you have a reference point for the job from beginning to end.
Keep in mind that negotiations might be tough. If your client feels the need to haggle over each nickel and dime, your payment schedule may take extra time to figure out. It’s a smart idea to be flexible — but you don’t want to offer too many discounts, either. This payment schedule should be the best way to keep the homeowner’s expectations reasonable.
Include a clause that covers change orders, too. Remodeling projects are notorious for changes. Maybe the discovery of a wiring defect after you remove drywall requires additional electrical work, or maybe the homeowner simply can’t make up their mind.
If you come across a situation that will affect the project’s costs, you need to add a clause that says all extra work or transactions not included in the original contract need to be signed by you and the client before they happen. This clause helps to ensure no unexpected expenses surface — and that you get paid for all of the work you do.
With remodeling contracts, payment schedules can be the most crucial part. After all, you want to be paid a fair price, while the homeowner likely wants to pay as little as possible. To keep everyone involved on the same page, ensure you don’t overlook financial clauses in the contract.
3. Warranties, insurance, and licenses
There should be a section in the contract that covers all points related to warranties, insurance, and licenses. Besides a payment schedule, your contract’s most important part will be where you cover the legal aspects — essentially, who is responsible if something goes wrong.
If you or the homeowner encounter any issues while the project plays out, you should be able to reference the contract to ensure you’re covered. These notes are especially crucial for remodeling projects, as your client won’t likely be well-versed in the warranties, insurance, and licenses you deal with every day. Make sure the homeowner can access that information.
What materials and services come with warranties? Dedicate a few paragraphs to state how long clients have to make claims. Be sure to include a point about potential extensions, as well, which will come in handy when you have to work with a particularly indecisive homeowner. Rather than have a one-size-fits-all warranty for every project, you’ll want to determine them case-by-case, as no two remodeling experiences will be the same.
Remember to highlight your company’s insurance details. This point will keep you and the client protected from potential legal situations that cost you time and money. It’s smart to outline workplace safety expectations established by OSHA, including specifications about worksite setups, so you can keep your workers’ best interests in mind throughout the project.
Because laws require contractors to list their license numbers on many documents related to remodeling projects, you need to identify all relevant workers who’ll be present on the job in the contract. List their information clearly and concisely. This way, clients will have a way to reference specific contractors, which in turn streamlines communication.
4. A detailed timeline
While completion times and dates are subject to change, you must outline the project’s timeline for reference. This timeframe should include particular start and end dates so the homeowner knows when you’ll be around to work on the project. Make sure you give the client a way to learn about time adjustments so they remain in the know.
Keep in mind that numerous events can push back a construction project, so you’ll want to add enough time to compensate for unexpected occurrences. A week extra at the end may be smart. This way, you’ll have leeway for inclement weather and other interruptions. There are also times when homeowners may need you to stop work due to personal circumstances.
Always include stages and milestones, as well. An organized construction timeline will involve deadlines for each subproject during the remodeling process, such as bathroom HVAC completion. Describe the entire picture as accurately as possible so the client knows when to expect certain updates.
Note that timelines can be a huge factor for homeowners on a remodeling project. It’s not like a commercial project, since your clients have to live in the space you’re renovating. While many homeowners are flexible, you still want to ensure you and your crew are on track so they can enjoy their new space sooner rather than later.
5. Indemnification clauses
How does indemnification work? Essentially, you include a clause stating that a party isn’t liable for certain repercussions they’ve caused through their actions. This indemnification section is an added protective layer in the contract that benefits your company’s interests.
There’s more than one type, so you should choose the best one for the job. It’s always wise to consult a lawyer so you know how to set up the indemnification clause correctly. Be sure to cover all your bases and get legal insight if needed.
6. Dispute resolution arrangements
What happens when you and the client can’t come to an agreement during construction? That’s where relationships can become a little complicated, so you’ll want to have a process in place to remedy disputes that occur in the project’s midst. This plan will help you avoid concerns like bias — and you can deal with particularly difficult homeowners.
There are multiple strategies for dispute resolution you can reference in the contract. It usually helps to have a mediation clause, where you consult a third party who can help you and the client agree on a solution to the problem. Feel free to add more than one clause that gives you several routes to consider when a dispute arises.
Though disagreements can surface during any construction project, you’re more likely to come across disputes when you’re remodeling a home since the client isn’t often experienced with construction. Therefore, they can have numerous emotions and opinions that might impact the project, such as unreasonable expectations, anxiety, hesitancy and more.
Because residential remodels can be unpredictable, you want to take precautions to ensure you have the resources to navigate potential issues between you and the homeowner.
Include these points for a successful remodeling contract
As a contractor, you know that problems can arise no matter the project.
However, since remodeling projects can present their own unique challenges, you’ll want to ensure you include specific points in your contract to cover your and your crew’s best interests. Then, everyone will be satisfied by the time the project ends.