CONTRACT ARTICLE

Why Do You Think They’re Called “Contractors”?
It’s Because of that Contract

by

Ellis Levinson

The thought of finding a reputable contractor can strike fear even into the heart of a Green Beret. In the last edition of Inside South Valley, I discussed the ways to choose a contractor for your remodeling job. But even tougher can be negotiating the contract. Why bother nitpicking the details of a contract? You went through the trouble of finding a reputable professional, so why not trust him to do the job right? Right?
Wrong. Have you ever heard the expression, “There’s many a slip twixt the cup and the lip”? That means what the parties agree upon and what they remember agreeing upon can be quite different. And if there’s a dispute, you’ll need a written document. My friends Rance and Mara hired a contractor to do a second story addition on their house. The document was about two pages long, probably one-tenth of what it should have been. Their descent into contracting hell was rapid and deep.
So what goes into a contract? Everything! And I do mean everything, down to the color and brand of the paint and the appliance model numbers. Never be afraid to negotiate the fine points of the contract. Don’t let a preprinted form intimidate you. Other than for legal requirements, everything in a contract is negotiable.
Make an extensive list of everything you’ll want in the contract. While you and the contractor write the document, include any changes. It’s easier to do at this stage so you won’t have to create change orders later on. Provide for negotiating such change orders as the work progresses.
For substantial renovations, have the contractor include sketches or building plans. Mara and Rance didn’t. If the contractor doesn’t have a design department, consider hiring an architect. If you take that option, interview several architect candidates, as you would when hiring a contractor. Be sure all your needs appear in the remodeler’s contract, as some incidentals may not appear in the architect’s plan.
You can negotiate for upgrades or a price reduction before you sign. But don’t get pushy. And get a warranty – at least one year, preferably backed by a reputable warranty company – on all work and materials.
Include a completion date with daily monetary penalties for late completion.
Anytime you pay for materials or services provided by a subcontractor – plumbers or electricians for example - have the contractor give you a lien release signed by the supplier or “sub”. If you don’t, your house could be subject to mechanics liens if the contractor doesn’t pay these providers.
Include wording that describes how clean the job site will be left at the end of each day and how waste will be disposed of.
Set up the payment schedule based on phases of completion, not upon dates. In other words, when specific parts of the job are completed - say the staircase is finished - the contractor will be paid for that stage of the job (once government inspectors sign off on the work). And be sure there’s a holdback included on the final payment of at least ten percent. Final payment should take place 30 days after completion in order to ensure that all work is done properly and everyone’s been paid.
Include a provision for settling disputes, whether through arbitration or court proceedings. Arbitration means you will not be allowed to sue the contractor.
Purchasing appliances and fixtures on your own might save money or offer more options.
Include a clause entitling you to inspect and supervise the job as work progresses.
Try not to pay any sums in advance. California limits deposits to ten percent of the contract or $1,000, whichever is less. If you have to pay for materials in advance of the job start, you may want to make the checks out to the materials suppliers. Include that in the document.
Rance and Mara did very few of these things. They paid for incomplete work and eventually asked me to rescue them from an overpriced and drastically incomplete job. It cost them a lot of extra money and emotional stress – to say nothing of the additional six months - to get the job finished.
If you’re lazy about putting in your share of the work at the start, you may end up putting in a lot more effort trying to make everything right later on. Good luck.

Ellis Levinson has made a career of helping consumers with their complaints against businesses that don't meet customers' expectations. Your business might be employing money-saving strategies in the short run while alienating customers day after day.