Review Remodeling Contracts Before Signing
by Lew Sichelman
Stop! Don't sign that contract with your remodeler until you are absolutely, positively sure it's clear, fair and complete. Most are not. "It's amazing the number of major agreements that are based on only a one-page bid sheet or a handshake," says Bruce Hahn, president of the American Homeowners Foundation in Arlington, Va. "No one page document can cover all elements of a good agreement." Even William Young, former director of consumer affairs for the National Association of Home Builders, agrees: Most contractors don't put a lot of effort into their contracts. For the most part, he says, they are boilerplate agreements. But even those that are pages long are likely to be so one-sided they'd make Peter Minuit blush. It's not that remodelers lay awake nights thinking of ways to cheat their clients. But in that their contracts often reflect a history of everything that's ever gone wrong in their professional lives, they usually are weighted heavily in their own favor. That's why you need someone to go over your agreement, someone to unscramble ambiguous verbiage, close off loopholes and strike out opportunities for abuse. A lawyer, perhaps. Not just any lawyer, though, but one well versed in real estate matters. Or someone like N'Ann Harp, who operates Smart Consumer Services, an Arlington, Va., non-profit which checks proposed contracts for completeness, accuracy and fairness on behalf of homeowners. Poorly crafted contracts are the main source of the remodeling horror stories everyone hears about, says Harp, whose "advocacy" reviews are recommended by the United Homeowners Association, the National Association of the Remodeling Industry, ImproveNet.com and other groups. "If what goes into a contract isn't completely clear," she warns, "the odds are very good that what comes out may be seriously screwed up." Harp charges $49.95 for an analysis, which can take anywhere from 45 minutes to several hours, depending on the contract's complexity. But your remodeler may be willing to foot the modest fee. Indeed, Harp hasn't had one yet who balked at such a request. "We're not down on contractors, and we don't present our findings on an adversarial basis," she says. "It's very low cost insurance, and it's good for the contractor's business because it builds trust." Based on thousands of reviews over the years, Harp says most contract pitfalls lie in a lack of clarity. But an absence of fairness ranks a close second. Often she sees no list of materials, or one so devoid of information that it is all but meaningless. The agreement should specify the make, model and color of appliances and other key products. For example, a jetted bathtub shouldn't be listed as simply a whirlpool tub; it should be listed by brand name. "If you've been told Jacuzzi, that's a brand and it becomes a quality issue," the consumer advocate says. Harp also makes certain the contract contains a key phrase that calls for "new materials unless otherwise specified." And she looks for a thorough description of the project, one that an unbiased third party can follow and understand. "A nice paragraph will do, but if necessary, a room-by-room breakout so that somebody who knows nothing about the project -- a judge or mediator, for example -- can tell what it was about," she says. "The more detailed, the better. When things start to go verbal, all is lost if anybody has a question." Another aspect of the contract that many attorneys fail to address when performing their legal reviews is the schedule of payments, or what Harp calls the "pay down structure." You shouldn't give the contractor too much up front, certainly no more than a third of the total price but even less if the law in your area calls for smaller downpayments. Tie progress payments to milestones, not time periods. And never write that final draw check until you're satisfied that all is complete. It may be the only leverage you have to get the contractor to come back and make those last little adjustments. "To ask for full payment when the job is not done is just not fair," the consumer advocate warns. "The whole notion of 'substantial completion' drives me crazy. Why in the world would anyone give away the most powerful tool they have in getting the project finished is beyond me?" Speaking of completion, it's also a good idea to insert a "time of performance" clause that requires the project be done in a reasonable but specific period, says 30, 60 or 90 days, depending on the amount of work involved. A firm completion date will prevent your contractor from juggling too many projects at one time. "One of the most frequent complaints we hear is that nothing is happening because the contractor is trying to run more jobs than he can handle," says Harp. Other common red flags: Contractors who ask their customers to pull the building permits, and warranties that are either missing or inadequate. "If the home owner puts his signature on the permits and the work doesn't pass inspection, guess who's responsible?" Harp warns. "Not the contractor. You're liable, because as far as the government is concerned, you're the builder, not him." Moreover, in states like California, where a two-year warranty on workmanship is mandatory, "time after time" Harp sees contracts that promise only a one-year guarantee. And in places where warranties are not required by law, she frequently finds they're left out completely. | 
