10 Areas to Watch Out for Before Signing a Renovation Contract!
For the first-time homeowners, home renovation could be overwhelming, especially when it comes to the negotiation and signing of a Renovation Contract.
What is a Renovation Contract?
A Renovation Contract delineates the complete scope of renovation work which the interior professional has agreed to carry out for the homeowner at a specified price. Aside from the scope of work, the price, the Renovation Contract also outlines the duration of the entire renovation process and the exact specifications of the delivered work the homeowner expects to receive.
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Why is a well crafted Renovation Contract critical?
A well drafted Renovation Contract helps to bring clarity and resolve ambiguity when disputes arise during the course of home renovation. Therefore, the contract should be as detailed as possible before you sign up with a home renovation professional.
Hence, no matter how small your home renovation project is, a well written contract is absolutely important. Here’s a non-exhaustive list of things to watch out for before you entrust your home renovation project to a renovation professional.
#01. Communication Protocol
Include the types of communication and frequency of updates you expect from your renovation professional.
The types of communication include the following:
(1) Verbal – The renovation professionals can update you on the progress of the renovation verbally through phone calls or through meetings in person.
(2) Written – Written communication can be done through communication applications such as WhatsApp, Telegram, WeChat or Facebook Messenger.
Communication is important for you to monitor the progress of the renovation and with constant communication, your renovation professionals will understand your requirements better. This practice also helps to mitigate any misunderstandings between you and your renovation professionals. A general rule of thumb is to ask for updates biweekly and the written communication should include photos of the renovation progress.
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Include a clause that your home renovation professional should bare all the costs and the work of managing the sub-contractor(s) when sub-contracting is involved.
Your home renovation professionals might sub-contract certain areas of your renovation works during when they do not have the expertise. However, your renovation professionals should not leave the task of managing their sub-contractors to you since they should be the one accountable for the delivery of your home renovation project. Furthermore, clarify the scope of liability and responsibility for the acts of the subcontractor with your renovation professionals and have the scope written down.
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#03. Third Party Contractors
Include a section that delineates your home renovation professional roles, responsibility and liabilities in areas where third party contractors are involved.
However, sometimes you may need to engage third party contractors to work on areas where your renovation professionals do not address. Hence, discuss with your renovation professionals on which are the possible areas of contention when more than one party is involved and its impact on the Renovation Contract.
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#04. Change/Additional Requirements
Include a section on the rate of man-hours, a list of additional materials, dimension costs, electrical points and so on. This is sometimes known as Also known as a variation clause.
It is crucial that you negotiate with your renovation professionals and lock down the prices before you sign the Renovation Contract. This is a very important area which your Renovation Contract should include since it is highly likely that your requirements will change and unexpected needs may surface as your renovation progresses.
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#05. Defects Liability Period aka Warranty Period and Coverage
Include a section that specifies the warranty period, the date which the warranty commences, the warranty coverage and the exclusion list.
Ensure that the warranty period starts after all defects have been rectified by your renovation professionals. Furthermore, ask for the list of warranty exclusions that are not under the warranty coverage. Negotiate the list of exclusion with your renovation professionals if you feel that the list is unfair to you.
Include a section which indicates the amount of money to be paid out when the renovation works have been delayed.
Also known as the compensation clause, you should negotiate on the terms, conditions and the amount you should be compensated for the renovation delay. The delay should be caused by the renovation professionals and not by you.
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#07. Liquidated Damages
Read the section which states the conditions and terms for the liquidated damages.
Also known as the liquidated damages clause, it states the amount of damages the party which has breached the contract need to compensated to the other party. In other words, if your renovation professionals assessed that you have breached the contract, they can claim the amount stated from you. Hence, it is critical to find out the terms and conditions and negotiate the amount before you sign the contract.
When the homeowners decide to annul their marriage and return the flat to the authorities, the homeowners might have to pay the renovation professionals for their losses incurred since the homeowners have to terminate the renovation contract.
#08. Termination Clause
Include a section which states the terms and conditions for the termination of the contract.
Include a section the right for you to cease the renovation contract when your renovation professionals have demonstrated their inability to deliver the works as promised. When such a situation happens, you need to only pay for the renovation works which they have completed.
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#09. Delivery and Payment Schedule
Include a section which details the delivery and payment schedule.
Discuss with your renovation professionals on the delivery milestones dates and what you should expect to receive. In fact, you should pay only when a deliverable has been made. Therefore, always negotiate for progressive payment instead of prepaying a big amount. Always ask for big sums to be broken down into smaller payments.
An example of a delivery payment schedule is as follows:
Contract Signing: 10%
Hacking and Demolition: 10%
Masonry and wet works: 20%
Carpentry work: 20%
Electrical wiring and plumbing: 10%
Painting and Cleanup: 10%
After Defects Rectification & Handover: 20%
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#10. Freebies, GST and Disclaimers
It is a normal practice for renovation professionals to throw in a few freebies to make their renovation package more appealing than others. Hence, ensure that the renovation professionals make good their promises by penning them down in black and white. In addition, double check with the renovation professionals whether the prices quoted are merely an estimate and if these prices are subject to GST. Lastly, check for the period of validity of these prices and watch out for additional disclaimers in other areas of the contract too.
Design: Zidane Design Associates
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