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According to NARI, here are some key areas you should look for in a contract:
Under Texas Law
According to the Texas Attorney General’s office, any contract you sign for work on your homestead must contain the following warning next to the space for your signature:
“Important Notice: You and your contractor are responsible for meeting the terms and conditions of this contract. If you sign this contract and you fail to meet the terms and conditions of this contract, you may lose your legal ownership rights in your home. Know your rights and duties under the law.”
When you sign a contract for home improvements on your homestead, the contractor can legally place a lien on the homestead. If you sign a contract containing the language quoted above and you fail to make the payments, the company can take away your home. Therefore, it is extremely important that you understand exactly what your obligations will be under the contract, and that you are confident you can meet those obligations. If you have any questions or doubts, consult an attorney before you sign the contract.
If there will be a lien on your home, make sure a notary is present to witness your signature. A notary other than the salesperson must be present to witness you sign the document creating the lien. It should be a warning to you if the salesperson does not have a notary present or if he says he will take care of the notarization later.
If your contractor fails to pay the subcontractors and suppliers, you are responsible, even though you have not contracted directly with the subcontractor or supplier. Under Texas law, if a subcontractor or supplier who furnishes labor or materials for the construction of improvements on a property is not paid, the property may be subject to a lien for the unpaid amount.
If your homestead improvement exceeds $5,000 in cost, the contractor is required by law to deposit your payments in a construction account at a financial institution. Ask the contractor for written verification of the existence of the construction account. Monitor deposits and disbursements to subcontractors, laborers and vendors. Access to the account record should be included as a requirement in your written construction contract.
Contractor Warranties in Texas
In addition to the information provided above, Texas residents are reminded of the following on contractor warranties, from the Office of the Attorney General of Texas (www.oag.state.tx.us).
Limited statutory warranties for residential construction in Texas became effective on June 1, 2005. These warranties apply only to residential construction that began on or after that effective date. The required warranty periods reassure all home buyers that if a home component covered by the warranty does not perform up to the stated standard, the builder is obligated to repair or replace it. Any residential construction that began prior to June 1, 2005, is governed by the warranties and building and performance standards in the home’s original construction contract or, if there is no express warranty in the contract, the law may have implied certain warranties to protect the homeowner.
- Be sure the contract includes the contractor’s name, address, phone and license number.
- Detail what the contractor will and will not do.
- Your contractor should detail a list of materials for the project in your contract. This includes size, color, model, brand name and product.
- The contract should include the approximate start date and substantial completion dates.
- Study all required plans carefully. Insist that you approve them and that they are identified in your written contract before any work begins.
- Federal law requires a contractor to give you written notice of your right to, without penalty, cancel a contract within three business days of signing it. This is provided it was solicited at some place other than the contractor’s place of business or an appropriate trade premises such as your home.
- Make sure financial terms are understood and spelled out in the contract. The total price, payment schedule and any cancellation penalty should be clear.
- A warranty covering materials and workmanship for a minimum of one year should be written into the contract. The warranty must be identified as either “full” or “limited.” The name and address of the party who will honor the warranty (contractor, distributor or manufacturer) must be identified. Make sure the time period for the warranty is specified. (See more on warranties below.)
- A binding arbitration clause is also a good inclusion in the event a disagreement occurs. Arbitration may enable you to resolve disputes without costly litigation.
- Thoroughly review the entire contract and be certain you understand it before signing it.
- Consider the scope of the project and make sure all items you’ve requested are included. If you do not see a specific item in the contract, consider it not included. Never sign an incomplete contract. Always keep a copy of the final document for your records.
- Consider having a legal professional review the contract before it is signed.
Under Texas Law
According to the Texas Attorney General’s office, any contract you sign for work on your homestead must contain the following warning next to the space for your signature:
“Important Notice: You and your contractor are responsible for meeting the terms and conditions of this contract. If you sign this contract and you fail to meet the terms and conditions of this contract, you may lose your legal ownership rights in your home. Know your rights and duties under the law.”
When you sign a contract for home improvements on your homestead, the contractor can legally place a lien on the homestead. If you sign a contract containing the language quoted above and you fail to make the payments, the company can take away your home. Therefore, it is extremely important that you understand exactly what your obligations will be under the contract, and that you are confident you can meet those obligations. If you have any questions or doubts, consult an attorney before you sign the contract.
If there will be a lien on your home, make sure a notary is present to witness your signature. A notary other than the salesperson must be present to witness you sign the document creating the lien. It should be a warning to you if the salesperson does not have a notary present or if he says he will take care of the notarization later.
If your contractor fails to pay the subcontractors and suppliers, you are responsible, even though you have not contracted directly with the subcontractor or supplier. Under Texas law, if a subcontractor or supplier who furnishes labor or materials for the construction of improvements on a property is not paid, the property may be subject to a lien for the unpaid amount.
If your homestead improvement exceeds $5,000 in cost, the contractor is required by law to deposit your payments in a construction account at a financial institution. Ask the contractor for written verification of the existence of the construction account. Monitor deposits and disbursements to subcontractors, laborers and vendors. Access to the account record should be included as a requirement in your written construction contract.
Contractor Warranties in Texas
In addition to the information provided above, Texas residents are reminded of the following on contractor warranties, from the Office of the Attorney General of Texas (www.oag.state.tx.us).
Limited statutory warranties for residential construction in Texas became effective on June 1, 2005. These warranties apply only to residential construction that began on or after that effective date. The required warranty periods reassure all home buyers that if a home component covered by the warranty does not perform up to the stated standard, the builder is obligated to repair or replace it. Any residential construction that began prior to June 1, 2005, is governed by the warranties and building and performance standards in the home’s original construction contract or, if there is no express warranty in the contract, the law may have implied certain warranties to protect the homeowner.
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