Hammer out your contract before the hammering begins.
Starting a home renovation may seem daunting, but following a few important steps, like drawing up a strong contract, can save you headaches down the road.
A good contract is all in the details
Not sure what to put in your contract? The Smart Reno checklist is a great place to start, providing every detail you may want to include in the contract between you and your contractor.
Total Project Price
This is how much you can expect to pay for your reno, all in.
Make sure you and your contractor are aligned on expectations, exhaustively covering the possible cost factors like fees and taxes.
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Project Scope
Define the tasks you expect to pay the contractor for, as well as tasks that are not included.
Scope refers to the exact tasks your contractor
is performing, and includes the cost of certain materials.
In your contract, make sure this section is detailed so that you and your contractor have a clear understanding of what is included (types/quality of finishes go here, too), as well as what is excluded from your total price. Exclusions often get overlooked, and can be a source of hidden costs.
With a clear understanding of your project scope, you can compare quotes from one contractor to the next. Don’t be afraid to ask them for a quote. If one contractor says you need beams to remove a load-bearing wall yet another says you don’t and offers to do the project cheaper, look out…there may be surprise fees down the road when support beams do have to go in, after all.
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Target Start Date
Confirm the date your contractor expects your project to start and what happens in the event of
a delay.
Just because you set a start date doesn’t mean that’s when your reno actually starts – make sure you’re protected. Material delays and weather can impact many projects.
Put the target date in writing to ensure you and your contractor both have the same expectations for timing.
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Payment Schedule
Always hold back at least 10% until the project is complete and all sub-contractors have been paid.
Contractors are often paid in instalments, including a deposit to book their services.
The contract outlines your payment schedule, so make sure it’s reasonable before signing (large deposits could be a red flag!). A deposit of 10%-15% of the total cost, followed by milestone payments of 10%-20% of the cost as work progresses is typical, and should be reflected in your contract. It’s also good practice to reserve at least 10% of the project value until the work is finished and all sub-trades have been paid out. Otherwise, they can put a lien on your property!
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Permits
Make sure your contractor has the proper permits to do the work.
Avoid confusion and any potential delays with a contract that clearly indicates who is responsible for obtaining these permits – you or your contractor. Check with your local municipality and regulators for more information on requirements.
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Refunds
Protect yourself by building a refund agreement into your contract in case of delays or complications.
As a service, you can’t return a renovation to the store.
A good way to protect yourself is to agree to terms of a refund if your renovation project is delayed. For example, if the start date is pushed, it would outline a percentage of the deposit would be returned.
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Insurance and Licenses
Check that your contractor has these in place before the project starts.
Making sure your contractor has insurance is another crucial way to protect yourself.
Ensure your contract stipulates that your contractor will maintain adequate and up-to-date insurance, and has all licenses required to work within their field and in your municipality.
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Contact Information
Your contractor’s contact details should be clearly outlined.
This might seem basic, but the contract should have your contractor’s contact information including their company’s legal name, address
and phone number.
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Signature
Ensure both parties have signed copies of the contract.
Make sure they actually sign your contract.
Request signed copies of the contract to ensure all parties have signed before the project start date and your first deposit.
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Warranties
Specify the exact length of warranty coverage negotiated with your contractor.
The length of contractor warranties can vary.
Ask what your protections and rights are at the outset of the project, and make sure these are written into the contract.
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What about unforeseen hiccups?
A contract is the best laid plan, so to speak, but when things don’t go according to plan here’s what you need to know:
Budget for unforeseen costs
When planning your renovation make sure you budget an extra 10-15% to cover unexpected costs.
Get everything in writing
If your project scope changes (i.e. extra or different materials, additional labour, code violations) get them in writing and agree on how the changes affect your payment schedule.
This is when it’s extra important to reserve that 10% of the total renovation cost until the project is complete, your subcontractors have been paid, and you’re completely satisfied with the work.
Understand the impact on timelines
Expect changes to the project to lengthen the timeline.
While frustrating it’s ultimately better to have a job done well than done fast.
We get it, contracts are hard.
That’s why Smart Reno is working on a Contract Builder that will tailor a contract specifically for your project.
Sign up for our free reno tip sheet and to be notified when the contract builder is available.
