Nail down dollars andfees before heading into a building project
If you’re planning to hire a contractor, you need to do more than brace yourself to sign big cheques. You need to make sure that both you and your contractor have settled on one of several approaches to payment that makes sense.
There are essentially two ways to go when it comes to setting these all important financial ground rules, though there’s a common problem. Most homeowners feel very uncomfortable hammering out the money side of major building work.
The tendency is to let the details slide until the job is underway.
But by then you’re committed to some kind of business relationship, perhaps with nasty surprises.
Two recent surveys of homeowners and contractors by Opinion Research Corporation identified finances as a major cause of jobsite strife. Homeowners get upset when contractors increase costs after the fact. Contractors hate it when homeowners try to talk down the price after work begins.
One approach to defusing these problems is the time and materials payment model. This means you pay for all materials and whatever labour time the building crew clocks in.
While it’s like handing a blank cheques to your contractor, that’s not necessarily a bad as it sounds.
If this person is honest enough to be legitimately trusted, time and materials offer the leeway to take as much time as necessary to do a good job in an unpredictable situation. That’s a good thing if youare involved in a major renovation that comes with a lot of questions about what you’ll find when the walls come down.
That said, if your contractor proves less honest, time and materials mean your building budget can be milked mercilessly, with no incentive to work efficiently.
I don’t recommend time and material deals for new buildings. There is no need. New construction is predicable enough that a fixed price can be set before work begins.
This approach requires the contractor to come up with a legally binding cost for the entire job (materials and labour), and to stick with this number.
This is a contract, hence, the name contractor.
Fixed price may sound like it reduces your risk, but not necessarily. There are 1,001 ways a contractor can save his skin if he has underbid a job, none of which leads to a good project outcome.
This is one reason why contracts must include a very detailed list of job specifications. You’ll need to describe exact details for construction approaches, insulation, wiring, plumbing fixtures, flooring choices and every other thing open for interpretation.
As a homeowner,you have a sober responsibility under a fixed price approach. You must not change your mind on any details once the work has begun, unless you are willing to pay for the added expense that changes always involves.
It’s only fair.
And even if you’re willing to pony up more money to fund your new idea, keep these changes to an absolute minimum. It drains worker morale when new accomplishments need to be changed or scrapped.
Feel like insisting on a fixed contract for an inherently unpredictable renovation job? Don’t do it. You’ll be forcing your contractor to build in an extra cushion into the price, a cushion that might well be larger than necessary.
Regardless of which payment model you choose, you’ll also need to settle on a payment schedule. Three or four milestones should be identified before hand, with payment due when the project is completed up to each particular stage.
Change your mind as little as possible, don’t look over your contractors shoulder all the time,and pay your building bills according to plan. You’ll be amazed how smoothly things can go.
Attributed to Steve Maxwell. Steve Maxwell is an award wining home improvement expert and technical editor of Canadian Home Workshop magazine. This article appeared in the Ottawa Citizen on Saturday, January 17, 2009.