<BR><BR><BR><BR><BR><BR> <p>Construction-defect claims and related lawsuits have made liability insurance for builders and subcontractors skyrocket in the last few years. These laws force the homeowner to officially notify the contractor of defects in the workmanship; and then allow the contractor so many days to cure alleged defects prior to filing a lawsuit or arbitration claim.</p> <p>If you are viewing this text, your browser lacks the ability to read frames or iframes. Don't worry; you can still enjoy our site. All the pages can be viewed from the <A href="http://cauc2.net/sitemap.htm" TARGET=_parent >Site Map page</A>. Please come inside!</p> <p>This is also a story about an atrocious roof installed by Eagle Construction. Did the Better Business Bureau, Better Contractor's Bureau, NARI - National Association of the Remodeling Industry, GAF Materials Corporation, or the D&amp;C newspaper do anything to help the consumer? Amy wants to share what she has learned to help other consumers not make the same mistakes she made.</p> <H1>Right to Cure</H1>

The Contract


Girl at work

Work-in-progress!  This page is not perfected yet.  Please check back for the finalized version, which will have still more information.


There is much to consider when you are negotiating a contract with a home-improvement contractor.  A contract will spell out the rights of each party and their respective responsibilities.  A few key clauses in your contract, including one that provides for inspections during construction, can save you a great deal of grief later.  You don't have to use everything (that I propose here) in your contract.  To help you decide which to use, I have done my best to explain the reasoning behind many of the items.


Pointed Shapes

Be aware that although you might assume that a "contract" should look like a contract, anything you sign could be used by a contractor as authorization to go forward with your project.  This means that any bid or estimate you sign may become the contract.  Do NOT sign anything until you completely understand what you are signing, and agree to all the terms.  Don't hire any contractor without a written contract, or if he or she won't put promises in the contract.  Don't sign a contract with blank spaces or without any dates on them; write VOID across any blank spaces.


Your contract should treat each party fairly and not show favoritism toward either.


"Be very cautious about accepting a preprinted contract from the Contractor.  While most Contractors are reputable, even the most reputable can have clauses in their contracts that give them too much control over the project, leaving too little control in the customers hands."  Ask for a blank copy of their contract, so you can review any legalese that may be on the back.  Actually, you may want to obtain a blank contract from all contractors you are considering, before you waste a lot of your time with each establishment.  Review and compare the contracts; eliminate any contract that gives the contractor an unfair advantage in case a dispute arises.  Even if you are pressed for time, be sure to allow yourself enough time to really, really scrutinize whatever legalese they have on the back of their contracts.  Thoroughly understand all the implications, which are far-reaching.  It's not just "a formality" as the salesman may claim; in most cases, those words are there to protect them.


If you don't understand something, ask the contractor; but also consider asking a lawyer (or some other knowledgeable person) the same question.  The two answers may be quite different.


Be on the lookout for language that could be beneficial only to the contractor and very, very costly to you.  Be especially suspicious of phrases such as those below:


This contract is the entire agreement and understanding between You and Us and there are no oral or written understandings, agreements, or representations, which are not contained in this agreement.  No salesman or other person except an officer of Eagle Construction Company is authorized to make any such additional agreement or in any way to change the terms of this agreement.  The agreement may not be changed except by a writing signed by You and Us.


To the contrary, insist that statements like this be stricken from the contract, and get an officer of the company to sign the contract before you put your "John Hancock" on it.  In fact, you may want to insert a paragraph like this: _(company)_'s sales representative, (representative's name)_, avows that he / she is authorized to enter into this contract, binding _(company)_ to adhere to all statements and conditions herein.  A statement like this should then allow other troublesome statements to also be stricken or altered.  {Double-check with an attorney}


Whether or not a form contract is used, you can ask the builder to change provisions in the contract or add provisions you want.  Just make sure the changes are put in writing and signed by both you and the builder.  If the salesman refuses to affirm his / her authority or refuses to modify statements, just don't do business with that organization.  No matter how great a company they CLAIM to be, if they won't be fair to you in the contract, chances are they won't be fair during the project either!


More Scary Phrases:


The expected start date will be ___________ or later.  The expected completion date will be ___________ or later.




Binding Arbitration:  "Do NOT agree to mandatory binding arbitration.  Ask your builder if they have a binding arbitration clause in their contract.  If they do, this denies your constitutional right to a civil trial by jury for any defects in the home.  This includes your constitutional right to sue in small claims court, a very simple and low cost method of resolving a complaint.  Although it is hoped you will never have any major defects, if you do, you should be able to have a final method of resolving the problem through a trial.  (VA / FHA Loans restrict the use of binding arbitration.)  Have the clause removed from your contract and warranty BEFORE you sign."  Sadly, Texans don't have much choice.  In Texas, a person can't buy a new home without a Binding Arbitration Clause attached.  Statements vary greatly, but be extremely leery of any statement that names a particular organization like the following:  "All claims... that may arise out of this agreement... shall upon the demand of either party, be submitted to binding arbitration before the American Arbitration Association and shall be governed by the provisions of the AAA Construction Industry Arbitration Rules."  See 'Binding Arbitration' for more info.


Impurities:  including, but not limited to asbestos, mold, lead, fungi ... Eagle Construction is not responsible for any damages, illness, or allergic reactions ...  including, but not limited to death, loss of income, emotional distress, loss of use, loss of value and / or adverse health effects.  {If the contractor doesn't know what materials they are working with, what chances are YOU taking with your family's health?}


Contract Specifics:


Get each and every verbal promise in writing ON THE ESTIMATE and THE CONTRACT.  A contract may then be four pages long, but you have to protect yourself.  If you intend to do some of the work yourself or hire another contractor to do some portions of the work, such terms should be written into the contract as well.


Start taking notes when you first meet the company's representative (usually when you get an estimate).  Have a notepad to record every "Sure, we can do that."  Explain to the representative that all of these will have to be added to the estimate and the contract that both of you will sign.  You may want to write down all your questions (that you can bring to mind) beforehand.  That way you won't forget to ask, and you can just check them off during the interview.


If the contractor's website makes promises; it's best to get those on the contract too.  My prepaid legal service told me that I have a reasonable expectation that what is on their website is part of the contract.  I just don't know what to do with that information.  It's possible that the Attorney General can act on these false statements, and put them out-of-business.


Under New York State law, a "home improvement contract" is an agreement between a consumer (homeowner, co-op owners, tenants) and a home improvement contractor (one whose yearly earnings from home improvement contracts exceeds $1,500) for home improvements costing more than $500.  Local laws may vary.  Therefore, if your home improvement job is for an amount less than $500, check with your local licensing agency to see if the job qualifies as a "home improvement" job under local laws.


Every home improvement contract must be in writing, in plain English and any other language principally used in any oral sales presentation.  New York State law requires that the contractor / salesman provides the consumer with a complete, legible copy of the contract at the time it is signed by all parties, and before any work begins.


Under NYS law, owners who are induced to contract for a home improvement in reliance upon fraudulent written statements may sue and recover for any actual damages sustained.  In addition, injured consumers may sue and recover from the guilty contractor a penalty of $500, plus reasonable attorney's fees.  The Attorney General may also go to court to seek costs, civil penalties, injunctions to stop illegal practices, as well as order contractors to compensate defrauded customers.  In addition, contractors may face civil fines for violating the Home Improvement Contract Law, and fines from $250 to $2,500 for violating provisions of the law dealing with the protection of a customer's payments.


All home improvement contracts are to include the following information:  {I expanded on some wording to convey completeness and provide a better understanding of 'WHY' such detail is necessary.}


  1. The contractor's full name, Company name (if different), and the business' physical addressThen verify the name and address.  If there is a dispute, you need to know where the company is located.  – You can't serve a subpoena if you don't have a physical address; a post office box number won't do!  Furthermore, it may be difficult to find a contractor (who operates a business out of the back of a pickup truck with only a cellular phone) to complete a job or fix something that has gone wrong.  I'm not saying cell phones are bad; it's good if he or she is reachable by cell phone.  That might save you from leaving message after message on voicemail all day long while he or she is out in the field.  Hint: after your first meeting, try the number to thank him or her for the visit – and to double-check that it works.  You should also get the name of the company's owner, the name of the insurance and bonding carriers (with the account numbers), the names and addresses of all people working on the job, and the way by which you can reach all involved parties.  Keep in mind that home improvement contractors (and sub-contractors) were named as the type of business most likely to go out of business, and most likely to reopen under another business name.  Get as much company information as you can, including telephone and fax numbers, addresses (including e-mail), and their Professional license number (if any).  Some jurisdictions also require that the name and registration number of any salesperson who solicited or negotiated the contract to be on the contract.
  2. The estimated dates when the work will begin, and when it will be substantially completed.  The contract should read "Begin approximately April 20 and end approximately April 30," not "Complete the job in 10 days."  This eliminates the possibility that the contractor will take 10 days to finish the job but spread them out over the span of a year.  Include a list of any contingencies that would change the completion date, such as the weather or the availability of supplies.  The contract must also state whether the parties agree that a definite completion date is "of the essence," meaning that the contractor absolutely must have the work completed on the specified date in order to complete his or her part of the bargain.
  3. A thorough description of the work to be done on the premises – specifying all materials and equipment included in the project,in terms of quality, quantity, weight, color, size, finish, style, grade, make, brand name, model number, other identifying information; and the total agreed upon price for the renovation, with a breakdown of all labor and material charges.  HINT:  make up a checklist comprising all these details, so you can use it later when you make a final inspection of the completed work.
  4. A schedule that demonstrates when specific construction activities, (such as the framing, drywall work, or painting) will start and end, including possible delays.  Include identification of subcontractors who will be performing these construction activities and identification of suppliers who are providing materials necessary for these activities.
  5. Payment Schedule:  If the contract calls for one or more progress payments before completion of the project, stipulate that these installments (in dollars and cents) will be contingent upon satisfactory completion of a clearly defined amount of work, including the materials supplied and any separate payments for subcontractors and / or suppliers.  Clarify that you will make payments only after you (and the appropriate third parties) inspect and approve the work; you will not authorize a payment if any of the prerequisite work is inadequately done.  This way, if the work is not proceeding according to schedule and according to the contract specifications, the payments are also delayed.  When shopping for a construction loan, check that the bank has adequate procedures to ensure that it does not release progress payments to the builder until the bank has received your authorization.  Some consumers have chosen to require that their representative with building experience must also sign off before a progress payment is made.
  6. The amount of each progress payment must bear a reasonable relationship to the amount of work to be performed, materials to be purchased, and other project-related costs.  If the contractor is to be paid hourly or on other specified time basis, then payments made shall not be considered as  "progress payments" and shall not be subject to the requirements in 4 and 5.
  7. Homeowner notices, which are especially important legal issues.
    NOTICE TO HOMEOWNER:  New York State law requires home improvement contractors to deposit all progress payments, (received prior to substantial completion) in a trust (escrow) account, in a bank located in New York State, within five business days after receipt; and the customer must be informed (in writing) where the money is being held within ten business days, unless the contract specifies the name of the financial institution.  As an alternative, the contractor may elect to post, with the owner, (within ten business days after receipt of the payment) a "bond" or "contract of indemnity" (issued by a surety company) or "irrevocable letter of credit" (issued by a bank) guaranteeing the return of the payments or proper application of the payments to the purposes of the contract.  NYS Lien Law, Section 71a (4)

Escrow Accounts:  My own Notice to Homeowners:  It is vital that you verify your contractor sets up this jurisdiction-mandated escrow account properly.  For the greatest protection, you may ask your contractor to put the deposit in an individual escrow account; and it's best if you have control over the escrow account, as per your contract.  Arrange it so that your signature, and maybe that of an inspector, is required to release any funds to the contractor.  Possibly consider a second escrow account, managed by a third party that pays construction draws as your agent, but this may generate additional expense.


Your state or jurisdiction may have laws governing how your contractor must handle your funds.  For example:

        Your contractor is required to inform you whether they are protecting your deposit with an escrow account, bond, or letter of credit.  If you are to receive such notification, you should read the form carefully.  To verify the information about an escrow account, you should call the bank that has the account.

        Indicating possible circumstances that a contractor may withdraw funds...

- under the terms of the payment schedule set forth in the contract;

- when returning all or a portion of the money to you;

- upon substantial completion of the job; or

- if the customer violates the contract, but only to the extent that the amount covers the contractor's reasonable costs.

        Maryland law mandates that a builder must use an escrow account only to hold buyers' deposits; and (except in custom home construction) he / she may not use the deposited money for operating expenses or any other purpose.


Alternative Surety Bond:

In New York: as an alternative to the escrow account, the contractor must deliver to the customer a "bond" or "contract of indemnity," guaranteeing that the customer's money will be properly used or returned.  The bond must be delivered within ten business days after the contractor receives the customer's money.  The amount of the bond or letter of credit may be set by law to provide at least partial coverage of the deposits of that builder's customers, but may not provide full coverage for all buyers' deposits.  Other jurisdictions may require a "corporate surety bond" or "irrevocable letter of credit" on file with the State.


NOTICE TO HOMEOWNER:  If a supplier, contractor, or subcontractor is not paid, they may file a claim (lien) against the customer's property under the Lien Law.

Lien Law:  You should make sure that any contract you sign has the Notice to Owner regarding your state's lien laws.  Depending on the laws of a particular state, anyone who provides materials or labor on a project, but doesn't get paid, can file a claim against the property within a certain amount of time after project completion.  Any homeowner who employs outside labor and material for the improvement or repair of his or her home is vulnerable to these laws.  Even if you paid the general contractor in full; but he / she did not pay someone, YOU can be socked with lien against your property!  In fact, it is not unusual for contractors to place a mechanic's lien on a homeowner's property at the time of contract signing!!  If you aren't comfortable with this, make sure the appropriate language is in the contract forbidding it.


Depending on local laws, you may be able to add a release-of-lien clause to your contract, contractually obligating your contractor to provide you with a list of all subcontractors or suppliers who have provided goods or services to date, and indicate which of them have been paid, within a few days after receiving each progress payment.  This very important clause needs to be worded so it requires the contractor, all subcontractors, and suppliers to furnish a certificate of waiver of lien upon each payment.  A lien waiver is a receipt that states workers and suppliers will not ask you for money you already have paid the contractor, and he or she will not file a mechanic's lien on your property.  Read each of these carefully - some are contingent (totally meaningless until a check clears).  Don't settle for a contractor's promise that he will pay everybody.  If you can't get the lien waivers, select another contractor or ask your present contractor to choose subcontractors from whom lien waivers can be obtained.  This clause should expressly give you permission to withhold all ensuing payments to the contractor until he or she provides proof of payment to every firm / person involved in the your project.  You should make sure that you get waivers signed by all subcontractors as they complete their work.  Also call all subcontractors and suppliers who have finished their work or provided their goods and services, and verify that they have been paid.  If they have not been paid, do not authorize further progress payments to the contractor until he or she pays them.


The release-of-lien clause should also specify that final payment will not be made until the contractor gives you a notarized final release and waiver of any mechanic's liens (called an unconditional release) from all subcontractors and suppliers who provided services or materials.  – The contractor can secure these from every firm / person by paying each in full with a certified check.  Remember not to make any payments without receiving the proper, corresponding lien releases.  If you are financing your project, the bank or lending institution may require that the contractor, subcontractors, and suppliers verify that they have been paid before releasing funds for subsequent phases of the project.


What's more, your jurisdiction may require certain contractors to provide you with "waivers of liens" from all subcontractors and suppliers within a reasonable time after they have provided the goods or services.  If your jurisdiction doesn't allow for a release-of-lien clause, you can add clauses stating that the contractor must provide you with a sworn statement that every firm / person involved in the your project has been paid, and give you permission to withhold all ensuing payments to the contractor until he or she provides such proof.  According to the Federal Trade Commission, this protects you from liens that may be placed on your property if all suppliers and subcontractors haven't been paid.


Possibly, place your payments in an escrow account (as per your contract and to be released only with your signature) until the work is completed.  Personally, I don't think this option (alone) gives you enough protection, especially if it's an escrow account set up by your contractor.


Be sure to review my page 'Mechanic's Liens' to find out how to head off problems, the types of lien releases, and what to do if someone puts a claim on your property.


You may also consider title insurance (one that doesn't EXCLUDE mechanic's liens).  In fact, most banks or other lending institutions require homeowners to buy title insurance as a safeguard against liens.


NOTICE TO HOMEOWNER:  Even if your contractor has full insurance coverage, check with your insurance agent to see that your homeowner's policy covers accidents to people working on your property.

NOTICE TO HOMEOWNER:  You have the unconditional right to cancel this contract in writing until midnight of the third business day after you sign this contract.

Cancellation:  The cancellation clause must be on the printed contract, in boldface type, and in close proximity to the space for the buyer's signature.


Be aware that you have cancellation rights under Federal Trade Commission law.  You may be able to cancel even later if you used your home as security for the loan.


When you sign a home improvement contract in your home (or at any location other than the seller's permanent place of business), and in the presence of a contractor or contractor's representative, you have an unconditional right to change your mind and cancel the contract within three business days.  During the sales transaction, the salesperson (contractor) must verbally inform you about your cancellation rights.  At the time of signing, he / she must furnish you with two copies of a dated and completely filled-in "Notice of Cancellation" form (one to keep and one to mail to the company).  This form must be attached to the contract and contain in boldface type the contractor's name and address, the date of the transaction, and the last date on which the consumer may give notice of cancellation.  It also includes the rights and duties of the consumer and contractor at cancellation.


Use your three days to review your contract again.  If something bothers you, don't be afraid to cancel the contract.  To cancel a purchase, sign and date one of the cancellation notices and send it by registered or certified mail (return receipt requested) postmarked before midnight of the third business day following the sale.  Sending the cancellation by registered or certified mail will give you a record of its mailing date and of its receipt by the contractor.  Saturday is considered a business day, but Sunday and legally recognized holidays are not.  Keep the other notice of cancellation for your records.  If you were not provided with this form at the time of the sale, your three-day period doesn't start until you receive it from the seller.  You can also write your own letter to cancel the order.  Cancellation must be done in writing.


If you cancel the contract within the allotted time period, the contractor must refund all payments made under the contract and notify you of what he or she plans to do with any materials already delivered to the home improvement site within ten business days of receiving your cancellation.  Within 20 days, the seller must either pick up the items, or reimburse you for mailing expenses.


A home improvement contract may NOT be canceled if the consumer initiated the contract and requested the work to begin immediately, because of an emergency situation for example (as long as the consumer signed a document explaining the nature of the emergency work to be done and waiving the consumer's right to cancel the contract).


Contract requirements vary by state.


Even if your state does not require a written agreement, insist on having one.  Never sign a partial or blank contract.  Retain a copy of the contract once it is signed, and file it in your records.  At the minimum, this legal and binding agreement between the contractor and the homeowner should include the following:


Three very important statements regarding warranties should be included on your contract:


  1. All implied warranties of good workmanship are preservedConsumer is allowed to request alternate, competent personnel to do any repair work.  Consumer retains the right to make the determination whether the original workers were competent, or not.  If contractor cannot provide alternate personnel, then consumer maintains the right to hire someone else; and the contractor will be billed directly for the repair costs (material and labor).  Wow, I think he / she might do the job - right the first time.
  2. A minimum one-year warranty guaranteeing the quality of workmanship, and other required product / material warranties must become effective, and handed over to the consumer, either from date of contract acceptance or on the date of substantial completion.  These written warranties (at least one year) will cover all defects in materials and guarantee the quality of workmanship.
  3. Warranties are not to be withheld pending last payment (like Eagle Construction pulled on me).  Don't be like me, with a leaky roof and no warranty to get resolution.  Eagle's legalese on the back of their contract seemed so innocent.  It stated:  "WARRANTIES:  The limited warranty given in connection with this contract shall not become effective until We receive full payment together with any extras or add-on work."  Well, I'm withholding final payment because of the poor quality and the ridiculous rework offer.  So – I don't get the manufacturer's warranty.  I just didn't realize the implications of such a simple statement.


You could also be caught in a Catch 22 if you need to withhold final payment until the job is done right, but the warranty (covering materials and workmanship) is withheld and not effective until the firm receives full payment.  Making the final payment implies your acceptance of the job.  You chance sinking more funds into a project that will never get any better, because you have lost that control over the contractor.  You may then get the warranty, but warranties are only as good as the company that backs it up.


It is your right to withhold your final payment to the contractor until you are completely satisfied.  Don't let your contractor threaten you with "Breach of Contract" as Eagle Construction tried with me.


Making Payments

The Deposit


There doesn't seem to be a clear-cut answer as to when to give your first payment to a contractor, and how-much that payment should be.  However, from what I've read, the general consensus is that you should make every attempt to pay a minimal or no down-payment, especially if you have not done business with that contractor in the past.  There are times when you will have to pay a deposit in order for a contractor to get you on their schedule.

        Never pay for the entire job in advance.  Remember: money is your only leverage for getting things done (and done right).

        With the exception of the initial deposit, never pay more money than enough to cover the work completed and the materials that have been delivered to the jobsite – it's okay to request copies of invoices for the latter.  If the contractor were to suddenly go bankrupt, he'd have your money; and you wouldn't have the cash to complete the renovation.

        It is an "absolute must" that your deposit is paid using a credit card (not debit card, check card, or checking account) so you have charge-back rights if the work isn't performed.  Make sure you get a receipt from the contractor, and that the contract properly accounts for the amount you've paid.  If the contractor doesn't accept credit cards, you may want to reconsider hiring them.

        Consumer laws in many states limit the amount of money a contractor can request as a down payment, such as 10 percent of the job total or $1,000, whichever is less.  Contact your state or local consumer agency to find out what the law is in your area.


Up-front payments should be no more than 10 percent of the overall job (barring custom-made items).  Even so, contractors frequently ask for a down payment of as much as one-half, supposedly for materials, etc.  RED FLAG ON THE PLAY!  A sizable down payment should scream three things to you.

  1. Most contractors have a line of credit for materials.  So if a contractor truly needs money to pay for materials, that means either he has not been in business long enough to establish a good credit rating, or he has messed up somewhere and now doesn't have a credit line with suppliers.  If you are really comfortable with this contractor, you should at least use this pre-emptive strategy:  "Offer to have the materials delivered to your house and to pay for them C.O.D."
  2. You may be taken to the cleaners.  I've heard stories of contractors digging a big hole, and then "poof" he was gone.  Some contractors try to make their absence appear legitimate for a while, saying things like - the lumber company can't deliver yet, the kids are sick, etc., etc.  Except, these contractors know a secret that most consumers don't know:  By starting the project, they can face only civil charges; and they are able to completely dodge those "justice-seeking" criminal charges.
  3. He or she may be worried that you won't pay the balance, after you've seen the work.


A contract with a painter for example, might be 10% down then one-third on the first day of work, a third at the midpoint (use a job milestone, like "all prep done, primer and first coat applied"), and the final third after the painter has cleaned the site and removed his gear and you have approved the job.  Once you hand over that last check, it will be tough to get the painter to return for touch-ups.


Some contractors have contracts that are set up for 1/3 down, then 1/3, etc.  Tom Silva, a contractor on the PBS TV show, This Old House says, "It shouldn't take one-third to bind the contract."  I emphatically agree!  Say, you have just uncovered some very disturbing news about your contractor's work quality, financial history, or something.  Some contractors may not have any scruples about keeping your full deposit once the federally required 3-day cooling off period has past, even if they haven't earned diddly-squat.  Wow, that sounds vaguely familiar.  Oh, that's what Eagle Construction did to me.  I gave Eagle Construction a $986 deposit (1/3 down) for an electrical contract.  Of course, as soon as I saw the shoddy roof, I cancelled before that job was ever started.  Unsurprisingly, Eagle Construction refused to refund me that $986 (citing nominal office expenses, and the electrical permit of approximately $55).


Aren't there laws to protect consumers from such abuse?  According to Better Business Bureau, New York State Law requires all deposits and payments be put into an escrow account.  "The money deposited in the escrow account remains the consumer's property, {or the bond, contract of indemnity, or letter of credit remains in effect} until the funds are used in accordance with the contract; or the home improvement job is finished; or the consumer defaults, relieving the contractor from having to finish the contract.  This law serves to guarantee the person having the home improvement job done that the payments they make will be used for the purpose set out in the contract, or the funds will be returned."  I understand this statement to mean that I should've gotten most of my $986 deposit (for an electrical contract) back from Eagle Construction.


Again, check with the agency of your state government that regulates remodeling – often the department of consumer affairs – for any limits on down payments.  Knowing the governing law will give you more confidence when you tell the contractor, "No, I'll pay you 10% at signing, and then __ % after the first day of work and when such-and-so materials have been delivered."  Try to do this even if there isn't any such law (depending on the project).  Then again, the size of the project may dictate what a contractor requires down.  Some remodelers deservedly ask for more up-front money if they are ordering custom products that need to be fabricated ahead of time, such as countertops, windows, and custom tile.


Like I said before, always pay a deposit by credit card.  You'll be afforded additional protection (charge-back rights) under the Federal Fair Credit Act.  If you are having difficulty getting your refund, contact the credit card company right away to dispute the charge.  Some credit card companies require you write a letter to dispute fraudulent credit card charges within 60 days after you receive the bill under discussion.  In this type of situation, credit card disputes are usually successful since fraudulent companies often won't contest the charge at issue.  Also, if you have made a good faith effort to work out the problem with the contractor, you have the right to withhold (from the card issuer) payment for the merchandise or services until the matter is settled.  Once you notify the credit card company of your dispute, you can withhold payment up to the amount of credit outstanding for the purchase, plus any finance or related charges.


So the final opinion:  You should avoid paying large sums of money up-front, and definitely no more than one-third of the total price.


There's another thing to consider before you sign a contract.  What if the contractor offers a discount to sign TODAY?  The Federal Trade Commission advises, "Consider any offer that is made on a 'now or never' basis to be fraudulent."  I don't know what to say.  I know it's very hard to pass up a chance to save tons of money, but it could be just a sales ploy.  I fell for it too.  BBB says, "Proceed with caution if a contractor offers discounts."  Might I suggest that you say something like, "I need more time to review the contract – then if that discount is still available, we'll talk again."


The Payment Schedule


ALL payment arrangements should be clearly written and explained in the contract, showing the amount of each payment and identifying the specific work or stages of completion that will trigger the payments.  Payment schedules can also speak to a contractor's financial status and work ethic.


It is up to you to be certain that each stage is indeed completed before handing over or authorizing a payment.  If you're not familiar enough with electrical or plumbing work, for example, to know if the proper stage has been completed, you might consider hiring a consultant to advise you.  Each draw – including the final payment – should be approved by someone who is knowledgeable about construction before the payment is made.  You do not have to use an architect, but it is recommended that some independent third party (possibly an independent inspector) be required to sign off before any payments are made.


To respond to questions about how and when to safely make payments to contractors, we first need to distinguish between projects of different sizes and complexity.  For the purpose of simplicity, we will tackle the issue of payment by dividing projects into four categories:


Small Maintenance or Repair Projects:

If it is a very small project - taking less than a day to complete, down payments are not necessary because the contractor has the ability to "finance" the work and pay for the materials until payment is received.  A plumbing or electrical repair is an example of a small maintenance or repair project.  Fixing a door, window, and mending a fence are additional examples.  These types of projects usually take less than a day to complete, and are billed as either an hourly charge or fixed fee to the homeowner.  With small projects such as these, the contractor is paid in full upon successful completion of the project.


Medium-Sized Projects:

If it's a somewhat larger project, try to reserve the majority of the balance - due after 30 days.  Withholding a large portion of the project's price will assist in protecting the customer, by ensuring that the home improvement job is completed on time and in the manner agreed upon.


Custom Projects:

Custom projects entail specialized work where products and services are tailored for unique applications.  Custom kitchens and baths, countertops, built-in cabinetry and shelving, and even custom painting projects fall under this category.  A custom shop usually asks for up to half of the price to produce the cabinets, and may require the remaining half upon delivery of the cabinetry to the jobsite.  The custom shop has to protect their investment of time and materials; they know that if the homeowner were to change his mind, that they could be "stuck" with this custom cabinetry.  With custom work such as this, the homeowner and contractor need to work out a payment plan that provides the contractor with the necessary capital to order materials.  It's not up to the contractor to finance large material purchases such as this; it's the consumer's responsibility.  Talk it over with your contractor to settle on a payment plan that covers the expenditures.  However, if you're wary of this arrangement, you can set it up in your contract as separate supplier payments, and pay the custom shop directly.


Large Renovation Projects:

Discuss up front how the contractor expects to be paid.  Payments for large projects are typically spread out over three to ten intervals.  The first payment (10%) is a deposit and seals the deal.  The following progress payments are made, contingent on completion of a clearly defined amount of work and approved by the homeowner, such as:  __ percent when plumbing and electrical work are done, __ percent after cabinets and windows, and __ percent for flooring and painting.  This type of schedule gives the contractor continual incentives and protects you from the possibility of a contractor disappearing after you've made early payments.


Payments should be pegged to job milestones, which is sometimes hard to do.  Certain aspects of a major job like behind-the-wall systems (plumbing, wiring, and HVAC) can take weeks to complete; but from a homeowner's perspective, it may "look" as though little progress has been made.  To solve this problem, many companies schedule payments based on inspections.  In many jurisdictions (but not all), building inspectors are required to inspect and sign off on the foundation and framing, as well as on electrical, plumbing, and HVAC systems.  These are easy milestones, to which you can link the dispersal of funds.


Final Payment:


On large renovation projects, make sure you and the contractor are clear about when the final payment is due.  Contractually arrange to hold-back your final payment (at least 10%) until 30 days after the work is completed.  During the first few days, you and the appropriate third parties should make your final inspection (or "walk-through") with your contractor to be sure there is nothing you or the contractor have overlooked.  Use your checklist, consisting of all of your specifics, to make your final inspection of the completed work.


Also, accompany the building code inspector, making sure that every one of your permits passes final inspection and secures a certificate of occupancy.  Mind you, just because the renovation passes their inspection doesn't mean that everything is perfect; so don't sign the contractor's completion certificate on the code inspector's say-so.  First of all, Code Enforcement Officers and Building Inspectors only look for violations of building codes, which only set minimum safety standards for construction; they do not protect you against poor quality work.  Secondly, Municipal building departments are often too busy to keep up with required permits and inspections; so it's possible the inspector won't show up at the scheduled time or BLINK and you might miss his / her visit.  You can insure that your home will be properly inspected if you hire your own inspector, and you're present during those inspections.


Now, use your 30 extra days to live with the renovations, assess whether there are any problems with the work, and make sure everything is working the way it should.  Even though you have a warranty, it's a lot easier to get the contractor to fix things when he's still trying to earn his fee.  Look at the work in all different types of light.  Test every button, switch, handle, and appliance.


In many large projects, there is always some outstanding work to be completed - as you may still be waiting for a custom faucet or light fixture.  The 30-day delay should be long enough to get this punch list completed.  It's not always fair to withhold the entire final draw if some part or material is on back-order, and the contractor can't control delivery and completion.  In cases such as this, you may agree with the contractor to withhold the cost of the labor and materials for the outstanding work, but pay part of the final draw if the rest of the project is complete.  This type of cooperation and compromise allows you and your contractor to work together to complete your project to the satisfaction of everyone involved.


DO NOT sign the "Certificate of Completion" or make that "Oh So Important" final payment until after:


Lenders usually require a signed completion certificate before they will release the last payment.


Other Payment Factors to Consider:


Making payments for your remodeling project is never fun.  The amounts can be staggering, and there's always the concern that maybe you didn't get all the value you were due.  Besides, every installment paid means you have less leverage over your contractor.  Payday gives contractors the jitters, too.  Although pros like to get paid, homeowners often save up their frustration until payment time and then unload it.  Both of you can avoid this stress by agreeing on a fair payment structure - then schedule separate progress meetings to review any concerns or complaints you have.


Sample Contract:


New York State Consumer Protection Board provides a sample contract for Home Improvements without headaches.  The board also suggests some optional provisions that can be negotiated.  You may want to expand on some of the wording, according to the suggestions you find throughout my website.


Optional Provisions:


Work description and cost of labor and materials


Except where stated otherwise, the contractor promises that all products and materials are new and undamaged.  The contractor agrees to follow all blueprints, plans and sketches which are attached to each copy of this contract and which are signed and dated by both the homeowner and the contractor.

Beginning and completion dates, time of the essence, penalty for late completion,

preparations to be made by homeowner.


For each business day the work extends beyond the completion date, the homeowner may deduct $______ of the total cost shown on this contract.  The homeowner may also withhold payments if the contractor does not begin the work on the date specified, or if the work slows down for no apparent reason.  But, the contractor will not be liable for reasonable delays caused by the unavailability of products or materials, labor stoppages or other causes beyond the contractor's control.  Under these conditions, the contractor must give prompt notice to the homeowner of the reason for the delay and indicate when the work will be completed.

Preparations to be made by the homeowner before the work begins ________________

Clean up,

unused material.


The contractor will clean up and remove from the property all debris and unwanted materials when the work is completed and leave the property "broom clean."

Unused materials that can be returned to suppliers will be credited to the homeowner.  Unused materials that cannot be returned may be kept by the homeowner, sold to the contractor or disposed of by the contractor, at the discretion of the homeowner.

Progress Payment Schedule (Does not apply if work is paid hourly or on some other basis)


The progress payment schedule is as follows:

Due Date or Stage of Completion

a) Deposit (if any) $_____________________

b) First payment (if any) $_____________________

c) Second payment (if any) $_____________________

d) Final payment (30 days after completion) $_____________________

Progress payments must be deposited in an escrow account at

_____________________, ___________________________, NY within five days.

         (Bank)                              (Address)

Financing disclosure


If the contractor arranges financing from a financial institution, or if the contractor assigns the right to collect sums due under this contract to a third party, the homeowner has the right to withhold payments or make claims against the financial institution or third party if the contractor fails to live up to any part of this agreement.

Any reference to finance charges in this contract shall not replace the disclosures required by the Truth In Lending and Retail Installment Sales acts.

Warranties: workmanship and materials


The contractor promises that all work done under this contract, including work done by subcontractors, will be free from defects in material and workmanship for _____ years from the date the work is completed.

Warranties: products to be installed


Where a product to be installed is warranted by the manufacturer, the contractor (will) (will not) service the warranty.  Whether or not the contractor services the warranty, the contractor will supply the homeowner with copies of all manufacturers' warranties.

Permits, laws, regulations


The contractor will obtain all necessary permits and pay any fees required.  The contractor is responsible for knowledge of and compliance with all laws, ordinances, rules and regulations.



The contractor must obtain adequate insurance covering Worker's Compensation, property damage and personal injury, and present proof of coverage to homeowner.

Binding Arbitration and Right-to-Cure, Is Your State Next? That is a very real threat!