There are over 50 different contractor’s licenses for California contractors to obtain, but among the most common types of contractor licenses are Class B General Contractors’ licenses – which allow any contractor to take on GC work in the state of California.
While every different construction project has different parameters, needs, and requirements – every type of construction project requires a robust contract that outlines what is expected from both the homeowner and the contractor.
Residential remodeling projects in California are no exception. Home improvement remodelers need to know what to include in a contract given to a client.
In this article, we’ll cover all the essential ingredients of creating a Home Improvement contract, so you can start taking on remodeling projects right away.
Please note that this is not financial or legal advice. Always consult a legal professional before creating or delivering a contract to any client.
The B-2 License: The Home Improvement Contractor License in California
If you work in home improvement, you’ll be very familiar with the Class B General Contractor license, specifically its sub-license – the B-2 Residential Remodeling license.
The B-2 License allows you to take on any residential remodeling, home improvement or other construction project involving a residential property under 3 stories tall. A B-2 license is commonly used by remodeling contractors who want to do jobs like bathroom remodels, siding teardowns and refurbs, and so on.
Learn more about the B-2 Home Improvement Contractor license in our blog post on the subject.
Do You Need A Home Improvement Contract?
The answer is yes – in most cases.
In California, a “home improvement” is legally defined as an agreement between a contractor and a homeowner or tenant for work to be performed at the owner’s or tenant’s home on projects with a value over $500.
Whether you are installing a new kitchen, adding a second story, or simply painting a room, if the cost of the project exceeds $500 – you need a home improvement contract and a CSLB-certified B-2 Remodeling Contractor to perform the work.
All home improvement projects that are less than $500 are excluded from CSLB rules. You don’t need a registered contractor, nor do you need a contract. Basically, anyone doing remodeling work under $500 is good to go, no additional paperwork or certs required.
Essential Requirements of a Home Improvement Contract
Clarity and Legibility
First and foremost, a home improvement contract should be clear and easily readable. This legal standard ensures that all parties understand their commitments and obligations and that the contract isn’t entered into under deceitful, misleading, forceful, or other circumstances of bad faith.
This means that any handwritten portions of the contract must be legible. While technically verbal contracts are binding – heck, you could have a contract on the back of a paper napkin – you should save yourself the bother of this requirement and just type out all of your contracts.
It’s 2023, there’s no excuse for any contractor to not produce typed contracts. Not that it matters anyway, as no client will sign on with a contractor whose contracts are written in pen.
When writing your contract, pay attention to the font size. Preprinted sections, including any headings of a contract in California, must be in at least a 10-point typeface.
First Page Information
The first page of the contract should include crucial information like the name of the project, the name of your contracting company, the date the homeowner signed the agreement, the name and address of both the homeowner and the contractor, as well as any name or address where you will receive project-related mail like cancellation notices.
Mechanic’s Lien and Down Payment Stipulations
A mechanic’s lien is a legal claim against a property that has been remodeled or improved. This legal instrument allows contractors to protect themselves against nonpayment – this usually covers things like material costs or wages if the homeowner cancels the project.
On the other side of the coin, homeowners who are protected in Home Improvement Contracts must include a statement indicating that upon completion of each phase of the project, the contractor will provide an unconditional release from any potential mechanic’s lien claimants.
Moreover, the contract should include a clear stipulation about down payments. California law caps the down payment at 10% of the total project price or $1,000 – whichever is less.
This law is designed to protect homeowners from paying too much upfront – only to be stuck with an unfinished project when an unscrupulous contractor skips town.
Change Orders and Bonds
Change orders are modifications to the original contract regarding the scope of work, materials, or cost.
The contract should contain a statement indicating that change orders will become part of the contract once they’re signed.
This protects both the contractor and the homeowner, ensuring that any changes to the work are documented and agreed upon by both parties.
Additionally, the contract should state that the homeowner has the right to require the contractor to have a performance bond.
A performance bond is a type of surety bond that ensures a contractor will complete a project according to the terms of the contract. If the contractor fails to complete the project, the bond compensates the homeowner.
The contract must include the contractor’s name, business address, and license number. This protects homeowners from unscrupulous contractors as there’s a paper trail they can follow to recoup any potential costs from bad construction work.
On the flip side, it puts the homeowner at risk as well as hiring an unlicensed contractor is illegal. They can face penalties for hiring them, as well as putting themselves at the risk of having no legal recourse should the unlicensed contractor make a meal of things.
Detailed Description of the Work
The contract should contain a detailed description of the work to be performed.
This description should be so comprehensive that it leaves no room for ambiguity or misunderstanding. It should specify the materials to be used, the process to be followed, and the expected result of the project – down to the last nail and screw.
For instance, if the project involves installing new flooring, the contract should detail the type and brand of the flooring, the pattern for installation, and any preparatory and finishing work that will be done. You’re a contractor – you know what a description of work is and what’s required!
Project Price and Payment Schedule
The total price of the project should be clearly stated in the contract, and it should be broken down to demonstrate where the money will be spent.
This price should include the contractor’s labor costs, the cost of materials, and any applicable fees, such as permit fees or Homeowner Association (HOA) fees.
In addition to the total project price, the contract should also include a payment schedule.
This schedule outlines when the homeowner will make payments to the contractor, typically upon completion of specific project milestones. This not only ensures that the contractor is paid promptly but also gives the homeowner some control over the project’s progress.
Start and End Dates
The contract should specify both the approximate start date and completion date of the project. Obviously, this is construction and things can change – and often do.
The point of including these dates is to set expectations for both parties and provide a timeline for the project for everyone to be familiar with and understand.
While not necessary, it is often beneficial to include a list of acceptable delays to these dates to ensure clarity in the event of unforeseen circumstances that might cause the project to be delayed.
Warranties & Additional Covenants
Finally, the contract should provide a description of available warranties. These warranties might be product warranties, which are offered by manufacturers to ensure that the equipment, fixtures, or products used in the project work as intended.
Additionally, the contract may include project guarantees, which are assurances from the contractor about the quality and longevity of their work. This is not required many reputable contractors
California is a state notorious for its endless labyrinths of red tape – but the bureaucracy and legal frameworks exist for a reason: to protect homeowners and contractors.
A quality home improvement contract does exactly this: it outlines all of the details of the project and sets expectations accordingly, while also detailing the penalties and consequences of either party violating their contract.