Before You Hire A Home Improvement Contractor
Before discussing any home remodeling project with a contractor, make sure you have made specific decisions about your budget and how you want the finished project to look. Visiting home improvement center showrooms and neighbors who have recently remodeled will assist you in this regard.
Do You Due Diligence
Once you have made these choices and have a general plan, you should consult at least three contractors. Be certain that they quote prices on the same list of specifications and materials so you can perform a meaningful comparison of their bids.
Ask each contractor for references and make every effort to see the contractor’s work and interview their previous clients. Contact the California Contractors State License Board (CSLB) (www.cslb.ca.gov) to verify the contractor’s license information. The CSLB also can provide you the contractor’s license history and pending or prior legal actions against them, if any. If possible, obtain references from subcontractors, suppliers and financial institutions to determine whether the contractor is financially responsible.
Home Improvement Contract Requirements
California law requires all home improvement contracts to be in writing if the total price of the labor, materials and equipment exceeds $500. The contract must also include a number of provisions and disclosures. Listed below are some of those requirements.
- Information regarding the contractor. The contract must contain the name, business address and license number of the contractor. If a salesperson solicited or negotiated the contract, the salesperson’s name and registration number must also be listed.
- A description of the work to be done and materials to be used. Make sure the description includes everything you think is important to the project. For example, if you want specific materials or equipment to be used, identify the manufacturers and model numbers. Verify that the contract describes who is responsible for obtaining permits and inspections and that the fees are included in the price.
If you want the contractor to cleanup and remove debris during and after construction, the contract should specify so. Any warranties on labor or materials should be described in the contract. If you are installing a swimming pool, the law requires a plan and scale drawing showing the shape, size, dimensions, construction and equipment specifications be included in the contract.
- Price, down payment and progress payments. The contract should list the entire price of the contract, including labor, materials and equipment. Any finance charges should be listed separately. The maximum down payment a contractor can require is $1,000 or 10 percent of the contract price, whichever is less.
A contractor is not legally allowed to be paid for work that is not complete or materials that are not on the job site. If interim payments are required before the project is completed, those payments must be detailed in the contract. If a salesperson’s commission is to be paid out of a portion of the contract price, the commission can only be paid on a pro rata basis in the same proportion as the progress payments.
- Time period. The contract must include approximate start and completion dates.
- Cancellation period. If you negotiate or sign the contract at any place other than the contractor’s office, the contractor must inform you of your right to cancel the contract within three business days of signing the contract. The notice may be in the contract or attached to it. It must also have a Notice of Cancellation form that you may use to cancel the contract within the three-business day period.
- Extra work and change orders. The contract must contain a notice that Change Orders become part of the contract. A Change Order form should also be attached to the contract. After you sign the contract, any changes to the job must be documented in a Change Order and signed by you and the contractor.
The Change Order should specifically describe the work (including materials and equipment), and the cost to be added and/or subtracted from the original contract price, including any impact it may have on any progress payments.
- Commercial general liability and workers’ compensation insurance. The contractor must state in the contract whether he/she has commercial general liability and workers’ compensation insurance. We always verify that the insurance policy contains specific coverages to provide maximum protection for our clients.
If the contractor does not have insurance, you may be financially responsible for any damages to your property or to others caused by the contractor. Also, if the contractor has employees or hires nonlicensed subcontractors and does not have workers’ compensation insurance, you will be financially responsible for any injuries they suffer while working on your project.
- Mechanic’s lien warning. The contract must inform you that anyone who works on your project who is not paid may record a mechanic’s lien on your property. This can be tricky because an unpaid subcontractor can still file a lien against your property even if you paid the contractor for the work.
To avoid having to pay twice, always insist on a release from all subcontractors and material suppliers who are to be paid out of each progress payment.
- Contractors State License Board notice. The contract must contain information regarding how to contact the Contractors State License Board if you have a complaint.
- Right to require a performance and payment bond. The contract must contain a notice that you have the right to require the contractor to post a performance and payment bond. While you have this right, you will also have to pay for the bonds that can cost about 10 percent of the contract price.
Before You Sign The Contract
Don’t sign the contract until you understand and agree with all the terms. Make sure the contract includes everything that you and the contractor agreed upon. Be sure to ask questions until you fully understand the contract and what the finished project will be. Before signing anything, you may wish to discuss the proposed contract, plans and specifications with one of our attorneys.