Ten Essential Components of the Home Improvement Contract

So you’ve shopped around for a general contractor, and now it’s time to write up the contract. But why do you need a contract, anyway? Isn’t a handshake good enough?

The popularity of the television show Holmes on Homes shows that when it comes to home improvements, many people quickly get in over their heads. A contract is a way to avoid this, by spelling out exactly what the homeowner and contractor can expect during the renovation.

Follow the tips below, and avoid getting yourself in a Holmes on Homes situation!

Ten Things You Must Include in Your Home Improvement Contract

1. Description of work

• A description of exactly what the work includes, and what it does not include
• What permits will be required
• What subtrades the general contractor will use (e.g. plumber, electrician)

2. Timing

• The dates that the work will start and finish

3. Terms of payment

• The total cost of the project
• A statement saying that payment will be made according to the Payment Schedule (see next section)
• To reduce the potential of “extras” greatly increasing the cost of your home improvement project, ask the contractor to include the statement “includes all materials as necessary for completion”, for each section of the contract.

4. Payment schedule

• This section can be structured by “milestone” (such as “pouring of the foundation”, “completion of framing”, etc.) or by date.
• Using the milestone approach, payment is made to the contractor after each major part of the renovation is completed. Using the date approach, payments are made on a regular basis (for example, every two weeks), regardless of how much work has actually been done.
• Regardless of the approach you take, the Payment Schedule should always hold back 10% of payment until the project is completely finished.

5. Changes in work

• How will changes in the planned work be dealt with after work begins (especially the cost implications)?

6. Utilities and washroom facilities

• Will the workers be allowed to use your home’s bathroom? Sinks?

7. Standards of work

• This section should state that work will be carried out “in a workmanlike manner”, and that the contractor will ensure your property is kept clean

8. Warranty

• Many contractors give (at least) a one-year warranty on their work

9. Insurance

• It’s important to make sure that the contractor has insurance to cover all of the bases – damage to your property, to your neighbour’s property, etc. Most contractors carry at least $1 million worth of third-party liability insurance

10. Dispute resolution

• This might seem unnecessary, but it’s important to spell out how any disagreements will be worked out between you and the contractor

For a detailed example of a contract, take a look at Canada Mortgage and Housing Corporation’s sample contract.

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