How to Write an Construction Agreement

Many people do home renovations and repairs. Although there are many do--it--yourself individuals, there comes a time when a professional is required to do major home renovations property. In order to be safe I would recommend that you enter into a signed contract between you and the contractor that you hire. Normally, the contractor will have a contract for you to sign; if you want to be proactive, it would be a wise decision to write your own contract and have the contractor sign that instead. The following should be included into the contract whether it is one that you have created or one that you are signing.

Instructions

Difficulty: Moderate

Write an agreement

1. The agreement defines the specifics of what work is being done by a contractor. This is your scope of work.
2. Insure that the contract provides a clear understanding of the materials, tools and equipment that are required by the contractor to complete the work as defined in the scope of work.
3. Discuss with the contractor the plans and preparation that is required for the subject work. A clear understanding of what work is to be accomplished, where the work will be accomplished, how long the work process will take to be completed, and the cost of the project should all be addressed in the contract.
4. Be sure to clarify the structure and site referenced in the contract. For example, if you are adding a deck to your home, the contract should provide a clear definition of the type of materials that will be utilized, what permits are required in order to do the work, and how the structure will be done. It is a good idea to have the contractor show you photos of his previous work and drawings of the plans described in the contract.
5. The contract should define all the payment terms. If it is a major project, such as a room addition, does the contractor require any upfront payment? If so, agree on an amount not to exceed twenty percent of the contract cost. The contract should also clarify when and how the remaining payment should be rendered. Will the project be paid in full at the end of construction? Will payment be considered rendered when financing occurs and or monthly payments are made? Particularly, if you are financing and making monthly payments, a clear understanding of the terms and finance charges are necessary in order to properly conclude the agreement.
6. If your proposed construction involves the use excavation of any sort, insure that the contractor has agreed to contact the appropriate officials in order to properly perform the contracted work. The utility lines, water lines, gas lines and sewer lines must be clearly identified prior to the start of the construction.
7. The contract must clearly define the responsibilities of all parties to the contract. Be sure that your contractor has the proper insurance coverage. Clearly define that potential worker injuries are not the responsibility of the homeowner. Likewise, any damage that maybe caused by the contractor should be covered under their insurance policy and the contract should state that.
8. Your contract should have a clear understanding of the permits required in order to perform the work. State and local permits may be required for certain types of renovations. The contract should include language that address potential delay in the completion of work that is under contract. For example, consider delays that may be caused by inclement weather if outdoor construction is being contemplated. The contract should specify how long it will take for completion of the construction.
9. Your contract should identify what will happen if the contractor or you fail to meet the terms of the agreement. The contract should also include language which clarifies that changes or deviations from the scope of work must approved by you prior to accomplishing the work with a modification. Finally, the contract should clarify how the clean up process will occur, that the premises will be cleaned and that all debris and remnants of the construction will be removed by the contractor.

Tips & Warnings

• It is imperative that both parties fully understand what the contract proposes and how the work will proceed.
• Do not pay for an unlicensed contractor. Make sure that they are fully accredited with the state that you live in prior to paying any funds to the contractor. Don't forget to check with the Better Business Bureau for references on your proposed contractor. Better safe than sorry.

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