When you hire someone to work on your house, having things in writing is critical for both parties.
Last week we took a serious look at finding a contractor and the need for a written scope of work and contract. Today we will expand on the basic elements involved in a contract -- the key elements you can rely on to get the job done without a hitch.
Creating a contract for your project
A contract usually begins with "This Agreement…" and is followed by a date and then identifies the parties involved.
Besides your name and address, it should name the construction company, its owner(s), all pertinent addresses, phone numbers and the contractor’s license number.
Your contractor should supply you with the name of his bonding agent and amount, as well as his insurance company and the liability coverage amount.For example, the contract would state: "This agreement shall consist of a scope of work as indicated in the included drawings, for this bid amount." It would also include any other specifications, such as a manufacturer’s installation and the general conditions of the work site (such as who will pay for power used, hours available to work, and even if the toilet must work each evening).
The contract should then clearly state the price agreed upon for the job, including all materials, taxes, fees and permits. This is a good place to decide if percentage payments are to be made as work progresses.
A brief description of the progress required for a payment, works well. For example, a foundation contract might state: "Twenty-five percent of the contract price will be released when the house is raised. Another 50 percent will be released when the concrete foundation forms are inspected, poured and forms removed. The remaining 25 percent will be paid at completion, when the house is set onto the level foundation, a final inspection is signed and all clean up is complete."
Learn to lean on lien waivers
Some folks learn too late that paying their contractor isn’t always the end of the story. If for some reason the contractor doesn’t use the money you pay him to pay his suppliers, you as the homeowner could end up paying twice!
That’s why the next heading in your contract should be "lien waivers." This very important part of the contract should state that your contractor is going to give you his "unconditional lien release," agreeing to protect, defend and indemnify the owner from any claims for unpaid work, labor or materials with respect to the contractor’s performance.
So, before you write a check to the contractor, have him provide a lien waiver from each of the suppliers or sub-contractors the payment is expected to pay. An additional security measure is to write two-party checks to the material supplier or subcontractor and the contractor.
Don’t forget the dates
Beginning and ending dates are also important elements to your contract. Time delays may occur, but what do you want to happen when the contractor doesn’t call or show up for a couple weeks? Adjustments to time and penalties for not showing up or finishing the job in the contract period should be very clearly stated.
What about other changes to the contract? Your contract should say something like this, "The owner and the contractor expressly agree that no material changes or alterations in the work, price or time shall be made unless in writing and agreed upon by both parties and signed."
Another issue your contract should address is responsibility for permits, code requirements and inspections.
At Aberdeen Neighborhood Housing Services, we usually have the contractor get the permit and call for the required inspections. The inspection card must be displayed where the inspector can see it and be able to sign it.
You should be aware of the required inspections, the inspector’s notes and signatures and attend the inspections whenever possible.
What about those subs?
A section of the contract should cover subcontractors. Your general contractor may need to hire an electrician or plumber, for example, and the contract should require that each subcontractor provide you with pertinent information.
It might read "Subcontractors are to supply licenses and Certificates of Insurance prior to the start of any work. The general contractor shall warranty all subcontractors’ work for the same period as his own."
And if there’s a disagreement?
The contract should also state what happens if there is a dispute.
We recommend that you and your contractor agree in writing to resolve any disputes out of court. Your first attempt should be to "mediate" any disputes. That is where both parties have the most control of the outcome because the solutions are their own.
If you are unable to resolve your dispute in mediation then agree to choose "a binding third-party neutral arbitrator" instead of litigation. A third-party neutral person facilitates negotiation and helps you arrive at mutually agreed upon solutions.
Both parties must agree upon an arbitrator, who will most likely have extensive contract and construction knowledge. Arbitrators are known to negotiate solutions and resolve conflicts in a more timely and less expensive manner.
The Coastal Dispute Resolution Center is available for more information at (360) 273-2291.
A final note: Both owner and contractor need to realize that they have a duty to each other in very clear and binding language. The better the contract is written and followed, the less likely there will be problems. And then long after the work is completed, both parties can bask in a job well done.
Dave Murnen and Pat Beaty are construction specialists at Aberdeen Neighborhood Housing Services, a non-profit organization committed to creating safe and affordable housing for all residents of Grays Harbor County. Do you have questions about home repair, remodeling or becoming a homeowner? Call us at 533-7828, write us at P.O. Box 407, or visit us at 710 E. Market St. in Aberdeen.
