Things to Know Before Signing a Renovation Contract for Your Dream Home

A home renovation contract encompasses much more than a mere collection of papers bound together. Signing such an agreement with a home renovation company or custom home builder is a safety net for ensuring that your preferences are fulfilled, given that the contract’s language reflects your expectations. Hence, here are our suggestions to help you comprehend a renovation agreement adequately, along with a few cautionary pointers.

Things Your Home Remodeling Contract Should Include

The size and complexity of your project will determine the length of your contract, which can range from a concise one-page document to an extensive “contract package.” Homeowners should examine the contract for the following standard elements.

Individuals/entities Involved in the Home Renovation Contract

This incorporates the home renovation contractor’s complete information, such as their name, full address, phone number, email, business license where obligatory, and business/GST number, along with your specifics, including your name, address (including project location if different), and contact information.

Scale and Scope of the Remodeling Project

The home renovation contract’s scope of work delineates the tasks to be accomplished, which includes a project description, an itemized list of materials and products to be utilized, incorporating brand, name/number, color, and dimensions, along with explicit details of the contractor’s and the homeowner’s responsibilities. Elaborate projects necessitate comprehensive descriptions, with further information added as annexures forming part of the contract.

For a small project such as installing a bay or bow window, the comprehensive task list should include the following:

1. Taking exact measurements of the opening and ordering custom windows.
2. Removing the current window(s) and preparing an opening for new installation.
3. Building the frame for the new window(s).
4. Installing the new window(s).
5. Insulating, using caulk, and capping the exterior.
6. Dispose of all construction waste.

For a more intricate project, such as a home extension, the contract should clarify the entity responsible for acquiring the required architectural drawings, engineers’ reports, and building permits and must ensure that they have the requisite insurance coverage.

Timeline of the Project

Small-scale projects may have a specified start and end date. At the same time, a comprehensive timeline is necessary for larger projects, outlining vital milestones such as the completion of foundation work, framing, and mandatory inspections.

Cost of the Project and Your Money

The contract establishes the complete expenditure and payment schedule, encompassing all aspects of the project, such as labor, materials, sub-trades, permits, and waste disposal fees. Small projects may mandate minimal initial and final payments, whereas larger projects may demand one or more progress payments linked with the completion of significant project milestones.

Along with the cost, a home renovation contract must encompass a few crucial financial specifics, including the deposit amount. Typically, contractors request a modest upfront deposit, often around 5 or 10 percent of the final bill, to confirm the project’s acceptance. When the homeowner agrees to work with the contractor, the latter turns down other job opportunities. In case the homeowner withdraws from the project just before its commencement, they may forfeit the deposit amount. However, if the contractor solicits a larger percentage for a deposit, say 20 percent or more, specifically for material purchases, homeowners should demand a receipt from the supplier to verify the same.

The contract may also entail “allowances,” meaning the contractor may have reserved a specific budget for a particular item or component, such as $5 per square foot for tiles. However, if the homeowner chooses tiles costing $10 per square foot, the overall cost will subsequently increase. In the case of more extensive renovation projects, It is crucial to understand the allowances allocated for various fixtures and finishes clearly.

Additionally, a 45-day holdback period is designated wherein homeowners may retain 10 percent of the final payment. This sum guarantees that all subcontractors working on the project have received their dues and no liens or legal claims exist over the home. However, this amount should not be viewed as leverage to withhold payment until the contractor resolves minor defects.

Insurance and Workers’ Compensation Coverage of the Contractor

The home renovation contract must include a Certificate of Insurance verifying that the contractor has insurance coverage to compensate for the harm caused to your property, adjacent properties, or any personal injury to you or others. Additionally, a Letter of Clearance providing evidence of the workers’ compensation coverage is mandatory, which is described in detail in the contract, with an attached letter proving the same. Workers typically require such coverage.

Warranty

The homeowner can guarantee that the contract specifies the warranty’s terms, its extent, duration, and possible limitations or exclusions.

It is important to clarify if the warranty covers materials, labor, or both. In case the warranty covers only the product, it must be noted that the homeowner will be responsible for the cost of any replacement or repair work necessary in the future.

Other Factors

In addition, a home renovation contract may comprise various clauses addressing concerns like building permits, zoning variances, change orders, and conflict resolution. Homeowners should ensure that the contract delineates these clauses in detail. It is important to remember that any uncertainty should not be left out and must be put down in writing in the contract.

What to Consider When Hiring a Contractor?

When seeking to hire a contractor for renovations, ensure that you:

• Create a detailed list of the specific tasks you want to accomplish while keeping in mind that modifications made during the project will incur additional costs.
• Set a precise budget for the renovation project.
• Consult recommendations from acquaintances and neighbors who have had similar work done.
• Be aware that workers and freelance practitioners in the construction sector are required to possess workplace safety and insurance coverage, with occasional exceptions.
• Ascertain if tradespeople hired possess certification from the Skilled Trades Ontario.
• Consider engaging the services of a local company, as this can simplify reference checks, warranty enforcement, and follow-up work.
• Obtain written estimates from at least three contractors and avoid accepting estimates over the phone or without a physical inspection of the area.
• Recognize that reliable contractors ask numerous questions so they can comprehend and strategize the project. For example, regarding driveway paving, they should inquire if heavy vehicles will be parked on the driveway.
• Avoid any deal that seems too good to be true.

Remember to Check for References Before Siginig a Home Remodeling Contract

It is advisable to obtain at least three references and verify them, even if you receive a recommendation for the contractor from someone you trust. Each reference should be from an individual who has interacted with the contractor firsthand.

Request references from individuals who have had work similar to the renovation you are planning.

Furthermore, it’s prudent to gather references from both recent and historical time frames as some issues may not manifest immediately. For instance, roofing or paving problems may not arise until a year or more following the completion of the project.

Important Recommendations

Before signing a home renovation contract, it is crucial to do the following:

• Limit down payments to a minimum (preferably no more than 10%).
• Refrain from paying the full amount of the contract until the work has been completed. This serves as leverage to ensure that the contractor finishes the job and protects you from monetary loss in case of bankruptcy or closure of the company mid-project.
• Discuss with the contractor ahead of time how any disagreements or disputes will be resolved. It is best to include this in the contract.
• Carefully evaluate warranties and guarantees, but bear in mind that the contractor’s reputation and level of experience are more crucial than any warranty or guarantee.
• Avoid cash transactions as legitimate companies comply with all legal requirements, including charging and paying applicable taxes. If paying in cash is unavoidable, ensure that the contractor provides a detailed, signed receipt.
• If a contractor offers construction financing, arranging your own may be more prudent.

Your Responsibilities

In case the contractor informs you that the renovation work qualifies for a government tax credit or rebate, it falls under your responsibility to confirm that you meet the eligibility criteria. Contact the relevant government ministry, department or agency to verify.

In the case of major renovation work:

• It is advisable to have a lawyer assess your contract, explain it to you, and guide you on your entitlements before signing.
• Check whether you require a building permit with your municipal city or town hall. Ensure you obtain the essential building permits and satisfy the legal requirements for the renovation. If you want the contractor to get necessary permits on your behalf, ensure that it is outlined explicitly in the contract, and refrain from allowing any construction to commence until you see the necessary permits.
• Contact your municipal city administration to access information regarding zoning by-laws and regulations.

You can check an example of a remodeling contract in Ontario.