Entering Into A Contract for Your Home Remodel? Read it Closely.

IT'S UP TO YOU TO MAKE SURE YOU'RE PROTECTED.

Contracts are a funny thing. No one cares what’s in them until they need them in court. Then, surprise, surprise! You just found out you are not protected. Don’t be that homeowner. I will say that the courts do tend to lean toward the homeowner in cases of contractor “abuse”. They are supposed to be the professionals after all. But if you initialed all those places that gave the contractor special rights…well, you supposedly knew what you were doing. And why pay for courts and attorney costs…wouldn’t you rather have that money go into raising the value of your remodel investment?

I mentioned in my rant on T&M contracts that I had a contractor present a homeowner with a contract that had 4 illegal clauses in it. It also held absolutely NO protection for the homeowner, just all kinds of outs for the contractor. When I presented my required changes to the contractor, he said “no one ever reads these”. YIKES! Apparently neither does he. One of the most glaring (and embarrassing for him) entries was where his secretary had put personal notes to HIM (ie: “Fred, use your standard terms and conditions but eliminate No. 6,9 blah blah”). Since he never read the contract, which he later stated was new to him, he did not see her notes! I asked him how many other jobs he was doing with this exact contract and he just got embarrassed. He didn’t answer. Good thing…I’m pretty sure I did not want to know.

Moral of the story:

READ your contracts and look to see if you’re protected. If you can’t make heads or tails of it, FIND SOMEONE WHO CAN. The added expense for a set of experienced eyes is minimal compared to what you could be risking!

Beware the Time & Material Contract!

My latest experience with a “Time and Material” contract explains why I have such a problem with them. I had a client who received 3 bids from 3 contractors, one of which had done some small work for them previously and so the client really wanted to go with him. When we received his contract it was “Time and Material”. What this means is that the contractor will bill you straight out for any time and any materials used on your job with an agreed upon mark up for profit and overhead. Sounds good, right?

I pushed back and the clients asked him for a lump sum contract. He said “why? I can come way under budget and why should you pay extra money?” I said “OK. If you know that you can come way under budget, put a ‘Not to Exceed’ price of their budget in it.” The contractor now hmmms and hahs and says “well, I can’t do that”. Now I got to ask “why? If you are so convinced you will come in under budget there is no risk to you here. We have 2 other bids that come in at budget and are lump sum.” He finally gave in and put the “Not to Exceed” into the contract. (The 4 illegal clauses in his contract that I made him revise is a whole other post!)

But the story doesn’t end here. If I had not been tracking his T&M billings throughout the project, no one would have caught the fact that he included material invoices for other peoples’ projects. Nor would they have caught that he made mistakes in the construction and charged the homeowner for the replacement materials and the labor to fix those mistakes. There were more things, but my heart rate goes up just trying to write this. In the end the homeowner negotiated merely a $50k overage to his “Not to Exceed” promise, down from the over $150k (not including legitimate change orders) he wanted to charge them. But, hey, no problem. He can come in waaaay under budget...

This story illustrates one of the reasons that I don’t recommend T&M contracts, but even more than that is that generally a contractor who has taken the time to REALLY bid your job has a much better idea of what he is getting into. The thorough bid is more likely to net a project with fewer hassles. And if the project can’t be done for your budget….you’ll know that before you ever start!

Check this out!

Hey! Check this guy out.

The information on this site is current, relevant to California and incredibly thorough! Be sure to look at the “Owners Manual” tab for things to watch out for and general information about your part in the construction process. The section on “Selecting a Contractor” has some of the best, down to earth advice I’ve seen from a contractor. Good building skills are necessary, but if a contractor can’t run a business, he’ll be thanking YOU for those checks to cover back taxes if you aren’t careful….

Have a Happy 4th of July!!