Contract Basics

Although remodeling contracts vary widely, there are certain terms you need to know, and elements that must be included, before you sign on the dotted line.

Project description: The contract should include a detailed list of what the contractor will and will not do, specifying exactly what the project will entail.

Timetable: The contract should state the project's start date, significant milestone dates, and completion date. Contingency clauses may be included, identifying such situations as weather-related delays.

Product specifications: Each contract should have a list of products to be included in the project. The list should state each product's brand name, model or make, size, weight, color, and quantity. Check this list carefully to ensure you get what you want; don't let the contractor specify "or an item of comparable quality." Also, if you want to shop for the products to be installed, inform the contractor up front and get this written into the contract. Specifically, identify which products you'll purchase and who will install them.

Price and payment schedule: Make sure the contract spells out all financial matters. The total price should be clearly stated, and that figure should be broken down so you can see how everything adds up. Payment amounts and due dates also should be prominently indicated. A typical remodeling project might require 30 to 40 percent down as an advance, an additional payment partway through the project, and the remaining payment upon completion of the project.

Lien releases: In most states, contractors can place a lien against your home if you fail to pay for their work; likewise, subcontractors who aren't paid by the contractors may also place a lien against your house. In your contract, make sure you have a clause that states the contractor must show lien releases from the subcontractors to receive final payment; this helps ensure that the subcontractors are paid and thus will not be able to file a lien against you.

Warranties: Your contract should specify warranties for products and workmanship. The terms of the warranty, the time period covered, and the name and address of the party responsible for fulfilling it must be listed.

Hidden conditions/hazardous materials: The contract should address unforeseeable conditions (such as termites in the subfloor) and hazardous materials (such as asbestos in the walls), which may affect the project's timetable and price.

Change orders: Your contract should explain how any amendments to the contract -- called change orders -- will be handled. Although many projects undergo changes along the way, be aware that the cost of these change orders can add up. Regardless of how small a change you or your contractor requests, get it in writing as a modification to the original contract.