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How to get your home improvement contracts right

Understanding contracts is key to making your home improvement schedule hassle free and cost effective. Find out how to manage them by reading the helpful tips below

Finding the right builder or trades person to carry out your home improvements can be like navigating a maze. So it is natural that having identified the person you think is right for the job, you heave a huge sigh of relief and agree to whatever method of payment he or she suggests for the job

Big mistake: the method of payment, indeed the very way in which you are quoted for the job, are also evidence of whether the builder is right for you or not. Here is what you need to think about:

Ask for a quote in writing

This is essential, as a written quote specifies exactly the job to be done. Also, note the difference between a “quote” and an estimate. A quote is a fixed price that the builder can't change once you have accepted it, even if they have to carry out more work than expected – subject to you not changing your mind half-way through and asking for the work to be carried out differently. An estimate, on the other hand, amounts to an educated guess.

It is not binding, and it means that you could end up paying more.

What this means in practice, is that you need to be completely clear about what work it is you expect to be carried out. The best way is to specify everything on paper, down to the paint you want used, the number of coats you expect to be applied and how you want the house to be left after the job is done.

Be aware, however, that quotes cost the builder time and money to prepare. He or she is less likely to want to submit one if you are asking upwards of five builders to quote.

It makes more sense to tell the builder he or she is one of two or three, four at the very most for a big project, that you want to do the job. Knowing they stand a reasonable chance of getting the work makes it more likely you will get a quote.

All quotes should be within 15% to 20% of each other. Beware of a quote that seems to be impossibly cheap, as well as one from a builder who says he can start immediately: what, you aren’t busy? Just exactly how sought-after are you?

Also, while it may be tempting to use a quote to then force a “Dutch auction”, in which the chosen builder is asked to reduce his price to match lower quotes. Your builder will resent you for it and then try to cut corners while on the job.

Agree a contract

A contract can prevent misunderstandings and establish the cost and duration of a project. Contracts can also provide you with peace of mind and ammunition if the builder doesn't complete the job according to your specifications. Therefore, it should go into detail in terms of:

• The work that needs to be done, including labour and materials
• The cost of each piece of work
• How payment will be made (in stages or at the end of the work)
• Whether there is a sum held back for "snags", putting right any minor problems that may arise after the work is completed.

Work guarantees

The best builders will also offer to guarantee their work for a period of time.

Before you choose your contractor - ask them to explain their guarantee and request that you have a written copy of it before the work starts. Not all trades professionals will have a standard guarantee document, and so they may have to prepare this for you.

You should also insist that the guarantee is insurance backed, because no business can say with certainty that they will be around in years to come to honour your guarantee. By insisting on an insurance-backed guarantee you benefit from an insurance company paying for any work if the builder ceases to trade.

While on the subject of insurance, make sure the builder has liability cover: if anyone has an accident on your site, you want to make sure that everything is covered.

NHBC guarantees

If the contract is big enough – for example, building a new home – you will probably need a guarantee from the National Home Builders Council, or NHBC. The NHBC 10-year guarantee covers about 85% of new homes in the UK.

The builder usually obtains this cover. You should always double-check with the NHBC that they have what they say.

• Find out more at the NHBC web site www.nhbc.co.uk

VAT

This is the classic one: the builder tells you that the work will be cheaper – "You don’t have to pay VAT" – if it is paid for cash in hand. This might be OK for a tiny job, a small area to be plastered, for example, or for a painting a couple of windows.

Apart from the fact that it is actually against the law, you also have no come-back if the job goes wrong. Means that there is no official record of the job and also the builder will be reluctant to offer a guarantee or enter into a contract.

Moreover, if the contractor is prepared to cut corners, will he cut corners throughout the job?

Deposits

Beware of requests for large deposit payments. There are far too many examples of homeowners paying large deposits and the contractor disappears, or goes out of business.

Always question the need to pay for a deposit up front - ask what it is for. All good trades people will have credit accounts with their suppliers, so to claim that the deposit is for materials is not only wrong, it also suggest the builder is operating on a "hand-to-mouth" basis.

If they say they need it to ensure the job goes ahead, you can state that you would rather sign a contract instead to show your commitment.

In certain circumstances it may be justified to pay a deposit, for example if a special item needs purchasing from a specified supplier. You should keep the amount as low as possible: 10% of the contract price is usually acceptable.

Useful links.

You can download a standard contract from the Federation of Master Builders Website

Please note that this information does not constitute regulated financial advice, which recommends a course of action based upon the specifics of your personal circumstances. The information is purely intended to provide you with general information only. You should consult an Independent Financial/Mortgage Adviser (IFA) before making any important decisions about your finances.

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