Renovation Litigation: Here’s how to avoid it

Author: Lawrence S. Jacobs Date: 03/28/2017

Categories: Estate Planning and Administration, Partnership Planning

I’ve been a lawyer for 42 years now and I have represented thousands of individuals and businesses.  But among the people who know me well, the real milestone is the fact that I have bought and renovated eight houses during that same time.  During just the past 17 years, my husband and I have owned three of the houses on that list and are getting ready to start our downsizing odyssey by renovating a condo.  That will make it number nine.

Not surprisingly, I’ve learned a lot about the renovation process and how all too frequently it can intersect with the legal system. I’ve represented many homeowners in their disputes with contractors and suppliers, as well as many suppliers and contractors that have gotten into disputes with homeowners. It just goes with the territory.

Part of the reason for these problems is that home renovations are not only expensive. They are an area in which most people do not have in-depth technical knowledge.  (Quick: what are the three main types of kitchen cabinets and what are the differences?)  Friends talk to me about renovating kitchens (my particular specialty), and ask me how much it should cost. My standard response is “pick a number between $5,000 and $500,000 and you can spend that amount.” The trick is to figure out what you really need, who can supply it at a reasonable price, and get the job done on the schedule that you want. The lack of clarity and specificity on those three points is what frequently leads to disputes and sometimes to litigation.

1. What do you really need? The rise of HGTV has broadened awareness of design choices, while creating the false impression that renovation is easy. If that were the case, many of the shows wouldn’t feature professional interior designers guiding customers through the process. Starting with a knowledgeable designer and having a clear understanding of that person’s capabilities and costs is the best way I know of to avoid problems down the road.  Far too many people start the process in a big box store where the level of skill and attention to detail is just not the same. Frequently, the resulting contract is not explicit and does not even comply with home-improvement law. Maryland, for example, prohibits any company or individual providing home-improvement materials that are going to be installed or related labor from demanding a deposit of more than one-third of the total cost of the project. I have seen this law violated by big and small companies alike.  It’s in place for your protection and could cost them their license. Run for the door if a store or contractor asks for more down and/or if they don’t include their home-improvement license number on everything. Of course you should deal only with a licensed contractor.  If you’re not sure, you can check their status online.  In Maryland, the agency is DLLR, in D.C. DCRA and in Virginia it’s DPOR.

2.  Home-improvement contracts should state the cost for the materials and the labor separately. Don’t let the supplier lump those two numbers together or you will have no way of knowing whether the charges are reasonable. While it’s difficult to compare the cost of labor, it’s very easy to do that for materials. Virtually every component, whether it’s a light fixture, an appliance or a piece of tile has a model number. You should always insist that they be specified.

3.  Home-improvement contracts are also required to specify the start date and at least an estimated completion date.  Of course, if you’ve been through this before, you already know that construction schedules are virtually meaningless. I’ve been involved in dozens of projects myself and I actually can’t remember one that was finished on schedule. It’s just the nature of the beast. However, if your contract is open-ended and provides no penalties for running significantly over schedule, then you’re sunk. Contractors hate penalty clauses but it is the best way of holding their feet to the fire.  However, if you specify Italian cabinets or some other exotic material, you must allow for the fact that it may take months to arrive through no fault of your contractor. Sure, Jonathan and Drew can seemingly complete the largest whole house renovation in a mere seven weeks, but that is not the real world. If that’s what you expect, you are bound to be sorely disappointed.

Take the time to gather information, compare bids, understand every item on the proposal, and ask questions before you sign a contract. It’s the best way to get you into your renovated home with minimal hassle and stay out of court.