Home improvement can be a hefty investment. Therefore, U.S. real estate law requires having a written home improvement contract for project costs exceeding $500 (the requirements may vary by state). Even if your project is small and the state does not make it mandatory to have a written agreement, you should ask your contractor for one.
Home improvement contracts outline the project terms, cost, and parties involved. It should be clear and concise, which legally binds the parties to their duties and responsibilities. Having an agreement between you and the general contractor can help address disputes that may arise due to non-compliance. It can also help you avoid common real estate frauds.
However, a real estate contract includes much more than the details of the home improvement to be done and its cost. It should clearly state every vital information as discussed herewith.
- Scope of the project: The scope of work outlines the details of the project, its inclusions, and exclusions. It should mention how the work needs to be done, different parts and supplies used, floor plan, creative renderings, and clean-up after completion of the project. Let’s understand in detail what should go in the project scope section of the agreement:
- The type of home improvement you are expecting
- Materials required for the project, including their brand name, manufacturer, and warranty details
- Contractor details along with name, address, and license number
- Cost estimate
- Project completion date or milestone dates to complete the project in different stages
- Design specifications, including blueprints or other documents
- Project Timeline: Home improvement contracts must include the project start and finish date. The contractor should thoroughly understand the scope of work and provide a precise estimate of the completion date. However, it should include contingencies like bad weather, which may affect the project deadline. You may prevent unnecessary delays by including terms of a penalty in the agreement.
- Change order: Changes are common in any type of construction project. However, such changes need to be managed efficiently to keep the project within its budget and schedule. A change order is an integral part of any construction agreement that can help protect the contractor’s interests if additional jobs or repairs need to be done. Having this clause in the agreement will allow you to issue approval for additional work and costs. It helps reduce the complexities of real estate contract disputes.
- Payment schedules: Both parties should determine the payment terms and include the specifications in your home improvement contracts. You may choose to pay a deposit at the time of signing the contract and the balance upon completion. You can set milestones for bigger projects and make payments when the contractor completes a task.
- Warranties: The agreement should also include how the home improvement project is covered by a warranty. The contractor, subcontractors, and suppliers must uphold manufacturer warranties along with that on the company’s design, engineering, and craftsmanship.
- Subcontractor: The agreement should also include the names of all the subcontractors involved in the project and their agreements with the contractor. The insurance information and license of each subcontractor should also be in the contract. This will help maintain transparency in the project and minimize fraud.
- Inspection: Another vital component of the contract is the provision for inspection. Home inspection is crucial to understand the scope of the project and provide quality deliverables. The agreement may include terms of the inspection and who will pay for the inspection fee and document filings.
- Regulatory requirements: The home improvement agreement must state the contractor’s obligation to get all necessary permits and comply with the regulatory requirements of the state.
Home improvement contracts are necessary for any type of construction or renovation project. It helps all parties to understand their liabilities and reduce the chance of disputes. However, drafting a real estate contract can be a complex task. You must seek guidance from an experienced real estate lawyer who can draft a contract in your best interests.
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