Illustration: Philippe Weisbecker
In San Diego, bay views are priceless, and Jody Costello wanted to capitalize on her location overlooking the ocean vistas of Point Loma. So, in mid-1999, she and her husband decided to add a third-floor master bedroom suite and a pair of decks to their two-story Mediterranean-style home. The contractor — well known locally for his frequent radio advertisements — told her the project would cost $107,000 and be completed within three months. Costello eagerly signed the contract he gave her and paid him the requested $30,000 to get started.

Costello didn't know that in California it's illegal for a contractor to ask for a down payment of more than $1,000 or 10 percent of the job, whichever is less. That wasn't the only red flag: Things began to go wrong from the scheduled first day of the job, when the contractor called to say that he couldn't get the lumber and would have to delay the project a few weeks. Then, during demolition, workers tore the vent off the gas water heater, which allowed carbon monoxide gas to escape into the house. Following that, the builders misread the plans and framed the addition 18 inches taller than city codes allowed. Before it could be fixed, and while the roof was still open to the elements, the winter rains arrived, soaking most of the Costellos' possessions that weren't in storage.

Now, three years and a second $30,000 payment later — and with the addition still unfinished — Costello is taking the contractor to court. "We messed up," she acknowledges. "We signed a bad contract that had too few specifics about what we expected from the project and how we would be protected if it didn't work out the way we wanted. Then we poured good money after bad."

Stories like Costello's make real estate and renovation professionals shake their heads in amazement — mainly because of how common they are. Although a home-remodeling project ranks among the biggest expenditures people make in their lives, in most cases the contract is little more than an afterthought, if it's considered at all. But a solid contract can be the closest thing to a guarantee that the job will turn out as the homeowner envisions. "People will pay $100,000 for an addition, but paying for an attorney and taking another week or so to make sure the contingencies are covered are often considered a waste of time," points out lawyer Ann Rackas, managing director for contract documents at the American Institute of Architects. "That isn't very prudent thinking."

A contract doesn't have to be complicated. For small jobs — say, under $1,000 — a simple one-page agreement that outlines the project, schedule, and cost should be sufficient. But even for big jobs, a handful of basic provisions is all it takes to protect the homeowner if something goes wrong with the project or, worse still, if the contractor breaks the law. Many construction companies offer their own versions, and local bar associations or the American College of Construction Lawyers, in Washington, D.C., can help locate attorneys in your area who specialize in construction matters. But whether using an existing contract or drafting one with the help of a lawyer, the best protection for a homeowner is to read and understand the document thoroughly. Following is a checklist of 12 key points you should make sure your building contract includes.
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