In brief – Choose your contractor carefully and look out for the warning signs
Having a good contract, carefully choosing your contractor, having home warranty insurance and keeping good records can all help you avoid a renovation disaster.
Good preparation is vital for any renovation project
You've finally decided to renovate your home or office space. No doubt you've heard some disaster stories about renovations. Here are some pointers to help you avoid a renovation nightmare.
The most important thing is good preparation. Do your homework before you jump into anything. It's time consuming but worth it in the end.
Having a good contract is crucial
A crucial aspect of preparation is your contract. This is a vital component of any project. Don't be scared to have a lawyer look at it for you. You might be tempted to avoid the cost of a lawyer, but remember that litigation is extremely costly. If something goes wrong down the track and lawyers need to get involved, a good contract could save you a huge amount.
Do not sign anything unless you know exactly what you're signing, even if your contractor tells you "it just says exactly what we've discussed".
Warning signs when choosing a contractor
- Don't put down too much money up front. Under the NSW Home Building Act, for example, if the contract price of a residential construction project is $20,000 or less, the contractor can't ask for more than a 10% deposit. If the contract price is more than $20,000, you cannot be asked for more than a 5% deposit. You most definitely want your contractor to be solvent, so if they need money upfront to buy basic materials, steer clear.
- If your contractor says that there's no need for a written agreement, demand it. A written agreement safeguards your position far more than any verbal agreement.
- Does your contractor have proof of liability insurance and workers compensation insurance? If not, find someone else.
- Your contractor should be willing to give you references. If they refuse, run for the hills.
- This might seem very basic, but make sure your contractor has a business card with all the contact details on it. Simple, but important.
- Be wary of slow progress and falling behind schedule.
- Research how litigious your contractor has been in the past. If they have been involved in a lot of litigation, consider choosing someone else.
Home warranty insurance is vital
Home warranty insurance insures the owner against non-completion of the building due to death, disappearance or insolvency of the builder, or failure of the builder to correct faults which are deemed to be the builder's responsibility. The legal requirement is that insurance is obtained where the contract price is over $20,000.
Make sure the insurance is effective before any work commences or any money is paid. It is illegal for the contractor to request a deposit unless home warranty insurance has been taken out (when the contract price is over the $20,000 threshold).
Does your contractor have a licence?
In NSW, to operate as a tradesperson you must hold the correct licence as determined by the Office of Fair Trading. All individuals or companies in NSW that want to carry out work over $1000 in value must have one. It's worth checking that your contractor holds the appropriate licence.
By law, a contractor's licence number must be shown on all advertising, stationery and signage. Keep an eye out for it.
Variations to the planned construction work
Variations to construction work are almost inevitable, because things can happen along the way that weren't planned, or are outside the scope of the contract.
Good communication with your contractor is key so that you know about any variations as early as possible. Make sure you approve in writing any changes that involve additional costs and/or delays in completion.
Keep good records of your renovations
Be organised and keep any and all documentation regarding your renovations. It's prudent to keep a record of all meeting minutes, notes of conversations and constant photographic evidence. Make sure all photographs have a date stamp.
Consider engaging a construction consultant for any quality issues. They can pick up things that you might not.
Things to ask your contractor before they start
- Ask about their experience in similar types of construction. If possible, it might even be a good idea to go and visit other similar projects they have completed.
- Ask for references of companies they have worked for and call them.
- Who will the project manager be? Check them out.
This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2023.