Home Improvement Contracts

From YourSITE.com

Contracts
Home Improvement Contracts
By John R. Schneider
Mar 3, 2001, 23:39

Today I am going to discuss specific items and details that every home owner should know when entering into a home improvement contract with a contractor. The contract between you and your contractor, is the most important part of having a successful job. It clearly outlines what will be done, how will it be done, what materials will be used and how much will it cost. If it is well written, the contract can be a valuable tool in making sure that the agreed upon terms are enforced.

In order for the contract to protect the two parties involved, the contract must contain certain items and disclosures made by the contractor to the home owner. There are several laws that govern how this contract is to be written under the California Business and Professions Code as well as the California State Contractor’s License Board.

Before any contract can be entered into, the contractor must give the “Notice to Owner” disclosure form to the home owner. This form clearly explains the contractor’s lien rights (as well as the rights of material suppliers and subcontractors), and offers four suggestions to the home owner as to measures that can be taken to ensure that the job gets finished and does not get liened.

The other notice a contractor must provide to the home owner is the fact that all contractors must be licensed, and if you contract with someone that does not have a license, the State License Board may not be able to assist you if there is a problem. It then asks that you check the contractor’s license number and gives the address for the CSLB to contact if they wish to file a complaint. Once the home owner receives these forms, a contractor can legally enter into a contract with them.

If the total cost of the job exceeds $500.00 (including materials, services and labor), a written contract must be used by the contractor. In the contract the contractor must

list his name, address and license number. If he or she offers any specific warranties, they must be clearly stated in the contract, and there should also be language describing the type of dispute resolution the contractor wishes to employ.

In general, all home improvements contracts must include, the approximate date the job is to begin, the approximate date the job will be completed, a description of what work is to be done, a description of what constitutes a substantial completion of work, and a notice to the home owner that states if the contractor does not start work within 20 days of the date in the contract, he or she will be in violation of Business and Professions Code Section 7159.

The mistake that most home owners make is not spending enough time with the contractor in clearly determining what the scope of work is and how the work will be done. This is usually the source of the majority of complaints between the contractor and the home owner

For example, instead of stating in the contract “refinish living room floor”, it should be stated as “ Sand down existing finish to bare wood, replace any stained or split pieces, putty and fill all nail holes and open joints and finish sand. Apply two coats of XYZ Satin Floor Finish, and stain new base to match.” It is best to give as much detail as possible so that your picture of the job is what the contractor actually does. Take the time to state the manufacturer of the product, and how the products are to be installed.

Part of the contract should also include plans and specifications as well as details on how debris will be removed, how the job will be kept clean, and any special requests like “furniture and floors to be kept covered at all times” or “home owner will install all finished light fixtures”.

Once the description the work is established, the price can be agreed upon and a schedule of payments can be written into the contract. At no time should the payment to the contractor exceed the amount of services performed or material supplied. By law, the contract must be completed for the agreed upon contract price.

Contractors can charge a down payment for their work, however, the down payment cannot be more than $1,000.00, or 10% of the contract price, whichever is less. There are no exceptions for special ordered materials. (With swimming pool contracts, the limits are $200.00 down or 2% of the contract, whichever is less.)

If for some reason the price of the contract must be changed, it must be accompanied by a written change order. The change order should be dated, clearly indicate what the change is to be, and what extra charges or credits will apply. It should then be signed by both parties. Here again, if the change order is not clear, there is potential for great misunderstandings.

For those of you who would like more information about hiring contractors and writing home improvement contracts, the California State Contractor’s License Board has an excellent publication called “Home Improvement Contracts: Putting the pieces together”. This booklet contains a copy of the notices a contractor needs to give to home owners and has a list of other resources. It is free and can be obtained by calling 1 (800) 321-2752, or you can reach the CSLB at their web site, http://www.cslb.ca.gov/. John R. Schneider is a licensed general building contractor and a certified residential code specialist. He is president of All About Homes, a residential inspection company, and has been performing code and construction consultations since 1985. Readers may address their comments to John Schneider, 24326 Mission Blvd. Suite 7, Hayward, Ca 94544. Fax number: 510 537-8666. Please include your phone number. Schneider will answer questions of general interest in the paper. He reserves the right to edit the letter for brevity and clarity. Readers are encouraged to contact a competent contractor or code consultant for specific information regarding questions they may have about their homes.