SPECIFIC STRATEGIES TO ASSIST MASSACHUSETTS HOMEOWNERS IN GETTING WHAT THEY ARE ENTITLED TO FROM AND UNDER THEIR HOME IMPROVEMENT CONTRACTS AND PROJECTS

By Massachusetts Construction Law Attorney Jonathan Sauer

I. INTRODUCTION.2
I’ll start off by saying that you may not follow all of the suggestions that follow.
For example, you can save some on architect and lawyer fees by having the contractor prepare most of the plans and specifications s/he will follow and the contract between the homeowners and contractor. As this article suggests, these things are usually a bad idea. Even with strict adherence to what follows, no one can guarantee that there won’t be problems on any particular project. But, if you follow these suggestions, which I have learned over 42 years working as a construction lawyer, this will give you your best chance of having a home improvement project run reasonably well, paying what you expected to pay and having the job done more or less on time.
One of the frequent mistakes homeowners make is overpaying the contractor in the early part of the job. Real problems, either in design or construction, may not be evident until the last ten percent of the job, which is the hardest part of any construction project to perform. And, by then, if the contractor has had his/her way, there is little or no money left in the job to fix them. A conundrum! Who is going to pay to complete the remaining work/corrective work? And, who will actually be performing this remaining work?
If you follow my suggestions with regard to a ‘schedule of values’ (explained later), a ‘termination for convenience’ clause (explained later), having ‘retention’ (explained later), having the architect review actual construction progress for any particular pay requisition, cutting it when it is too big, and having a ‘liquidated damages’ clause (explained later) along with other suggested contractual language, this will give you your best chance of having enough money at the end of the job to finish it, should you have to finish it yourself. Which, unfortunately, is sometimes necessary.
And, these strategies are designed to minimize the chances of your having to go to court. Whenever possible, we want to try to avoid litigation, to the extent we are able. Court is not a particularly pleasant experience being completely unlike how it is portrayed on television. Your attorneys’ fees and court costs to take a superior court litigation from beginning to end will exceed twenty-five thousand dollars, probably more if you use one of the larger Boston firms. This is money you do not want to pay. This is money that I don’t want you to pay. And, one must keep in mind that with regard to lawsuits, half of the parties will lose. And, if you are going to be the one having to pay, on top of whatever the judgment against you is, you will have to pay, at minimum, 60% of that amount, in addition, as interest.
The scope of this article is to address the various issues, concerns and strategies and things that need to be done for the time period from the homeowner’s decision to have a HIP right through the time the project has been designed and the contract has been executed and it is time to commence performance.
This article will not address what happens at such point in time that the homeowner is getting ready to default the contractor during the performance of the project and then has to figure out how s/he is going to get his/her project complete and how any mechanics’ liens that have been filed can be removed from the property and there is a real and, possibly, imminent possibility that one or more litigations will commence. That will be the subject matter of a subsequent article(s).

To begin!
The hardest construction projects are renovation contracts. Sometimes, the extent of the problems with the sufficiency of the existing construction won’t manifest themselves until the contractor begins opening the house up.
At its heart, this is what a Massachusetts home improvement project is. For the typical homeowner, this type of project is the first construction project s/he has been associated with. S/he has not previously worked with architects, engineers and contractors before. Unfortunately, for all too many homeowners, such projects turn into nightmares where the work is delayed, sub-standard and/or incomplete. And, the homeowners don’t have enough money to finish the job because they overpaid the contractor.

The financing bank is unhappy and wants to have payments on the loan start. But, the home is either not habitable or completely habitable. There can be safety concerns with regard to incomplete and improperly-done construction, which can be especially dangerous for young children, with things such as shock hazards and falling hazards.
The result for some homeowners at this stage is that they are not able to get an occupancy permit, thus only allowing them to drive past their home where they have spent, maybe, two hundred thousand dollars pursuant to a home improvement contract. Yet, this home – which they were living in two hundred thousand dollars ago - cannot legally be lived in. For the last several weeks (months), families with small children have had to live in small apartments or motels, waiting for their long overdue construction (and growing nightmare) to end.
A lot of the reasons why this happens is that homeowners know next to nothing about how to go about this and let the contractor almost entirely control the process which, for some, is like having a fox guard a henhouse. It’s a great deal for the fox. A lot less so for the hens.

By my experience, most homeowners let the contractor design the project and determine the kind of contract to be used. They may have felt that they were properly prepared by having an architect provide two or three architectural (“A”) drawings which generally only show the outside dimensions of the addition but have very little information on them as to what will be constructed inside of those exterior walls.
And, they don’t have a lawyer look at the contract before they sign it and/or they don’t have an architect review contractor-prepared plans and specifications and periodic requisitions. There are no ‘submittals’ (discussed below). There are no ‘punch lists’ (discussed below).

An apparent saving of money and convenience up front are the very things that can croak a homeowner with an incompetent/dishonest contractor. Ben Franklin reportedly was the one who first said that ‘an ounce of prevention is worth a pound of cure’.3 Homeowners getting technical and legal assistance before this process goes forward can end up saving themselves a lot of money on the other side, if things don’t go well.
The purpose of this article is for me to explain how best for homeowners to protect their interests with home improvement contracts, getting what they are paying for and retaining (hopefully) most of their sanity!
While this article primarily deals with home improvement projects (HIP), much of what is said here will also apply to homeowners who are either buying a spec house being built or having a contractor build a house for them.4
What we will be doing with this article is starting before the construction project with things homeowners need to be thinking of. First of all, does the homeowner have the money to pay the actual costs of construction? Then, we’ll go through the process of interviewing and vetting contractors. Discussing what should be used as plans and specifications and who will be preparing them. Making sure that homeowners have the right kind of contract. Discuss effective supervision of the contractor’s progress, including the payment of periodic requisitions. How to prepare and manage the punch-list. All of this working towards the result of getting that all-important certificate of occupancy.
We are going to use, as a model, a HIP with a price tag of two hundred thousand dollars, which would be roughly the going rate for the construction of a good-sized addition, such as either adding a floor or adding several rooms onto a ranch house. For the ‘Project’ discussed in this article, the contractor will be adding a second floor to a ranch house, including one and one-half bathrooms and three bedrooms. The homeowners are John and Jane Doe, husband and wife

Ready? Well, then, let’s get started with the particulars!
But, unfortunately, first . . . . . . . . . . . .

II. THE FOLLOWING SCENARIO IS THE KIND OF NIGHTMARE WE WANT TO HELP YOU AVOID.
The following is an all-too-frequent nightmare problem job presenting itself to me close to its very end. It is a fictional project that really is an amalgam of numerous similar problem jobs I have been involved with in the past. Among other things, the homeowner simply didn’t/doesn’t have enough money to complete the construction, hired the wrong contractor, did not follow good construction procedures, didn’t use an architect or a lawyer at appropriate times and essentially allowed the contractor to overrun him until he was little more than roadkill.
I’ll get called in by the homeowners – Mr. and Mrs. Anycouple – who think that they are fairly close to finishing the construction. The project is for 275k, involving adding several rooms on the first floor of their home with some renovations to the existing construction.

But, the job is not done and any number of problems have arisen. The homeowners have run out of money for any number of factors, including that they didn’t borrow enough money. (They didn’t carry any costs for architects and lawyers and had no contingency for change orders or to pay for a second low bidder who was several thousand dollars higher than the low bidder but a much better contractor.) They went with the ‘low bidder’ because they didn’t have enough money to contract with the second low bidder, which had a far better track record and reputation. And, they overpaid the contractor by allowing the contractor to ‘front end load’ the job, a process by which a contractor gets paid for more than the actual value of its earlier performed work, which results in there not being enough money in the contract to perform the later work items. Additionally, they also allowed themselves to be overbilled because this was the only way they felt they could keep the contractor and its subs working on the job. There was no ‘schedule of values’ (discussed later).
So, the project is only about 85% complete with very little money remaining in the contract. And, some of the work that has been done is either incomplete or defective, which will require further work. There being no more money left in the job, the contractor says s/he will only complete the contract if s/he is given a 100k change order for “increased costs”, which have not been defined. In fact, the contractor is saying that if it doesn’t get this change order, it is going to sue. At present, the contractor has been off the job for four weeks.

The homeowners knew fairly early on that they were having problems and were going to be having more problems. Not enough construction was getting done. The contractor was sporadically on and off the job, frequently working elsewhere.
But, one of the things that they did not know is that even when a contractor has been fully paid the amount of the contract, once there is no more money left in a job, contractors often lose interest in the job and go on to another job that has some money in it that they can bill against. The homeowners think “This isn’t fair.” And, of course, they are right. But, this is the reality of construction as to some contractors.

Several subcontractors claim that they are owed money and are threatening mechanics’ liens. (These are claims by material suppliers, subcontractors and general contractors where they are trying to reach the homeowner’s equity interest in their house to get paid, such claims made by filing various forms at the local registry of deeds and then suing the homeowner.) Some of those subcontractors state that they won’t finish their work unless they get paid first for what they are owed. M/M Any couple can’t get an occupancy permit and are living with in-laws, which, increasingly, is not working out.

There is no easy answer to solving their problems because, in large measure, they arose by not following good construction practices: not having a ‘schedule of values’ (discussed later); not having partial ‘lien waivers’ (discussed later) from the subcontractors and general contractor; allowing the contractor to ‘front end load’ (overbill early in the job.) One of their biggest problems is that they tried to take on something they knew little about – the law and construction – and, notwithstanding, decided to ‘go it alone.’ Really, there is no other way to say it. They should have known better.
The bank will not lend them any more money. In fact, because of these several problems, the bank will not be allowing M/M Anycouple to make further draws on their loan even though there are remaining monies in their account. And, because the contractor has seriously overrun its completion date, the bank wants M/M Anycouple to begin making loan payments, even where the job is not done and they can’t even live in their house. M/M Anycouple do not have enough money to finish the work and take care of some of these serious problems.

Now, most of these problems M/M Anycouple contributed to due to their unfamiliarity with good construction procedures and because they relied too heavily on the contractor, who turned out to be the wrong contractor.
I tell them that there were a lot of things that I could have done for them early in the project to prevent some of these problems. At present, I can send a C. 93A ‘demand’ letter to the contractor threatening a suit for unfair and deceptive trade practices which, if successful, could have them paying double or triple damages plus actual attorneys’ fees. But, I tell them that most bad contractors simply ignore this kind of letter. And, I tell them that I can sue the contractor for a variety of claims, including various contract claims, claims for fraud and misrepresentation and claims for unfair and deceptive trade practices.

I tell them that there will not be a trial on these claims for the next four or five years. They ask me what the legal fees will be if they want to sue the contractor or if the contractor or any of its subcontractors sues them. I say that if a construction case goes through an entire superior court process, including trial, it will cost in excess of 25k per case. And, they are looking at the potential for having several different cases.

They leave my office very discouraged. And, I am discouraged that there is little that I can presently do to help them, even though if they had come to me very early in the process, I could have prevented most of these bad things from happening.
Friends, it is because of their experiences – and the experiences of numerous other homeowners I have spoken with – that I have prepared this article, a kind of primer as to how homeowners should go about their home improvement projects (HIP) so that they can minimize the possibility of such bad things happening.
But, before we start drawing up plans and specifications and hiring contractors, there is that little matter that governs so much of what we want to do or try to do in life, which will have to be dealt with. And, you know what that little matter is! It needs to be confronted and dealt with head-on before we go any further. Because it is important to know . . . .

III. CAN YOU REALLY AFFORD THE ACTUAL COSTS OF YOUR HOME IMPROVEMENT PROJECT?
How much are our homeowners going to have to borrow? Certainly, they will need to borrow enough to actually complete the project. That sounds sensible, almost something that goes without saying. So, where’s the problem?
Well, the first thing the homeowners are going to have to decide is: are we going to go about this intelligently? Because, if they are, they will need some level of services from an architect (and, possibly, from an engineer). And, they will need some level of services from a construction lawyer.

From the number of homeowners I have spoken with who were in one form of the nightmare or another – and there have been a lot of them – most of them must have thought that having such technical and legal assistance up front really wasn’t necessary. And, if homeowners get an exceptional, ethical contractor and they have a lot of good luck with changed conditions and differing site conditions, then the answer might be ‘no’.
But, not getting that help at the start significantly increases the chances for a nightmare. And, how will M/M Doe know, up front, whether or not their contractor is both exceptional and ethical? And, how will they know up front that they will have good luck with issues such as changed conditions and differing site conditions? Quite simply, they won’t know either of these things up front.

We start with our ranch house. Is the state of the construction of the ranch house, built sixty years or so ago and for which there are no existing construction plans or as-built plans, such that it is strong enough to bear the weight of what is essentially another additional house on top of it? If the matter is referred to an engineer, one way or another, we will have an answer. That answer might be an unequivocal ‘yes’. Serendipity! Or, the ranch house may be sufficient
to support all that weight with some additional construction, beefing up those walls and foundation. Or, the answer might simply be, ‘no’.

Avoiding hiring that engineer might mean adding a second floor that causes the underlying ranch house to collapse. If the existing ranch house collapses, then the homeowners will need to buy another house. And, they will have to continue paying the mortgage on that ranch house which no longer exists.
That ranch house ten years ago might have cost 225k. Today, that same ranch house might cost 300k or more. So, if the homeowners want to buy a new house, we are now talking about paying two mortgages. And, even though the second floor addition collapsed and is worth nothing, the homeowners will still have to pay back the bank the 200k plus interest they borrowed. We are now talking about their having to pay three mortgages. And, of course, the whole collapsed mess will have to be demolished with the debris appropriately dealt with, including the asbestos that can be expected to be found in a house of that age.

Not spending the two or three grand on the engineer might end up costing the homeowners hundreds of thousands of dollars and unending heartache. They very well may have to file bankruptcy. With all of the stress and mutual recriminations, the husband and wife might lose their relationship. No longer being able to afford living in their neighborhood, their kids might have to go to inferior schools somewhere else.
A false economy, to say the least.

If our homeowners feel that they are willing to run the risk of a nightmare by borrowing less money because they don’t think that they need technical and legal assistance, then the answer for them might be a ‘no’. We are willing to go with what we have which, essentially, is their home improvement contractor. For homeowners who understand all of the bad things that might happen with the lack of sufficient technical and legal assistance, the answer will very definitely be ‘yes’. We will need some technical and legal assistance.

We’ve all heard the expression that ‘his eyes were bigger than his stomach’. Every day, life asks us whether or not our goals and dreams are bigger than our ability to pay for them. Whether we like it or not, life has a way of presenting us with rather stark reality checks, every now and again. And, this is one of those times.
The very worst thing homeowners can do is to take on an HIP when they have borrowed an insufficient amount of money to actually perform all of the HIP. The estimate that M/M Doe has to build Project is that it should cost about 200k. And, we will assume for the sake of our exercise, that was a good estimate. (But, one must always keep in mind that an estimate is not a guarantee.) In fact, they know of a contractor who is willing to do the job for just that price, who seems enthusiastic about Project and wants to get started right away.

So, their thought is that they should borrow 200k. But, that amount of money doesn’t take into consideration necessary architect and lawyer fees and provide a contingency for change orders (extra work not originally planned on.) And, Friends, for jobs of this nature, there are always change orders. That is so whether you have a good contractor or a bad contractor. Until the contractor begins removing the roof and taking the house apart, there is no real way to be sure that additional work won’t have to be done.

And, as a practical matter, it is the rare homeowner who doesn’t want to make changes in the Project once he/she sees what it is really going to look like. Maybe, I might want a different, more expensive kind of flooring. (The carpet looks too cheap.) Or, maybe, I might want a more expensive kind of tile. Or, even though we did carry a fairly hefty ‘allowance’ (an estimated number for a contract item which acts as a placeholder until the actual cost can be ascertained) for cabinets, in reality, the ones the contractor wants to install look cheap. Or, I might look at a room and want more electrical outlets and more data outlets. The list of items that might be changed between the time of design and the end of construction is almost endless. It must be taken as a given: there will always be additional work. And, somehow, that work has to be paid for.

There can also be ‘differing site conditions’, meaning that because of what might be ‘behind the walls’ of the ranch house when construction commences, there might be problems with the existing construction that were not figured into the original construction costs but which must be remedied before construction can continue. There could also be ‘differing site conditions’ with the physical aspects of the Project site, although where we are not going outside of the ‘foot print’ of our original ranch – its physical length and width – these should be minimal for Project.
Like so many things in life, ‘finish what you start’. Or, if you can’t, then don’t start it at all. Because, if you do so with an HIP, you could quite possibly end up in a situation like that discussed in Section II above. In a word, an utter nightmare.
Is this figure of 200k one that they should take to the bank?

The bank is going to only want to underwrite this loan once. As explained below, the actual cost of this Project is probably going to be somewhere in the 283k range.6 The bank right now might be willing to lend you that amount of money. But, if you only borrow 200k now and want to borrow that additional 83k six months from now when the Project has any number of problems, the bank will not be willing to lend you that 83k then. The bank will not likely lend you any additional money if and when the project appears to be in serious trouble. So, it’s best to get approval for this number now. This is a number you are going to ‘draw’ against – take out in discreet pieces for different things and at different times. The fact that you can ‘draw’ the entire 283k doesn’t mean that you can’t draw less. In every thing we will do design and manage this Project, we will try to spend the least amount of money possible. So, although you have a possible draw amount of 283k, with exceptional good luck, you might not have to draw more than 250k. The particulars of any specific loan should be thoroughly reviewed – and understood – before we go any further.

Now, we will do the best we can to improve on this number and we might have some success. But, you are not going to be able to shave off any really appreciable amount, unless some of the necessary work has already been performed or unless you are willing to pay ‘chicken’ with your financial future. In fact, any number of factors could make this number actually go higher, particularly if there are any significant ‘differing site conditions’ (the actual project site and composition are, in reality, different from that shown on the plans.)
So, one might ask: what happened to the 200k estimate?

Well, you have to borrow enough money to pay for the architectural and legal services that you will absolutely need, unless you are willing to gamble with your family’s future. And, of course, there are the change orders. And, we want to have a small contingency that would allow us to hire a contractor bidding more than 200k. Once the bids actually come in, even if you have a contractor who bids the job at 200k – exactly the amount of the fairly accurate pre-construction estimate - in the long run, hiring a better contractor who came in at 220k might give you a better product with fewer change orders and fewer problems and will actually be the least expensive contractor when all is said and done. Homeowners should be aware that sometimes contractors will bid a job with a fairly low number because they want the job and figure that they’ll make up the difference between them and the next bidder - and, possibly, adding in even more - on change orders.
Let’s look at each of these elements.

(A) THE COST OF THE ARCHITECT.
There are various estimates of what an architect’s fee should be as a percentage of construction costs. I have seen fees listed for between 6% and 12%, with the lower number applying to more expensive projects and the higher number applying to lower priced projects. I have seen other estimates having architects charge 15% to 20% for remodeling projects with new construction running between 5% and 15%. So, if you don’t have the actual number for your architect for Project when you go to the bank, these are some numbers to consider. And, just as one receives estimates from various contractors bidding on the construction work for Project, we should get several bids for the architectural work for Project. At any given time, someone is hungrier than someone else in any line of business.
We are going to try to run the numbers as tight as we can. At this point, we are figuring actual construction costs of between 220k and 230k. 15% of 220k is 33k. We don’t want to pay that much. And, we’re probably going to have the contractor contribute something to the design of the project, this on his nickel (although almost certainly included in his contract price). Recognizing that we may be low-balling this somewhat, we’re going to go with 25k.

There could be charges for things such as these: (a) his/her initial preparation of the anticipated cost of construction; (b) such design as the architect will be doing himself, including reviewing the contractor’s actual proposal for additional design elements; (c) a review of the construction as it progresses; (d ) reviewing the contractor’s ‘submittals’, which include things such as ‘catalog cuts’ of the materials the contractor intends on using, which are ‘submitted’ to the architect for his/her approval; (e) review the contractor’s pay requisitions and pricing for change orders, each of which requisitions will require a job visit; (f) the preparation of a ‘punch list’ at the end of the job, being a list of contractor deficiencies and incomplete items. Thereafter, other visits to the job may be necessary to see which items are ‘punched-out’ (completed) and which still require further work.
For the purposes of this exercise, then, we will assume that these fees will be around 25k.

(B) THE COST OF THE LAWYER.
The lawyer’s services will be in preparing the form of contract you will want, negotiating with the contractor over requested changes to that contract and the preparation of other contract documents, such as partial and final lien waivers and releases. Also, get some idea of what this is going to cost before you finalize the loan papers. Since our Project is fairly small, we’ll want to keep these as minimal as possible.
Could you have the contractor provide you with a form of contract? They will want to, not because they are doing this as a customer service but because if they can use their own form, they control the Project – and control you – to a greater extent. While this saves some money initially, the value of a better contract favoring your interests will pay for this cost several times over in both avoiding difficulties and in dealing with any difficulties down the road. Your having better legal/contractual control over your contractor should make the likelihood of having serious problems less. Frankly, your having good legal representation for some of these things quite often will have the contractor be a bit more reasonable as s/he will realize that his/her chances of taking advantage of you due to your unfamiliarity with construction processes will be less. After all, you don’t know how to sue the contractor. Your lawyer does. And, the contractor knows that.7
For the purposes of this article, we’ll assume the lawyer will have to expend approximately fifty hours working on contract-related issues which, at three hundred dollars per hour, would be $15k, this figure not including any money for handling anything other than the most minor of problems.

(C) THE COST OF ANTICIPATED CHANGE ORDERS.
And, be sure to include some room in your budget for ‘change orders’, the necessity/desirability of which is discussed above.

And, there will be ‘change orders’ where, as construction progresses, you may want to make some changes to what you are getting, which, generally, will involve getting better materials and fixtures. Allowing a factor of at least 10% would be customary but is fairly minimal in this regard and quite likely might not actually be enough. But, we will try to make do with 10%. So, if the construction itself is going to cost between 220k and 240k, more or less, we’ll split the difference and say that you should borrow an additional 23k to fund the change orders which will arise.

For the purposes of this article, then, we are going to assume that there will be change orders in the amount of 23k.
(D) SINCE THE LOW BIDDER MAY NOT ACTUALLY BE THE LEAST EXPENSIVE CONTRACTOR OR BEST CONTRACTOR IN THE LONG RUN, A CONTINGENCY THAT WILL ENABLE YOU TO TAKE A CONTRACTOR WHOSE BID IS SOMEWHAT HIGHER MIGHT BE HELPFUL.

Friends, please carefully read this paragraph. The contractor with the lowest bid may not ultimately be the cheapest. It may be that this contractor has low-balled his/her estimate, thinking that they will make up the difference with change orders. A contractor who is ten percent higher than the lowest contractor but who has a better reputation for quality work with fewer change orders and problems may ultimately be the least expensive contractor to do your job. So, if the actual submitted price for the estimated construction of 200k is actually 200k for the low bidder, your going with a better contractor with an initial cost of 220k may, ultimately, give you a better product and be less expensive.
A lot of experience has taught me that I’d rather have a bad contract with a good contractor than a good contract with a bad contractor.

For the purposes of this article, then, we are going to assume that you will need an additional 20k so that you can hire the bidder who will cost you 220k, meaning you will have to be able to borrow enough to cover this potential increased cost. Having the bids in hand before going to finalize the financing might somewhat help with this ‘sell’.
(E) YOUR LIVING EXPENSES FOR THE TWO OR MORE MONTHS YOU WON’T BE ABLE TO LIVE IN YOUR HOUSE AND STORAGE COSTS FOR YOUR FURNITURE AND OTHER ITEMS.

I did not include this in the amount of money you will need to borrow. After all, you will want to borrow as little as possible. But, they are very real expenses that you will incur to some extent, notwithstanding.
To put a second floor on your house, the contractor will be removing your existing roof and opening up the walls. You won’t be able to live in your house during this time because it wouldn’t be safe, would be very uncomfortable and you would get in the way of the construction, which could increase costs and the time necessary to do the job.

And, since the house will be open, you will have to remove most of your furniture and anything of value and put this in storage. The house will not be weather-tight, potential burglars will be encouraged by an empty and unguarded house and your furniture and possessions would constitute safety hazards for the workers.
So, motel and food costs should be taken into consideration when figuring out whether or not this is the time for that HIP.
If you plan to live with family, such costs can be minimized. You will have to answer this question: can you stand living with them for two or three months? And, can they stand living with you for two or three months?
In any event, if you could live with family or friends, this would help keep this particular type of cost down.
IV. BEFORE YOU EVEN THINK OF STARTING CONSTRUCTION, FILE A HOMESTEAD ON YOUR HOUSE.
For a variety of reasons, in most circumstances, you will want to file a homestead on your property before even beginning this process.

A homestead is automatically provided for every Massachusetts homeowner – without their doing anything – in the amount of $125,000. What this simply means is that provided the homeowner and/or his/her spouse and/or his/her minor children below the age of 18 live in the house, the house cannot be sold to pay debts by other than the bank providing the mortgage or by other prior incurred debts of certain kinds. This helps protect your house against ‘mechanics’ liens’, which is a way for a subcontractor or a general contractor to put a lien on your house with the idea of ultimately trying to force you to sell your house to pay their bill.

Having a lien on your property does all kinds of bad things. It can accelerate the payment of the promissory note underlying your mortgage, causing all of the amount borrowed to become entirely due at once. So, instead of making monthly mortgage payments for the next thirty years, the bank will say that they now want you to pay them the entire thing. Right now!
A mechanics’ lien can cancel your ability to have regular construction draws as to your construction financing.
You will not be able to refinance the property or sell the property as long as the lien remains on your title because with the lien on the record title, you cannot give ‘good and marketable title’, which is necessary to be able to accomplish either of these things.

Homeowners need to keep in mind that they have no obligation to pay a general contractor’s subcontractors and material suppliers except through mechanics’ liens.
Here’s one of the best legal bargains you can ever get! Notwithstanding the ‘free’ homestead exemption Massachusetts gives you, for a filing fee of $35.00 on a form that is easy to fill out, not requiring a lawyer, and which form can be found at the Massachusetts Secretary of State’s website, the homestead can be increased from $125k to $500k.

This should be filed before you enter into a home improvement contract with a home improvement contractor. This is because a homestead, under certain circumstances, can’t be declared against a pre-existing debt. For example, it’s not any good against a prior-filed mortgage.
Where this might help you with your HIP is that there is very little you can do to actually prevent material suppliers, subcontractors and your general contractor from filing mechanic liens. They are guaranteed such rights by various statutes.

But, lawyers trying to collect from homeowners for their construction clients typically have a relatively short attention span. When they see that they can’t get past the amount of your first mortgage and your five hundred thousand dollar homestead protection, this sometimes makes them more amenable to a short dollar settlement of their liens. Sometimes, they might just walk away.
Even if you weren’t starting a home improvement contract, you should have the maximum homestead protection possible. You could conceivably get into a situation where you will need this extra protection. For example (and God forbid), you might cause a serious car accident where one or more people are seriously injured. If you have 100k/300k bodily injury car insurance, this is probably not enough insurance to cover the damages a jury might find you liable for.

V. HOW TO FIND TWO OR THREE HOME IMPROVEMENT CONTRACTORS FROM WHOM YOU CAN SEEK BIDS.
While you certainly might inquire of friends and family as to contractors they have either used or are aware of as being good contractors, don’t just accept their recommendations.
This is particularly true of families. If I had a nickel for every such HIP I have seen go south where immediate family in the early days gushed about the abilities and qualities of particular home improvement contractors, I’d have a lot of nickels. Friends and families – but, particularly, families – can cause homeowners to allow their own critical judgment to be substituted for by the prior experience of family and friends, which is never a good idea for anything of consequence. They take the trust and good feelings they have for family and depend too heavily on such recommendations. They call ‘homework’ ‘homework’ because this is something that you are supposed to do and to take your time in doing so that it will be done properly.

Other sources for names? One person to inquire of is your architect. Assuming this is a relatively local architect, s/he will know who are the good contractors and who are the bad contractors. You might ask for recommendations from realtors located in your community. They’ll have a pretty good idea of who are the good home builders and home improvement contractors. Similarly, where you will most likely be borrowing money to construct this addition, you might ask for recommendations from your mortgage broker. You might inquire of whatever lawyer who handled the closing when you bought your home for suggestions. You might look at any on-line reviews of contractors working in your town. I find that when I am thinking of whether or not I am going to buy a particular product from Amazon, for any purchase of any value, I’ll study the reviews by purchasers of those products. And, assuming you read enough of them, I think you will find that the majority of such recommendations/reviews have merit and are pretty accurate.

One of my home improvement contractor clients gets the majority of his business from Angie’s List. ‘YELP’ contains reviews of various businesses. These types of websites seem to be popping up all over the place at an increasingly frenetic pace.
Once you have two or three ‘finalist’ contractors, run their names through your search engine. It is simply amazing how much information is available out there!

Lawyers have access to court docket information for various courts. And, just finding out how many times any particular contractor has been sued is some evidence you might want to take into consideration in making your choices.
Picking the right contractor is probably the single most important part of the process that you will participate in.8
Sure, your family and friends can be helpful in providing you with leads. But, since you will have to live in the new addition – they won’t have to – and since you will have to pay back the bank for the amount of money you will borrow to finance construction and incidental costs – they won’t have to – there is no substitute for a good injection of a lot of research on your part to find your contractor.

It’s a good idea, of course, to actually interview prospective contractors. Ask them to give you the names, addresses and telephone numbers for other homeowners who had similar work done. And, go look at those jobs. And, call the homeowners and ask them if they will share with you their experiences with their project and with this contractor. For commercial and public projects, usually involving a great deal more money than an HIP, this is precisely what the owner’s architects do in performing their ‘due diligence’ in terms of evaluating the suitability of the particular bidders to perform the project in question.

One might think that being very careful with selecting your builder, reviewing his/her criteria, looking at some similar buildings they have built, maybe checking specific references that the builders will give you whom you will call and seek their opinions on the value of what they received might telegraph - somehow- to the builders that you have a suspicious, non-trusting mindset.

On the contrary, this will not dissuade good quality contractors from working with you. If anything, they might appreciate this, as this will tend to favor them and disfavor some of their less ethical and less competent construction brethren. Just as you will want the contractors to act in a reasonable and professional manner, they will be looking for the same in you.

And, if it is your misfortune to find some of those who are less ethical and less competent interested in your Project, the fact that you are approaching this Project carefully and with architectural and legal assistance will, hopefully, suggest to at least some of them that if they are looking for homeowners to take advantage of, perhaps they should look elsewhere.
To realistically succeed with a home improvement project, really researching your bidders and then choosing your contractor carefully is the one thing that will predominantly depend on choices you make. Yes, your attorney can make sure you have the best possible contract and help smooth any (hopefully, small) bumps along the way. Your attorney will be working with the contractor, however, that you have selected.
And, your architect can prepare good plans and specifications and/or review pay requisitions as they arise and/or prepare punch lists and perform other architectural services well. But, they will be working with the contractor you have selected.

So, select well.
There is the familiar maxim that “You can’t make a silk purse out of a sow’s ear.” Both your attorney and your architect can put a variety of mechanisms into your contract and contract procedures to help assure a good result with your HIP. But, if you have selected the wrong contractor, nothing they can do will somehow make this contractor turn into the right contractor.

‘Cinderella’ only works with princes and princesses (and, in similar stories, frogs!) And, uh, with very large pumpkins. That are big enough that you can stick axles through them without their coming apart, in which case they are good for little else other than for making pies. With wheels that are consistent with, uh, well, with pumpkins.

VI. DESIGNING THE PROJECT: WHO WILL BE PREPARING THE PLANS AND SPECIFICATIONS.
One of the first choices that a homeowner will have to make. Do I let the contractor prepare the plans and specifications or do I have my architect prepare the plans and specifications? Or, is there a way for both the architect and contractor to do jointly prepare the design together, hopefully saving the homeowner some money? For that matter, might there be some other options our homeowners might consider?

A. HAVE YOUR ARCHITECT FULLY DESIGN YOUR PROJECT.
This is probably not something we will do with our 200k one floor addition. That is because the cost of such work, including review of submittals and periodic pay requisitions and the preparation of punch lists, will be disproportionate to the dollar amount of the contract. And, what you are getting designed, is a single, relatively uncomplicated single floor residential addition.

But, for our Project, what you don’t want done is to have an architect only prepare ‘architectural’ drawings for you, which are referenced in the trade as “A” drawings. In the main, these are simply exterior two-dimensional drawings for the home improvement providing the outside dimensions of the project. While such drawings have some useful information and value, what you also need are drawings of the inside of the building, specifically demonstrating sizes of specific rooms, where the windows are, where the closets are, what kind of mechanical equipment is included in the design and where it is located, etc. Sometimes “A” drawings have some references on them as to inside dimensions and as to what materials and equipment they are to include. My experience has been that with HIP, frequently, they do not.
Most HIP do not have separate specifications, which are detailed, rather technical, written descriptions of the various construction going into the job (e.g. plumbing, electrical, HVAC). To the extent they exist at all, they are generally written descriptions actually on the various plans but less likely to be on “A” drawings.

So, having merely “A” drawings from an architect is not something that will be of any great help. More likely than not, the majority of potential problems that there will be with the job deal with what is inside the building, not the outside dimensions of the building. If you are going to employ an architect with the idea that the architect is fully designing the HIP, then the drawings need to be more extensive, generally following the suggestions above.
Whether you are going to go with a maximum design or with a more minimal design, your architect should prepare a reasonably comprehensive description of what the HIP will consist of stated in words.

So, the general description of Project might look something like the following:

“The new construction will consist of the addition of a second floor to the house at 123 Main Street, Anytown, MA, which addition will be plus or minus 1750 square feet, consisting of one full bathroom and one half bathroom and with the construction of three bedrooms, each bedroom to have a closet with sliding doors. All floors will be hardwood with the exception of the bathroom floors, which will be tile. The walls will be drywall with a coating of field-applied plaster. Each bedroom will have at least two energy efficient windows and all new construction will be energy efficient. Windows will be ‘Renewal By Anderson’ or equal. The entire house, including the existing structure, will be covered with a good quality vinyl siding, which will have a manufacture’s guarantee of at least thirty years. A new water heater, a new boiler (furnace) and new air conditioning system sufficient to achieve two zone heating and air conditioning for the entire house will be included in this project. All exterior walls shall be plywood, with the walls being framed with two by six lumber and fully insulated. All construction will comply with the building codes applicable to one family homes in Anytown, MA and must be sufficient to meet the current requirements of the various building inspectors employed by the Town of Anytown.”
Now, this paragraph above does not contain all that such a paragraph should actually have. But, I have included it just to give you the idea of what it should generally look like. With a sufficient word description in addition to the “A” drawings, prospective home improvement contractors will have sufficient information to prepare estimates for the cost of construction.

If the architect is going to fully design your project, there would have to be drawings describing clearly what is expected of the contractor, including mechanical drawings. And, whether or not these are on the drawings, there will have to be comprehensive specifications, stating in words just exactly what the contractor will be supplying and installing in terms of materials and equipment.

But, for a relatively simple job such as Project, a complete design will most likely be prohibitive in cost and probably not really necessary.

B. HAVE YOUR CONTRACTOR FULLY DESIGN YOUR PROJECT.
What about having the contractor supply the plans and specifications? This is usually a mistake.
There are a variety of problems with this. First of all, and just so that we are clear, however personable s/he might be, your contractor is not your friend. S/he is in business to make money and they want to profit from your construction.
If you allow the contractor to supply your HIP with plans and specifications (Contract Documents), they will be very minimal and may not actually reflect what you were expecting/hoping to get. They might not, actually, even meet the requirements of your town’s building inspectors, which could affect your ability to get a certificate of occupancy (CO) at Project’s end. The time you don’t want to find this out is when the addition is up (or mostly up), your contractor is clamoring for more money, some subcontractors are threatening you with liens and the building inspectors are refusing to issue your CO because of various code violations of one kind or another. (This could definitely give one a serious case of the agita.)

While having your contractor include the cost of his preparation of Contract Documents in his/her proposal might seem cost-effective at the very beginning of your HIP, this may turn out being a very expensive mistake at the other end of your HIP. Because, quite simply, your contractor is preparing such documents to benefit him/her and not to benefit you. And, as we discussed earlier, we won’t really know how competent or ethical our contractor is at the very beginning of the project.
At the same time, getting full plans and specifications from your architect can be an expensive proposition, although the greater the dollar amount of your HIP, the better off you might be in doing so.

Now, for our Project, we are adding a floor to an existing ranch house, which was neither in the design criteria or construction criteria of the ranch house when it was designed and constructed thirty or forty years ago. Specifically, and without limitation, someone will need to carefully inspect the construction of the ranch house and be sure that the basic ranch house itself is strong enough to take the weight of what is essentially another house of similar size being placed on top of it. Ideally, the architect or the contractor will have some consultation with engineers, who would make the final determination of the suitability of another floor and, if suitable, how it should be constructed so that the house can support the additional weight of the addition.

C. HAVE YOUR ARCHITECT DESIGN SOME OF THE PROJECT WITH THE CONTRACTOR DESIGNING THE REST, WITH THE CONTRACTOR’S DESIGN CONTRIBUTIONS TO BE REVIEWED BY YOUR ARCHITECT.
A compromise solution might work in most cases. That is, to have your architect do “A” drawings, along with a general description in words of what the HIP will consist of, an example of which is given above. Then, have your contractor complete the design, and submit it as part of his/her proposal for your and your architect’s approval. Speaking from a lot of experience, the higher the quality and comprehensiveness of the architect’s drawings and general word description, the fewer the opportunities there might be for the contractor to circumvent it or otherwise just screw it up. This is a balancing act and it is never going to be perfect.

Now, in terms of actual final drawings and final specifications, the contractor might submit his contributions to the architect’s design as part of his proposal/estimate or, even, as a kind of submittal to be reviewed by the architect. Under the best of circumstances, what the contractor is likely to submit will be a great deal more minimal and lacking in detail than that which would be generated by an architect. A small element of the difference might be that some of what an architect might prepare might be unnecessary or excessive, But, the majority of it wouldn’t be. When your architect looks at the contractor’s design contributions, not a small amount of their attention needs to be focused in upon in what ways the contractor is actually trying to minimize (cheapen?) various requirements of the architect’s design.

Please keep in mind that with fixed price contracts, generally speaking, if a contractor is going to be actively competing in price with other contractors, the materials and fixtures the contractor will want to install will be the least possible such materials and fixtures as will meet the requirements of applicable contract documents. This is because construction projects are usually awarded to the contractor with the lowest bid.

Put another way, don’t expect that you will be getting anything better from the contractor than what is listed in his/her proposal. If you want better materials and equipment, they should be added to the mix now before there is a contract and before construction begins. Ideally, these would be described in the architect’s general description of the Project and/or by the contractor’s proposal.

Now, at this point, you have two groups of design/construction documents. You have your Architect’s “A” drawings, showing general design and appearance, along with a written description generally describing the construction to be achieved, which documents you have already provided the bidders with. And, in response to this, you will have various contractors’ proposals with proposed supplementary plans and specifications, which as is indicated elsewhere are likely to be fairly minimal.

Before making an award of the contract, give each of the bidders the proposed contract, which your lawyer has prepared, important elements of which are listed below. This is important because if the contractor is dead set against your form of contract, why spend any more time needlessly dealing with him/her? Sure, in a negotiation, not each side gets in the deal all of the elements s/he might want. But, the form of contract that we will be proposing is essentially fair and reasonable and not onerous. Put another way, there’s not a lot in it that a fair-minded contractor should object to.
It’s going to have some things in it that they will not like. But, four things will tend to work in your favor. First, the contractor will be more inclined to sign the contract if they need/want the work. Secondly, when contractors look at contracts for review, they are primarily reviewing them for scope and price. They are less interested in the ‘legal stuff’. Thirdly, most home improvement contractors don’t have their contracts reviewed by their lawyers (assuming they have one) before they sign them. Fourthly, quality contractors will have fewer objections to the contract form because they know they were intending all along to give you what that contract form requires as a matter of course.
You should solicit such documents from at least two or, preferably, from at least three contractors. You can tell each of the bidders that you are soliciting proposals from other contractors but do not identify who they are to the other bidders.
As part of the proposals, tell the contractor bidders that you also want from each a proposed ‘schedule of values’. (More on this later.)

And, you should have the contractors’ proposals with such additional plans and specifications as the contractors generate reviewed by your architect. And, any revisions to your contract which are proposed by the contractor should be sent along to your construction lawyer to review, both for conformance with the HIP statutes and regulations and to make sure that they are consistent with general contract and construction norms.
Do not have a wills and estates or divorce lawyer do this work. Law is like medicine in this regard: people specialize. Any lawyer who has an ad somewhere stating that s/he does wills and estates work, family (divorce) law, criminal law, real estate law and personal injury law means that the lawyer, in all likelihood, is not very good at any of them. In fact, s/he is likely to simply stink at most of them. For, even just one area of the law – such as construction law – there is so much to know! Have someone review the contract who knows what s/he is doing. Don’t have some non-construction lawyer within your family or group of friends review such documents, even if they’ll review the documents for free. They simply won’t have much of an idea as to what they are doing and as to how you should be best protected.
Here’s another thing ‘not to do’. And, that is, finalize the design now before the contract is signed and then, once you enter into actual construction, to the greatest extent possible jus leave it alone. Having a spouse suggest changes in finishes and construction details during the construction period drives contractors crazy and will likely extend the time period of construction (almost never a good idea) and will likely increase your costs (also, something you don’t want.)
I find that with regard to many of the HIP projects that come to me - and, generally, these are projects that are in trouble - some spouse changed his/her mind several times during construction with regard to fixtures, counters, cabinets, changing the size of rooms, etc. As much as possible, resist this. Do your design at the front end involving both spouses and then proceed with the construction as designed with as few changes as possible.

One final thing not to do. Once you sign a contract, you are legally bound to this contractor and s/he knows it. ‘Dating manners’ might come to an abrupt end, as will the contractor’s interests in further working to accommodate you as to design content and contract content.

To the extent that you have any leverage over the contractor during this process, this is largely before you sign the contract. After both parties have signed the contract, leverage switches over to the contractor. This is because s/he has begun taking apart your house , which you hope at some point will be put back together, new and improved. And, you’ve started spending money to finance the construction with this contractor. Since you are going to have only a finite amount of money to do this work, once you start with a contractor, it will become more costly to move to another contractor down the road (although, sometimes this may be required by circumstances.)

D. OTHER POSSIBLE OPTIONS?
As readers have probably realized by this point, renovation is harder, in many ways, than new construction. With new construction, one is not trying to match two things that are different from one another: the old and the new. This not only means the differences in the age of the same kind of materials from the old construction to the new construction. But, this also can mean the differences in materials themselves as a result of construction material advances, as are used in the new construction, not to be found in the old construction. And, certainly, different codes governed residential construction sixty years ago – about when our ranch house was constructed - from such codes governing residential construction today.
In considering our Project, and the kind of money we are talking about, at some point, possibly M/M Doe might consider/might have considered three other options.

The first would be in knocking down the ranch house and seeing about possibly purchasing a modular home, especially if one could fit on the ranch foundation with minimal modifications. Almost certainly, this would cost more money. But, there should ultimately be fewer problems, headaches and risks and the homeowners would essentially end up having a new house. And, in eastern Massachusetts, the greater part, by far, of the purchase price of a home is the value of the real estate, not the actual cost of constructing the house.

Secondly, we would encourage our homeowners, if we saw them before they first met with the architect or as a possible alternative to the architect, to see to what extent there might be any packaged designs that they could purchase which would still reasonably work in terms of tying in new construction to our ranch. Doubtlessly, they would require some modifications. But, if the homeowners had a builder that they had some confidence in, they might bring such plans to the builder and ask him/her: ‘can you make this work’? Or, for that matter, ask the builder if the builder could find a packaged design that they could purchase and make work.

Thirdly, I would think that building out would have fewer problems than building up. So, rather than just adding a second floor onto an existing house with the various problems that might involve, I would think in some circumstances, adding a similar addition at the same elevation would have its advantages. This wouldn’t work, of course, if the size of the lot won’t support this. But, if it would, this might have its advantages.

This is a particularly interesting idea if M/M Doe have read this article to this point and convinced themselves that they don’t have enough money to do their HIP. Possibly, they could break the construction down into two different additions: one today and the second in the future, as finances allow. After all, this is how construction used to work. Families kept adding on to their home as they needed more room, to the point that the additions actually were larger than the original house.

Another advantage to building out rather than building up is the family should be able to stay in the ‘base’ home for some of the periods of the construction time. This will save money on living expenses and on storage expenses.

VII. VARIOUS THINGS THAT YOU OR YOUR LAWYER SHOULD MAKE SURE ARE INCLUDED IN THE CONTRACT YOU WILL USE.
The following is not an exhaustive, comprehensive list of all of the contract provisions and requirements you should have in your home improvement contract. It is intended to cover some of the more important points, recognizing that there will be other important points your construction lawyer will include in your contract to reflect the specifics of your HIP.9

A. MAKE SURE YOUR CONTRACT INCORPORATES THE MOST IMPORTANT ELEMENTS OF THE STATE MODEL HIP CONTRACT.
As indicated elsewhere, there is a kind of state model for HIPs prepared by the Commonwealth of Massachusetts. Review this and make sure that the more important elements of that model are in your contract. These include items such as: having firm start and completion dates; not allowing the contractor to have more than a one-third deposit up front;10 whether it will be the contractor or the homeowner who will be getting necessary building permits; providing information concerning warranties; providing information as to a homeowner’s right to rescind (cancel) the contract within a certain number of days of signing it; and, providing for a payment schedule.

By no means are these the only things that should be in such a contract. Your contractor’s proposal should include a fairly detailed list of not only what materials and fixtures s/he is intending on using but some information as to the quality level of those materials and fixtures. If you, yourself, have copies of the catalogues that these descriptions are contained in, it would be a wise investment of your time for you to consider not only the materials and fixtures your contractor is proposing to give to you but also what alternatives there are to those materials and fixtures. It adds a lot of time and potential costs to an HIP contract when the contractor installs certain materials and fixtures only to have the homeowner insist that they be removed because s/he is not satisfied with the quality level of those materials and fixtures. You can get a lot of such information at a variety of home improvement stores.

B. MAKE SURE YOUR CONTRACT REQUIRES A SCHEDULE OF VALUES AND THAT EACH CONTRACTOR REQUISITION BE CAREFULLY CHECKED AS TO CLAIMED PERCENTAGE OF COMPLETION AND GENERAL ADEQUACY OF CONSTRUCTION.
Quite simply, what a schedule of values is is a fairly comprehensive list of the different items of work that will have to be done with a specific cost or value associated with it to perform the work of your HIP. For this job, you would have, for example, different elements for demolition, rough carpentry, finish carpentry, siding, roofing, plumbing, electrical, HVAC, drywall, fixtures, painting, etc. Each of these items themselves would be broken down into its constituent elements.
Looking at such a schedule, I would know what the gross overall costs for each of these categories is along with what are the actual anticipated costs for the various elements constituting each such item.

So, for example, with the contractor’s first requisition, s/he might claim that 50% of the demolition work is done. So, s/he will want to be paid for 50% of the scheduled or listed value for the demolition work. Since the values have already been agreed to, what needs to be done is for the architect to review the actually performed construction in place and either agree or not agree with the percentage of acceptable, contractually-compliant that work has been performed. Once this has been done, you will know what you have to pay for that particular item.

Contractors want to get as much money as possible as early as possible, often billing for greater percentages of individual work items than have actually been performed. This is called ‘front end loading’. This is detrimental to the interests of the owner because there will come a point in the job towards the end of the job when the cost of the work remaining to be performed is greater than the amount of money remaining to perform it. This becomes especially important with regard to the “punch list” which is a list of remaining work items, including the correction of defective work, that is prepared by either the architect or by the contractor (but, usually, by the architect) at such point in time that the contractor claims it has reached “substantial completion” of a certain project. “Substantial completion” of a project means that the building or project can be used for the purposes for which it is intended. For our Project, this could mean at such point in time that M/M Doe can move back into their home with their children. Once the punch list items have been performed, then the project has reached “final completion”.

When the cost of the work remaining to be done exceeds the money available to perform it, it’s not unusual for the home improvement contractor to lose interest in the job, even though s/he has been more than properly paid. Contractors want to be performing work at all times that will generate income. And, when a job has been over-billed, this means that the contractor itself will have to be financing a portion of the job and work items, which is something they try to avoid, even though the homeowner has fully paid the contractor to perform this work.
It’s very important that front end loading be avoided or, at least, minimized to the greatest extent possible. Verifying what percentage of the work has been performed is something that architects do every day of the week. A person not trained in doing this work would tend to agree with the contractor that higher percentages of work have actually been performed because they would not know all of the component parts of what any degree of completion would require. For example, even though you see that a light switch has been installed, you don’t know if that switch is fully wired and properly attached to an electrical source. A sink or a toilet may be sitting on a floor but unless it has been properly piped, it may not work or work properly.

Evaluating percentage of work completed is not something that is intuitive but is something that requires technical knowledge and a lot of actual experience.
With my experience as a construction attorney, I would say that whatever the architect charges the homeowner for reviewing actual percentage of work performed, that cost should be a lot less than the amount of money that the architect will be able to keep in the contract, not being paid out through a front end load, making the possibility of completion of the contract work with existing monies more possible. And, as stated elsewhere, it is always easier to keep a contractor interested in a construction project when there are still monies that can be obtained through further performance of it.

C. MAKE SURE THAT THE CONTRACT PROVIDES FOR YOUR CONTRACTOR’S SUMBISSION OF ‘SUBMITTALS’ FOR ARCHITECT APPROVAL.
This simply means that the contractor will provide information about the various materials and fixtures s/he will include in the Project to the architect for the architect’s approval before such materials and fixtures can actually be installed at Project. This is a very important and necessary step in making sure that you are getting what you are paying for.
Now, the greater the description of what the architect wants on the plans or in his/her general description of the Project, the greater the chance that the contractor’s proposal will meet the required quality level for materials and fixtures. Typically, submittals include physical samples of things such as bathroom tile. They will also include sections from material catalogues – called ‘catalogue cuts’- describing the materials and fixtures the contractor intends on using. And, no such materials or fixtures can be installed at Project until approved by your architect. In a very real sense, the architect literally serves as the gatekeeper for the quality of the materials and fixtures that will go into Project. Without having a design professional involved with this process, the greater the chance will be that less than adequate materials and fixtures will be installed at your Project. And, since your loved ones will live and sleep in your home – the ‘Project’ – you will want to make sure that the absolute highest quality of materials and fixtures are employed, especially anything related to safety.

D. MAKE SURE THAT YOUR CONTRACT INCLUDES A ‘TERMINATION FOR CONVENIENCE’ CLAUSE.
Without such a clause, for either party to terminate the other party (ordering them to cease further contract performance) there has to be some material fault or breach of contract that the terminated party has committed. For example, overrunning contract time is a material breach of contract, which can justify termination. Not properly paying subcontractors is a material breach of contract, which can justify termination. Not properly manning the job over a sustained period of time is a material breach of contract, which can justify termination. Not correcting in a timely manner defective work when notified of the same is a material breach of contract, which can justify termination. Typically, if one party has breached the contract, the other party is entitled to whatever damages resulted from that breach. But, whether or not the party which terminated the other party was justified in doing so can lead to court action. In fact, a termination by one party of the other party when not justified can itself be a material breach of contract by the party that terminated the contract, potentially entitling the other party to damages. Termination for material breach of contract frequently leads to various court actions, with one party suing the other looking for damages or with both parties suing each other, each looking for damages.

With a termination for convenience clause, an owner can terminate the contractor without claiming that the contractor materially breached the contract. The contractor can be terminated for any reason or for no reason. And, this is a good way of dismissing your contractor when it is clear that this relationship is not working out, that is not the contractor for you. In a sense, this is kind of a business form of ‘no fault’ divorce as applied to contracts.
Such a clause typically provides that the contractor will be paid for all work that has been performed to date and approved by the architect at the time of the termination for convenience. The contractor will not be entitled to be paid any overhead or profit on omitted work not performed.
If this is done properly, there will be no court action required. That is because there is nothing to litigate. There is no issue between the parties as to which one of them is at fault because fault isn’t a relevant factor. And, since the amount the contractor is entitled to be paid is established by the termination for convenience clause, this isn’t an issue between the parties.

If there is a fly in the ointment, it is this. If the owner terminates the contractor for convenience, the owner will not be entitled to recover any damages from the contractor. So, if the owner feels that it is entitled to a large amount of damages from the contractor and that the contractor has the ability to pay those damages and that the pursuit of the contractor in court is worth the expense and the uncertainty of litigation, then the owner will have to terminate the contractor for fault or cause. In such a case, the contractor can file a counterclaim (counter-suit) against the owner for wrongful termination and seek damages, if it wishes to do so.

E. MAKE SURE THAT YOUR CONTRACT PROVIDES FOR RETENTION.
For most commercial and public construction, a small percentage of each approved requisition is not paid by the owner to the contractor. This is called ‘retention’ or ‘retainage’. Ordinarily, this is either 5% or 10% of the approved value of the work that is done. As an owner, I’d try to get 10% retention.
There are several reasons why this is a good idea for the owner. For one thing, this provides a fund of money to finance the performance of the ‘punch list’ of incomplete and/or defective work at the end of the job. And, the fact that the contractor still has contract income to look forward to obtaining has the tendency of keeping the contractor more interested in the job.

F. MAKE SURE THAT YOUR CONTRACT IS CLEAR THAT ALL PAYMENT REQUISITIONS WILL HAVE TO BE APPROVED BY THE ARCHITECT BEFORE YOU HAVE THE OBLIGATION TO PAY THEM.
This is, of course, to make sure that the contractor will only be paid for the actual percentage of work properly performed through a certain date less retention. It’s intended to try to prevent (or minimize) front end loading or any other form of overcharging. Having the architect review each pay requisition means that the architect will have to visit the job. Doing so, the architect will often be able to spot problems that are developing with the construction, for which s/he will try to find some solution. As in many other areas of our lives, fixing ‘small problems’ are usually less expensive than fixing ‘large problems’. As the FRAM oil filter guy says in his commercial, ‘you can pay me now or you can pay me later.’ ‘Paying later’ always seems to be more expensive and, with construction, it can be a lot more expensive.

G. MAKE SURE THAT YOUR CONTRACT HAS AN ATTORNEYS’ FEE PROVISION IN IT.
This is very important. Under ordinary circumstances, when a party wins a court case, s/he doesn’t get reimbursed for their attorneys’ fees in Massachusetts, unless the contract at issue has an attorneys’ fee provision in it or the party suing has a recovery under a statute providing for them. This is called the ‘American Rule’ of attorneys’ fees.12 Having an attorney’s fee provision in your contract means that if the homeowner has to sue the contractor to enforce the terms of the contract and wins, the contractor will have to pay two attorneys’ fees: its own and the homeowner’s.
This, not being terribly attractive to the contractor, is a factor in some cases in getting the contractor to voluntarily fulfill his/her contract obligations where if the contractor were only facing the possibility of only having to pay his/her lawyer, s/he might be less inclined to do so. Put another way, potentially having to pay the other side’s attorneys’ fees can be a significant factor in a party’s evaluation of its exposure in any particular case.

H. MAKE SURE THAT YOUR CONTRACT PROVIDES FOR LIQUIDATED DAMAGES.
This is also very important. A common problem with HIP contracts is that they tend to run late, sometimes really late. Namely, although there is a completion date in the contract, the contractor overruns it without the job being completed. What ‘liquidated damages’ are is a certain amount of money that will be assessed against the contractor’s account, including remaining contract monies, for each day that the contractor runs late. This is a strong incentive to the contractor to pay attention to the completion date and to finish on time. A figure of $250 to $500 per day for a Project of this size would be typical.

I. MAKE SURE THAT THE GENERAL CONTRACTOR HAS TO SUBMIT LIEN WAIVERS FOR ITSELF AND FOR ITS SUBCONTRACTORS BEFORE ANY PARTICULAR REQUISITION IS ENTITLED TO BE PAID.
A lien waiver is a document that your lawyer will draft for you.
In it, the general contractor (or the subcontractors) will acknowledge that through the last payment period, they have been completely paid anything they are entitled to be paid for Project. This provides some defense for the homeowner as to claims coming in out of the blue, such as with the general contractor in our nightmare scenario suddenly claiming that it is entitled to be paid an additional 100k. It also gives the homeowner earlier notice if the subcontractors are not properly being paid. If the owner knows that while there is still money in the general contract, then the owner can use those monies to make sure the subcontractors get paid so as to minimize the chance of mechanics’ liens being filed against the property.
Make sure that the subcontractors directly send to you their signed (and notarized) lien waivers. If you allow the general contractor to send to you the subcontractor lien waivers, you may find that the contractor forged the subcontractors’ signatures to them, in which case those documents have absolutely no legal force or effect in terms of limiting the rights of the subcontractors to file liens.

VIII. CONCLUSION.
A painter would tell you that the easiest part of painting is the actual application of the paint. Because, before the paint can be applied, there is an awful lot of work involved with stripping, scraping, sanding, patching and surface preparation.
We are hoping that, at this point, you have a contractor signed up under contract, basically following many (most!) of the suggestions stated above. You have prepared yourself and your family for this Project to the extent it can.
And, how exciting a time this is! You are going to double the usable space in your house with more bedrooms and bathrooms. Your home will immediately increase in value for at least the greater majority of what you had to spend to perform Project. Over time, because two story houses are more desirable than single story ranches, your having had Project performed will actually make you money. This will have turned out to be a very good investment on your part!
If you have followed most of these suggestions, then you’ve properly set this job up. Your signed contract with the contractor in addition to your relationships with your architect and with your lawyer is your plan. So, now it is time to execute that plan!

For the moment, there is nothing left for you to do by way of preparation.13
It is now time to commence construction.
If your architect has approved the contractor’s proposal and the schedule of values and the contractor’s submittals and the contractor’s requisitions and reviews on a regular basis the amount and quality of construction that is being done, this should allow him/her to spot most problems while they are still relatively small.
Now, it’s important to keep in mind that a ‘contract’ is a legal document, which describes a legal relationship, being that between you and the contractor. There are any number of responsibilities and obligations owed by each party to the other. And, at the same time, there is the ultimate benefit the homeowners are going to get. The new second floor!
My experience has been that lawyers are usually brought into a problem too late to be as effective as they might have been had they been brought in sooner. And, the cost earlier in the problem will almost definitely be less than the cost when the attorney is brought in later in the problem when there may be fewer options and significant lawyer time may have to be incurred in correcting, if possible, mistakes that the homeowner has made. If you want to pay lower attorneys’ fees, then you have to do those things that are necessary and appropriate before the lawyer gets involved. And, get him/her involved earlier!

IN ANY EVENT, my best wishes for a successful, timely and on-budget result for your next home improvement project! Let me know how it turned out and what elements of this article were helpful to you and which elements of this article need to be changed. And, if there are additional subjects you think might make this article better, I’d appreciate your letting me know.
***********************
(Copyright claimed 2018)
Jonathan P. Sauer
Sally E. Sauer
Sauer & Sauer
Phone: 508-668-6020; 508-668-6021
jonsauer@sauerconstructionlaw.com
sallysauer@sauerconstructionlaw.com
Main Office
15 Adrienne Rd.
E. Walpole, MA 02032
Conference Facility
284 Main Street (Route 1A)
Walpole, MA 02081
29
All correspondence and deliveries should be sent/made to the Main Office only.
All client meetings, depositions and seminars take place at the Conference Facility.
www.sauerconstructionlaw.com
*************
This article is not intended to be specific legal advice and should not be taken as such. Rather, it is intended for general educational and discussion purposes only. Questions of your legal rights and obligations under your contracts and under the law are best addressed to legal professionals examining your specific written documents and factual and legal situations. Sauer & Sauer, concentrating its legal practice on only construction and surety law issues, sees as part of its mission the provision of information and education to the material suppliers, subcontractors, general contractors, owners, homeowners and sureties it daily serves, which will hopefully assist them in the more successful practice of their business/lives. Twice a year, in the spring and in the fall, Sauer & Sauer provides free seminars on topics such as: how to file payment bond claims; how to file mechanics’ liens; basic construction contract law; claims involving differing site conditions, changes and delays. If you are on our emailing list, you will be notified about when they will be next held. If you are not currently on our email list but would like to be, please send us an email and we=ll put you on it. Articles and forms are available on a wide number of construction and surety subjects at www.sauerconstructionlaw.com under the ‘construction law articles’ button. We also send out >Squibs=, our free monthly newsletter, which contains articles on various construction and surety law subjects. All prior Squibs can be found on our website under the ‘Squibs’ button. We literally have on our website hundreds of pages of free information, content and forms that might be of assistance to you. All of this teaching and writing is done by only one person, Jonathan Sauer, who has more than 42 years of experience as a construction attorney. We don’t believe that you will find a site on the internet with more information on it. If your lawyer is not working this hard for you in providing you with free information and education that you are not being charged for, you might want to question whether you are getting the best value for your legal dollar.
AKnowledge is Money In Your Pocket! (It Really is!)@ J
(Advertisement)
1The actual, somewhat longer, title for this article is: “READ (AND STUDY) CAREFULLY AND SEVERAL TIMES THIS ARTICLE ON HOME IMPROVEMENT PROJECTS AND YOU (PROBABLY) WON’T HAVE TO TAKE TWO ASPIRIN AND, MOST CERTAINLY, A GOOD STIFF DRINK SUCH AS PASION AZTECA, HENRI IV DUDOGNON HERITAGE COGNAC GRANDE CHAMPAGNE, OR, FOR THOSE WHO HAVE BEEN SLIGHTLY LESS BLEST BY WORLDLY SUCCESS (UNFAIRLY SO, NO DOUBT) GLENMORANGIE PRIDE 1981 HIGHLAND SINGLE MALT SCOTCH WHISKEY, AND CALL ME IN THE MORNING (IF YOUR HANGOVER, RATHER INORDINATELY EXPENSIVELY OBTAINED, ISN’T TOO BAD.”) We used the shorter title at the top of the article for two reasons. One, to avoid those annoying four o’clock in the morning knocks on the
30
door by the Internet Police SWAT team. (They won’t buy you a new door after they ruin your existing door using that 40 pound hammer-thing.) Two, it won’t fit on the bumper stickers that we are having made to celebrate what a simply grand accomplishment this article is. (I have been informed, possibly reliably, that the Pulitzer Prize Committee is carefully considering considering it.) If you want a bumper sticker, take a couple of healthy gulps first from whichever bottle has anything left in it and send us an email and we’ll send you a price list. Not to tip our hand, but you’ll need, at bare minimum, at least one Platinum card to order one. Like a Rolls Royce, if you have to ask what the price is, you probably can’t afford it.
2 There is an article that a homeowner might want to read in the ‘Construction Law Articles’ section of my website (www.sauerconstructionlaw.com), dealing with the legal requirements of a home improvement contract. This is: “MASSACHUSETTS HOME IMPROVEMENT SAMPLE CONTRACT WITH COMMENTS”. The actual model state form can be found at: https://www.mass.gov/files/documents/2017/12/08/Home%20Improvement%20Sample%20Contract.pdf.
3 He did have that little issue with, uh, flying a kite in the midst of a lightning storm. No doubt, this explains why his hair seems to be a bit unruly in some of the pictures he is shown in! No one is perfect!
4 Rather curiously, having your builder construct for you a brand new house is not covered by a fairly extensive and stringent set of requirements for home improvement contracts even though, from a dollar standpoint, home construction contracts for entire houses almost always are for larger sums than those involved with HIP.
5 Our first choice for the homeowners were John Q. Public and his wife, Charlene. Unfortunately, they were engaged in another project.
6 One first reading this might think: “Why are you increasing the cost of my project so dramatically?” The answer to that is that by just thinking of the construction estimate of 200k, you are understating the actual costs of your project. You have not included all of the various costs that go along with that estimate, including providing a 10% contingency for change orders and another contingency allowing for you to select a bidder other than the ostensible low bidder, along with various professional costs that you will be necessarily incurring if you wish to go about your home improvement contract in a business-like way. At a time such as this one, I am reminded of the immortal words of Gomer Pyle: Surprise, surprise! But, it’s always better to have the ‘surprise’ up front rather than after the fact.
7 Even if you were to understand that you or a loved one needed to have an appendix removed, you wouldn’t try to remove it yourself. And, that is because the doctor has medical knowledge and skills and training that an ordinary person does not have. Why, then, would a person think that s/he can be his own lawyer with regard to an HIP, having to deal not only with contract law issues but interpolating those with various technical information and customary contractual procedures? I have had a number of HIP contracts that were drafted by homeowners who were attorneys but not construction law attorneys. And, fairly routinely, these contracts have simply been horrible – and, not necessarily in the homeowner’s favor.
8I teach a variety of construction law courses. Being a contracts lawyer for several decades, an expression that I often use is that I would rather have a bad contract with a good contractor than a good contract with a bad contractor. Through several decades of practicing law, this has proved itself out over and over and over again.
9 I would be more than happy to completely prepare your home improvement contract for you. Preparing contracts is one of the things that I routinely do as a construction attorney.
10 That’s a ‘maximum’ that can be charged for a home improvement contract. If this is necessary at all, I’d propose a smaller percentage. However, paying some deposit up front is fairly standard with home improvement contracts. Among other things, having a deposit up front allows the contractor to order whatever materials will be necessary to accomplish the job.
31
11 I realized I was starting to get older when I realized that I was more interested in seeing what is available at Home Depot than I was in checking out new models of motorcycles!
12 If neither of these two circumstances is applicable, by statute, a party winning a case is awarded an attorney’s fee (called, in court lingo, a taxable ‘cost’) of either $1.25 or $2.50!
13 Hulk Hogan would say that, in addition, you should always say your prayers and take your vitamins. (The Jolly Green Giant would most likely add that you should also eat your vegetables.) The Hulkster is a guy who stands 6 ft 7 inches tall and weighs 302 pounds with 24-inch biceps. Do you want to be the one to tell him that he is wrong? Particularly when your mother has also been telling you for years to say your prayers, take your vitamins and eat your vegetables? As he might say, ‘Not me, Brother