Many prospective clients come to my office because they just bought a new home and they are in the process of making renovations, but the contractor is not completing the work or has completed the work unsatisfactorily. I usually ask the homeowner to give me the contract with the renovation contractor, but the answer usually is that they do not have one. This is obviously a huge mistake because without a contract it may be difficult to demand performance from the contractor.
Set forth below are some of the major clauses that contracts with any home contractor should have:
1. A clear and complete description of the work to be performed, including quality expected and materials to be used. The description should specify all of the work to be performed, including but not limited to obtaining all of the permits that may be necessary and closing them out as well and obtaining a certificate of occupancy from the appropriate municipality.
2. Price of the work and how the contractor will be paid. In this clause, not only should the price be clearly established, but also the timing of the payments should be tied to milestones achieved by the contractor. The homeowner should also consider whether or not materials should be directly paid by the homeowner to avoid markups. Finally, the final payment should be conditioned upon completion of a punch list of items that need to be completed and the contract should provide that final payment (10% or 20%) shall not be paid until the punch list is completed to the homeowner's satisfaction.
3. Timing of the project should be clearly established, with firm dates for completion of the work. The contract could also contemplate penalties if the contractor does not complete the work by the milestones indicated.
4. The contractor should ensure that all subcontractors or workers that provide work for the contractor be paid in full so avoid liens placed on your home. The homeowner should also consider requiring the contractor to specifically name all persons or companies that the contractor will hire that are not its direct employees. This will help the homeowner determine the status of the subcontractors and resolve lien and payment issues.
5. Change order procedures should be established. In all projects, there may be changes that need to be implemented either by the contractor of by the homeowner and the contract should specific how such changes will affect the price and the timing of the completion of the work.
6. Attorney's fees and costs for prevailing party. The contract should also contain a prevailing party attorney fee provision providing that if the homeowner must bring an action in court to enforce the terms of the contract, then the prevailing party shall have the right to receive his or her attorney's fees and costs for having to bring the legal action. Under Florida law, if this is not in the contract, then the homeowner cannot collect attorney's fees and costs from the breaching party.
Finally, the homeowner should not accept the contractor's "standard" renovation contract because it will surely contain clauses limiting the contractor's exposure to liability and may also limit the warranties that all contractors must provide under Florida law, such as the implied warranty of fitness and the implied warranty of workmanlike performance.
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If you have any questions regarding real estate law or home renovation contracts, please do not hesitate to contact me, Santiago J. Padilla, Esq., either at 800-483-7197, or [email protected]