Episode 7 | What’s in a Contract | Carmel Builders Sidelight Series

January 22, 2020

In this episode of Carmel Builders Sidelight Series, owner Louis Weiher goes over the importance of what should and shouldn’t be included in a remodeling contract. The contract is a very important part of any remodel project and we want to make sure our customers are as educated on them as possible.

Transcript:

Welcome back to another episode of our Sidelights Series vlog. I’m Louis Weiher with Carmel Builders, and today we’re talking about ‘what’s in a remodeling contract’.

We get a lot of questions from people wondering what should be included in their remodeling contract or even a new construction contract. The fact is if you go online, you’re going to find a lot of different information and some of it is really contradictory. But at the end of the day, there’s some really important things that you need to make sure are included in a contract before you sign it, before you engage with a contractor to do your project. 

For starters, the parties…let’s make sure we name whom the two people are. You as a homeowner and me as the contractor.  Make sure the names are in there very clear. Use legal names, legal descriptions. That’s really important. 

Secondly, and this should go without saying, the total cost of the project needs to be in there. It should be a fixed number. It should not be a ‘not-to-exceed’ type of number. It should not be an unsure number. It should not have a lot of stipulations. There should be a fixed price in a contract. If it is a time-in-materials or a cost/plus type of contract, that should be very clearly defined as to what that means so that you know what you’re paying and how you’re going to be billed for it. 

Next, the timeframe. This is really important and in the state of Wisconsin it’s actually required as part of a home improvement contract. We want to make sure that we know what the timeframe is going to be. Now, that could be as specific as it’s going to start on this day and end this day. It could be a little bit more of an open ended like it’s going to start on or before this time and complete within a certain number of working days. Either of those is fine, but it should have a timeframe. You want to avoid those situations where you think it might take a month or two and then you hear the horror stories of somebody’s project going on for six months, a year, even longer. So timeframe is really important.

Next, I want to make sure that the specifications and the scope of work are included. Who is doing what and what are they doing? Really, really important. That’s almost always going to include a set of plans as well and those things need to work together. They need to explain what we’re doing. So a contract shouldn’t just say we’re installing a new sink. It should tell you what that sink is. It should tell you where that sink is going.  It should tell you who is providing the sink. If you, the homeowner, are providing the sink, that’s perfectly fine, but the contract should say that. So make sure really detailed specifications, really detailed scope of work, don’t leave anything unknown. And if it’s not sure, I would say you have every right to not sign that contract. Tell your contractor, tell your partner ‘hey, we need to make sure that this is clarified before I’m comfortable signing it’.

Then there are some other things that should always be included in your contract, things that kind of get into maybe what we call the terms and conditions of a contract. Things like disputes. Look, the reality is reasonable people can disagree on things, but there should be something in your contract that defines how you handle disputes. What are you going to do if you disagree with the contractor during the project on how something is going to be handled? That should be clearly spelled out, how that’s going to be handled. Oftentimes, maybe your local building association, your local chapter of NARI might have a dispute resolution process. If you’re going to use it, great. But put it into the contract and encourage it and make sure that that’s clear. Otherwise, you might find yourself spending a lot of money on attorney’s fees that you really didn’t need to.

Unknowns. I talk about the unknowns a lot. There are going to be unknown things that happen in your project. We’re going to open up a wall and discover something we didn’t know was there. But how does that get handled should be clearly defined. In my opinion, you, the homeowner, should be made aware of it right away and given options before we do the work. But that’s not always possible. Sometimes it’s a situation where we have to fix it. Maybe it’s illegal, it’s dangerous, and it’s causing some other problems, so that should be defined how those unknown conditions get handled. 

And then lastly, I talk about insurance. First of all, make sure your homeowner’s insurance is clear, but also make sure that it’s clear on what insurance your contractor is carrying. Things like worker’s compensation, general liability, and do they have an umbrella policy? Who’s covered? Who’s not? Make sure that’s all very clearly defined, because again, if something does go wrong and things do, it’s just the nature of the world we live in. Things go wrong. We want to make sure that between your insurance and or our insurance, somebody is insured. At the end of the day, insurance is important. We need to make sure it’s clearly defined who is covering what and how it’s being covered. So kind of high-level stuff there, but really important. 

So just make sure when you’re signing a remodeling contract, as it’s a big unknown for you and you don’t know what you’re going to get until you’re done, take time review the contract. Be comfortable with it and if you’re not, talk to your contractor. Maybe talk to an attorney. Maybe talk to a friend or whatever, but make sure that you’re comfortable with it before you sign it. 

Thanks a lot and we’ll have some more information about some of these details in future episodes.