Essential Provisions in a Home Remodel or Renovation Contract

A construction contract is a binding agreement that specifies the terms and conditions for service and payment of the renovation or remodel. Both homeowner and builder have individual interests to protect, so be sure your contract contains the following important provisions.

Essential Provisions Builder Should Include in the Construction Contract

The greatest hit the builder takes when working on a project is unanticipated building costs. Surprises can occur such as a boulder where the basement was meant to be or termite damage in the old studs. Whatever the situation, if you are not careful, you will end up paying for these costs yourself. To make sure this does not happen, place a section in the construction contract that specifies all unanticipated building costs are to be paid by the homeowner.

Another problem the builder may encounter are homeowner changes that are not architecturally possible. Sometimes the homeowner will not take “no” for an answer and will refuse payment to a builder who is unable to make the changes. Protect yourself from this by placing a section in the construction contract stating that changes to the original design will be permitted only if they are architecturally possible.

Essential Provisions Homeowner Should Include in the Construction Contract

The homeowner is in an especially vulnerable position in a construction contract. If you are disatisfied with the work and refuse to pay, the contractor can place a lien on your home causing damage to its overall value. Prevent this by placing a section in the contract stating if any renovations are not done completely or correctly, you have the right to withold payment.

Another common problem for the homeowner is a lien placed by subcontractors or materials’ suppliers. In some states, subcontractors and materials’ suppliers are allowed by law to place a “mechanic’s lien” on your property before they begin work or deliver materials. The lien will remain until work is completed and the subcontractor or supplier is paid. In states where the law does not provide for “mechanics liens”, your contract should include two parts to protect your interest. First, draft a section specifying that you may withhold payment if a subcontractor or materials supplier places a lien on your property. Second, state that subcontractors and materials’ suppliers may not place liens on your property if you have already paid the contractor in full. This forces the subcontractors and materials’ suppliers to sue the contractor instead of you.

Case Studies – Key Provisions in a Construction Contract

Case Study 1: Protecting the Builder

In a home remodel or renovation project, builders face the risk of unanticipated building costs. To safeguard themselves, builders should include a provision in the construction contract stating that any unforeseen expenses arising during the project will be the responsibility of the homeowner.

This ensures that the builder is not burdened with unexpected costs that could impact their profitability. By clearly outlining this provision, builders can establish a fair and transparent understanding with the homeowner.

Case Study 2: Ensuring Feasible Changes

Homeowners often request changes to the original design during the course of a construction project. However, not all changes may be architecturally feasible or within the scope of the project. To protect builders from disputes and payment issues, they should include a provision in the contract stating that changes to the original design will only be permitted if they are deemed architecturally possible.

This provision sets clear boundaries and helps prevent disagreements and payment disputes related to unrealistic changes requested by homeowners.

Case Study 3: Securing the Homeowner

Homeowners can face challenges when it comes to the quality of work or the potential placement of liens on their property. To address these concerns, homeowners should include provisions in the construction contract that protect their interests.

One important provision is the right to withhold payment if renovations are not completed or performed correctly. This provision ensures that homeowners have recourse if they are dissatisfied with the work and provides leverage to resolve any issues.