Negotiating with your Contractor

You wouldn’t enter into an important business deal without a contract. It is absolutely imperative that you finalize a written agreement with your contractor, sometimes referred to as a work authorization, prior to beginning construction. Although contracts of this nature can vary greatly in terms of lengths and formats, there are a number of key elements that should be included for your protection.

 

Keep in mind that, while this post will highlight some valuable contract considerations, it is not a substitute for professional legal advice.

The agreement should clearly delineate each phase of the project, with descriptions of the type of work to be done in each phase. Each payment should be tied to the completion of, and never to the start of, a phase. Descriptions of the work should be as specific as possible, for example, “First payment due upon: ordering kitchen and bathroom cabinets, sliding glass patio door, and three interior doors.” Payments should be in reasonable increments, such as five payments of 20% each. Do not commit to payment arrangements requesting the majority of the total bill in the early phases. Each time you receive an invoice from your contractor, check the contract to ensure that every item attached to that phase has, indeed, been completed.

Your contract should also contain language that commits the contractor to begin work within a certain number of days after the contract date. This language will give you some assurance that the contractor is serious about beginning and ending the work within a reasonable time frame.

It is even more advantageous if you can negotiate a penalty should the contractor miss his deadline. This payment may be defined as a set dollar amount or percentage discount off the project. Some customers will also commit a bonus to their contractor for quality work that is completed on or before the scheduled deadline. Including the language “time is of the essence” will cement the importance of complying with the timeframes as designated in your contract.

You may also want to include some language related to code violations. For example, “All work to be done in a thorough and workmanlike manner in strict accordance with the Building Code of the State of _____ and the City or County involved.” 

Your contract should also confirm that your contractor carries both Worker’s Compensation and Public Liability insurance. You will want the comfort of knowing that your contractor is capable of assuming responsibility for on-the-job injuries. 

 

The document should specify how disputes between the contractor and homeowner will be resolved. It is often recommended that such disagreements be handled via arbitration. An attorney’s office or professional trade association can recommend an arbitrator, who is then specified in the contract. 

 

Your contract should also hold your contractor accountable for providing you with lien releases. Lien laws, which vary from state to state, allow unpaid vendors to stake a legal claim for payment against an owner’s property. Your contractor should provide you with a lien release for he and his subcontractors each time you make a payment. If a lien should be placed on your property, you will have difficultly selling or refinancing your home in the future.

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