Home Improvement Contracts

I am going to discuss specific details that every home owner should see when entering into a home improvement contract with a contractor. The contract you use when working with a contractor is the most important key of having a successful job. It should clearly outline what will be done, how will it be done, what materials will be used to do the work, and how much will it cost.

In order for the contract to protect the two parties involved, it must contain certain items and disclosures made by the contractor to the homeowner. There are several laws that govern how a contract is to be written and they are contained in the California Business and Professions Code as well as the California State Contractor’s License Board.

Before any contract can be entered into, the contractor must give the “Notice to Owner” disclosure form to the homeowner. This form clearly explains the contractor’s lien rights (as well as the rights of material suppliers and subcontractors), and offers four suggestions to the home owner as to measures that can be taken to ensure that the job gets finished and liens are not filed.

The second notice a contractor must provide to the homeowner is the fact that all contractors must be licensed, and if you contract with someone that does not have a license, the State License Board may not be able to assist you if there is a problem. It then asks that you check the contractor’s license number and gives the address for the CSLB to contact if they wish to file a complaint. Once the home wner receives these forms, a contractor can legally enter into a contract with them.

State law requires a contractor to use a contract if the total cost of the job exceeds $500.00 (including materials, services and labor). The contract must also contain the contractor’s name, address and license number. If he or she offers any specific warranties, they must be clearly stated in the contract, and there should also be language describing the type of dispute resolution the contractor wishes to employ.

In general, all home improvements contracts must include, the approximate date the job is to begin, the approximate date the job will be completed, a description of what work is to be done, a description of what constitutes a substantial completion of work, and a notice to the home owner that states if the contractor does not start work within 20 days of the date in the contract, he or she will be in violation of Business and Professions Code Section 7159.

The most common mistake most homeowners when entering into a home repair contract is not clearly defining what the scope of work is and how the work will be done.

For example, instead of describing the job as “refinish living room floor”, it should be stated as “ Sand down existing finish to bare wood, replace any stained or split pieces, putty and fill all nail holes and open joints and finish sand. Apply two coats of XYZ Satin Floor Finish, and stain new base to match.” It is best to give as much detail as possible so that your picture of the job is what the contractor actually does. Take the time to state the manufacturer of the product, and how the products are to be installed.

Part of the contract should also include plans and specifications as well as details on how debris will be removed, how the job will be kept clean, and any special requests like “furniture and floors to be kept covered at all times” or “home owner will install all finished light fixtures”.

Once the description the work is established, the price can be agreed upon and a schedule of payments can be written into the contract. At no time should the payment to the contractor exceed the amount of services performed or material supplied. By law, the contract must be completed for the agreed upon contract price.

Contractors can charge a down payment for their work, however, the down payment cannot be more than $1,000.00, or 10% of the contract price, whichever is less. There are no exceptions for special ordered materials. (With swimming pool contracts, the limits are $200.00 down or 2% of the contract, whichever is less.)

For those of you who would like more information about hiring contractors and writing home improvement contracts, the California State Contractor’s License Board has an excellent publication called “Home Improvement Contracts: Putting the pieces together”. This booklet contains a copy of the notices a contractor needs to give to home owners and has a list of other resources. It is free and can be obtained by calling 1 (800) 321-2752, or you can reach the CSLB at their web site, http://www.cslb.ca.gov/.