Decoding a Renovation Contract
A renovation contract is exactly what it sounds like, it is a contract that specifies what work is going to be done to a home (or another type of property) as part of a renovation. Not only does it set out what work is to be done, but it goes into details regarding how the work will be done such as when, how much, and by whom. Renovation contracts protect you (or your client) by providing an enforceable written record of your understanding and agreement with both the real estate lawyer and the contractor for the renovation.
It is important to have a written contract so there is a clear understanding of what is going to be done by whom, and when. This may seem obvious to some people, but it is not uncommon for parties in renovation contracts to disagree over key aspects or some other related matter. This could lead to significant (and expensive) disputes over who was supposed to do what, and who is liable for damages, lost profits, and any additional time and resources that may be required because of the failure to meet the agreement .
Regardless of how large or small the renovation is, having a written contract can provide significant peace of mind, in addition to ensuring that your rights will be protected in the event of a dispute. Common elements in a renovation contract include:
No two renovation contracts are the same. The most specific and detailed contract is going to be the one that you get from a renovation-specific industry association, but these usually come at a fairly high cost. Lawyers can draft custom renovation contracts and these are often the most thorough as well. However, you can get online contract templates for a more reasonable cost. Of course, they are not going to be as specific or thorough as those from real estate and renovation industries associations, but they can be a good starting point, especially for people who just want a simple contract for a small renovation.
Selecting a Renovation Contract Template
When it comes to choosing the right renovation contract template, several factors come into play. Different projects have different needs, and these are often reflected in the complexity of the proposed work. Yet, even with a project that appears simple on the surface, it can be difficult to determine which renovation contract template is going to be the best for your specific requirements. You can begin assessing this by considering some of the most common molecules of home renovations. A kitchen or bathroom remodel is one of the simpler projects you can undertake, and most standard renovation contract templates will work for this. A full home remodel is much more complex, however, and tends to involve many more areas requiring attention. For these scenarios, you must ask yourself whether or not you should consider using separate renovation contract templates for large and related projects. Consider other factors, too, such as permits, financing and state or local guidelines that might apply to your situation. Project size can dictate the type of renovation contract template you use for your purposes. In a residential renovation, you’ll typically only need a single contract template covering all work to be done, such as on a kitchen. In a commercial renovation, however, you may consider using one contract for each area of a job to cover, for instance, interiors and exteriors separately. A template implies standards to both parties, so be sure to use the right one for your needs.
Essential Provisions to Incorporate
The foundation of any successful renovation contract template lies in its core clauses. These clauses help you set the scope of your work and protect you and your clients from the unexpected. Here are some essential clauses to consider for your contract template.
Scope of Work
This is an especially important clause for renovation contract templates, because with renovation work, so much can vary depending on what you find behind walls and floors or under ceilings and sinks. Make sure to be as clearly as possible in stating exactly what work you’ll perform, what is excluded, and how you’ll handle any additional costs that may arise during the project.
Payment Terms
Payment terms are absolutely essential in a contract template for a renovation contract. With something as intricate as a home renovation, there are lots of variables and expenses, and both parties will want to be clear on what money goes out when. There are lots of variations on payment terms, but some examples include project milestones (e.g. framing, rough-in plumbing and electrical, drywall, trim work, etc.), every Friday following the week worked, or other scheduled intervals.
Timeline
Continuing off of payment terms, most contract templates contain a show of good faith on both parties to stick to a given timeline. However, all of that is subject to change with a large renovation project, and a clause that helps both parties deal with timeline changes to the renovation without too many headaches is critical. For instance, you could stipulate that you’ll provide a new timeline with each new installment invoice, or that the project will be completed under best efforts in a reasonable time, payable at each phase of work.
Dispute Resolution
Any homeowner will tell you that renovations can be fraught with all kinds of complications, especially when the hidden plumbing, electric, or frame of a house could have anything from a small electrical fault to a major plumbing failure as soon as you start doing any sort of work. So it’s not unreasonable to expect some disputes to arise, and a dispute resolution clause in your renovation contract template is an excellent way to ensure everyone knows what to expect.
In Canada, like in the United States, certain types of disputes are brought to The Canadian Construction Mediation Council (CCMC), but others, like contractual disagreements are often handled through mediation and then arbitration. Arbitration is less costly and more efficient than litigation, and provides each side a chance to have their say and then either person can briefly testify if invited. An arbitrated decision is legally binding, so it’s up to your negotiation skills to decide if you want to make that decision obligatory or non-binding.
Modification of the Template to Suit
It is important to customize your contract template to reflect the specific requirements of your project. You will find that the standard form contract template does not always fit your needs, so you should modify it accordingly. There are many amendments and additions that can be made to address your particular project needs.
The contract template should be modified if your project: The contract template should be modified if your project: The customization of these documents allows both parties to spend less time arguing over the terms of the agreement and to focus more on the essential aspects of the construction project at hand.
Legal Aspects and Limitations
It is not just important to use a properly drafted construction contract that protects your legal rights and remedies; you also need to ensure that the contract complies with applicable law in your jurisdiction.
While some jurisdictions do not specifically require written contracts or outline what form such a contract must take, others do. Some require contracts to be signed by two witnesses, while others do not recognize e-contracts at all or impose specific requirements for them. Disorganization in terms of paper or e-files could leave an owner vulnerable to claims and lawsuits, and can add to the length of a case in court.
Contracts should include the name of any insurance and bonding companies you have worked with in the past. Sites, such as The Joint Commission, allow contractors to work with insurance and bonding companies to build credibility and establish a history of working with customers who have had positive experiences with the company .
Especially in the case of larger projects, you want the person assigned to the job to align with the contract. Assigning a new person without the experience and background that was promised could leave the owner without recourse. Pay attention not just to what the contract says but also to what the contract doesn’t say. Contracts should be explicit about whether the customer is responsible for permits, as well as what types of permits are necessary.
Perhaps most importantly, each contract should be unique based on the specific job and the parties involved. It’s tempting to use the same template or boilerplate agreement over and over again; however, failing to customize contracts could mean leaving out details or obligations that can leave the contractor without recourse. Before using a renovation contract template, be sure to have the template reviewed by a lawyer in your area who specializes in construction law or homeowner protection.
Benefits of a Template
Contract templates offer numerous benefits for contractors. They save time and money in preparing the contracts because they are already written and only have to be customized and filled in; they minimize legal risks by helping a contractor to establish a professional atmosphere that builds effective client relationships; and they are also cost-effective. For example, contract templates for a bathroom renovation are readily available online for download at such sites as Rocket Lawyer, Legal Zoom and U.S. Legal Forms.
The cost of crafting a specific, enforceable bathroom renovation contract is likely more than the price of a contract template. The trouble with trying to write a bathroom renovation contract is that you probably do not know what you may need to include. For example, you may have to include lien waivers, an arbitration clause, a warranty or other disclosures. You may not be aware of these requirements, so it is safer for you to review samples to determine if you want to include them. Contract templates also provide you with a variety of clauses, such as those that a bathroom remodeler might want to make such as: What happens when a homeowner does not like the final design? Or, how to handle extra costs? Are change orders permissible and under what circumstances? How is mediation and arbitration handled?
Sources for Genuine Templates
Sources for Reliable Templates
Finding legally sound renovation contract templates can be a bit tricky. A good starting point is professional organizations such as the Home Builders Association or the National Association of the Remodeling Industry. Their websites usually provide free forms for their members, and though they may not be jurisdiction specific, they can get you headed in the right direction.
Legal firms that focus on construction law are also a solid source . Many legal firms post samples of their work on their website, or blog about useful forms for homeowners and contractors.
Govt. organizations that focus on construction often have some samples or forms. Check your provincial or state Department of Labour website as track down local administrative bodies that oversee the building/construction industry.
Lastly, contractor associations often keep an online library with forms and template contracts.