Rehab question before the work begin ??

2 Replies

GM. Question. From a legal standpoint what contract agreements do you make your contractor sign before he starts the rehab?

Isiah:

Well the most important thing is your contract for rehab, including the terms and conditions you have in there.   You should have a lawyer help you with the legal stuff.   On your end, you better specify EXACTLY what work is expected, EXACTLY what materials should be used, and use your contractor's quote to contractually note a SPECIFIC cost  (do not pay by the hour).   Note, changes are common.  Handle them as addendum.

Critically important is documenting when you pay.  NEVER pay up front.  You can pay along the way, but always incentivize the contractor to finish the work to make his profit.   Also, you should have a penalty in your contract for exceeding a specified time limit.    If you are reasonable a good contractor won't mind that at all.  (For example, if the contractor says the rehab will take 2 weeks you can put in an clause saying $100/day penalty for every day over 3 weeks.)

Your accountant may want you to sign the 1099 paperwork if you do this a lot.   Then, when done, get a lien release.

All the legal stuff is a seperate package... but the #1 thing is a CLEAR list of work.  very detailed.  the bedroom cieling light.  what is happening to it.  Dont assume.  You will walk a property, talk a LOT with your guys, most of it will end up in the contract but the detail will be lost.  

I am learning this now with my flip.  we have "replace vanity" in the contract... but the style and size and color wasnt delineated... for my next one I plan on having a rolling document that I keep all decisions and color choices in...

Carson Wilcox

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