If your property needs renovating, you might be wondering, “Do we need to sign a contract for renovations?” Indeed, you do. It is a grave mistake to move forward without a contract. However, any old contract will not suffice. You need a renovation contract as opposed to a generic business contract. If you are like most people, you are wondering what to include in a renovation contract. This unique agreement details specific aspects of the project ranging from materials used to a timeline for completion, the total cost of the project and plenty more. Let’s take a look at what should be present in your renovation contract. And while we’re at it, let’s delve into additional details pertaining to this important project.
Pay Attention to the Subtleties of the Renovation Contract
Read every single term of the renovation contract proposed by the renovator. Do not sign your name on this contract until the renovator and you are in full agreement in regard to every single term. If you do not feel comfortable reviewing the details of the contract, run it by your attorney or another contracts specialist. As soon as you are comfortable with what you see, you can move forward in full confidence. Once all the proper terms are in place, you will rest easy knowing the project will reach completion on time, with the proper materials and at the quoted price.
Renovation contracts should have language that details the amount of money going towards payment and when the payment will occur. This language should state payment will be provided after the project is complete. There should also be a termination clause that empowers you, the client, to walk away from the arrangement without any type of penalty in the event that the renovator violates the contract. Keep in mind, some renovation contracts require payment of a certain percentage of the project at the start. This way, the renovator has the confidence necessary to move forward with the project, knowing they will receive financial compensation. However, it is a mistake to pay the vast majority or all of the project’s cost at the outset. Doing this will somewhat reduce the renovator’s motivation to properly finish the job and complete it in full.
Zero in on the language pertaining to the timeline for the project’s start and completion. There should be a specific start date and a completion date noted in the contract. These dates provide a framework for the project’s completion, laying out exactly when the renovation team will have access to your property.
Sweat the Small Stuff of the Project Description
The renovation project’s description provides all the details of the project. It explains which party is responsible for what and defining the scope of the work to be completed. The description details the access to the property and the materials going into the renovation. Moreover, it mentions the parties with the authority to amend and sign the contract.
Ideally, the renovation contract will have a comprehensive itemized list of materials to be used. It will also cover the labor to be performed and additional costs tied to the project. If you want certain materials used, a specific color combination, a specific brand or anything else in particular, now is the time to state that desire and include it in the renovation contract. Furthermore, information pertaining to the warranty of the materials and final renovation should also be present as appropriate. There is also the matter of renovation costs per square foot that one must take into account.
To learn more about renovation costs and their differences from construction costs, check out our article Cost of Renovation vs. New Construction Commercial.
Recognize the Potential for the Renovator to Miss the Target Completion Date
There is a chance the renovator will not be able to follow through on the promise to complete the renovation by the original target date. The renovation contract should include language that details the penalties for missing the project’s completion date. Such penalties provide the negative reinforcement necessary to motivate the contractor to finish the project within the specified time frame. Make sure that these terms and penalty amounts are crystal clear.
Language Pertaining to Local Authorization
The contract should specify the contractor is responsible for obtaining the regulatory permits necessary for the renovation project. The sad truth is some low-quality renovation companies gloss over these details in contracts for prospective clients. Do not give your business to a renovator who refuses to comply with all the nuanced requirements of local licensing and permitting agencies.
The Contract Must Include Procedures for Changes to the Agreement
Truly comprehensive renovation contracts detail the process that will be followed for any additions or alterations to the project. As an example, some renovation contracts have terms that state both parties must provide a written sign-off for alterations to the renovation project. There should also be language that the property owner does not have to accept changes without authorization.
The Termination Clause and Additional Protections of a Renovation Contract
The renovation contract’s termination clause explains the property owner’s legitimate reasons for ending the job before its completion. This language will also detail the acceptable reasons for the renovator to prematurely end the job without penalty. As an example, if the job misses incremental deadlines or the deadline for completion without sufficient explanation, if the renovator fails to properly communicate or if the work quality is insufficient, the termination clause can be activated.
Furthermore, it is in your interest to request that the contract include mention of a lien release that protects you against liability in the event that the renovator fails to compensate subcontractors involved in the project. This way, you will not end up financially liable for those subcontractor payments.
Indemnification in the Renovation Contract
Language pertaining to indemnity must be present in the renovation contract. It will provide legal protection against potential damages, exempting parties from liability resulting from specific actions. As an example, an indemnity clause in a renovation contract can protect a property owner against liability in the event that someone receives an injury onsite when the renovation is taking place. If the contract that the renovator proposes does not include a clause that indemnifies you, the property owner, against potential legal liability, request that you include it prior to the start of the project.
If you need some assistance making sense of your renovation contract, our Calgary construction location provides consultation services. Though it focuses primarily on retail, you can learn additional renovation tips from our other article, Tips for Retail Renovation.