Under California Business and Professions Code Section 7159 (b) a home improvement project costing over $500 cannot legally go forward without a written contract in place.
It behooves all parties involved for their mutual protection to create as thorough a document as possible, spelling out in specific terms the obligations and rights of the contractor, the homeowner, and even the architect or designers.
A good rule of thumb in drafting a contract is to detail everything agreed to between homeowner and contractor. This includes but is not limited to the following: what work is to be performed; the project start date and completion date; total cost of the project; payment schedule; who is responsible for obtaining the necessary building permits; what materials are to be used and who will pay for them. In the case of materials the contract should indicate the quality, quantity, weight, color, size, and brand name of each. (See Business and Professions Code Section 7159 for a complete list of contract requirements.
The contract should also be very clear about the financial terms agreed to; beyond total cost and payment schedule, it should identify the amount of any down payment required (according to Business and Professions Code Section 7159 (d) (8) not to exceed 10% of the total budget or $1,000, whichever is less*), as well as any cancellation penalty. Regarding cancellations, the contract must state that any party may terminate the contract without penalty within three (3) days of signing provided that the terminating party put the cancellation in writing and mail it prior to midnight of the third day (Business and Professions Code Section 7159 (e) (6)).
Even after a contract has been written to the satisfaction of all parties, reviewed by an experienced attorney if necessary, and is signed, the contract may need to be amended after the project begins. A change in the design plans, the materials used, a foreseeable delay in the project completion date, whatever the cause of an alteration to the original terms of the contract, these amendments must be put in writing as “change orders.” (Click here to read our article on change orders and the importance of including a “changes” clause in your contract.) A proper change order lays out the specific modification to a contract term and how said modification affects the project budget. (See Business and Professions Code Section 7159.6.) Once a change order is signed by all parties it becomes a legally enforceable part of the contract.
The more time spent thinking about what a particular home improvement project will demand, and clarifying each aspect in writing using unambiguous language, the less opportunity there is for misunderstanding and confusion which can lead to long delays, bad reputations, and potential legal problems.
*See the Contractors State License Board website for exceptions to this rule.
For further information on real estate, construction and related matters contact our Harvey I. Stern at hsternla@gmail.com or call 800-233-8521.