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Renovation & Design

It's all about the percentages

Pay your contractor in stages... and only for work that's done

I've seen too many renos fall off their tracks. And there are two big reasons why they do: First, homeowners hire a friend, family or neighbour to do the job; and secondly, they don't have a payment schedule tied to specific milestones in the job.

Not hiring a friend of the family or someone you know as your contractor should be a no-brainer. I can't tell you how many people I have had to help because a contractor ruined their home and their lives -- and that contractor used to be their friend, or is their neighbour.

Nine times out of 10 the friend/family/neighbour as contractor leads to a doomed relationship. And there are a few reasons for that. But the main one is if it's a friend, you might be more lenient with the kind of work being done because you want to be nice. You don't want to ruin the friendship. You don't want to step on their toes or question their skill.

But if you're more worried about your contractor's feelings and potential fallout than your home, your renovation is doomed.

If you want results, you need to be clear about them, and you can't be scared to demand them. And, at the end of the day, a renovation contract is a contract; there are obligations. And the better you build your contract the better and smoother the job will be -- for you and the contractor.

The first step to keeping a renovation on track is to hire a good, reputable contractor. The next step is setting up a contract with a detailed payment schedule tied to specific project milestones. The most common milestones or stages are rough-in, drywall and completed.

Rough-in is when anything that has to do with the foundation, subfloor, framing, sheathing and roof are done, and all the electrical and plumbing has been roughed-in.

The drywall stage is when the drywall can go up and your contractor can start closing in on the job -- that means all electrical and plumbing is done.

The last stage is usually called "completed" -- but the project isn't exactly 100 per cent done; it's more like 90 per cent. That's why your contractor should have only 90 per cent of the total budget in his pocket at this point. You hold onto the last 10 per cent to make sure everything completed to this point is as it should be. Once you know it is (usually not more than a month after the job is done) you make the last payment.

Remember, the contractor's power is his work. Your power is money. A contract that ties payment to completed project milestones sets out all the rules for a fair exchange of these two powers.

Before anything starts, your contractor will ask you to secure the job with a down payment. It shouldn't be more than 10 per cent of the total cost of the job. There are exceptions to the 10 per cent rule, but they need a good reason, like having to order custom cabinets.

But any payment you make to your contractor after the initial deposit must be in relation to how much work is completed. For example, if a job costs $30,000 and the only progress your contractor has made is demolition, don't pay him $11,000. Why would you pay 35 per cent of the budget for not even 10 per cent of the work? That doesn't make sense and you know it. Don't agree to it in your contract and don't get bullied into it during the job.

Once you hand over the money, you lose your power. Now you've opened the doors for your contractor to postpone your job and work on other jobs he still needs to collect on. A good contractor won't do this. But then again, a good contractor wouldn't ask you to fork out 50 per cent of the budget for 15 per cent of work.

The best jobs are the ones that make sense and move forward at a good, steady pace -- weather permitting. Twenty per cent of the job gets done, 20 per cent of the budget gets paid. Another 30 per cent of the job gets done, another 30 per cent of the budget is paid. You get where I'm going.

And if there is a delay, your contractor should set up a change order, have you both sign off on it, and then give you a revised schedule and a revised bill.

Renovations are risky business as it is. Don't take more risks than you can afford.

Catch Mike Holmes in an all-new season of Holmes Makes It Right, Tuesdays at 9 p.m. on HGTV. For more information, visit hgtv.ca. For more information on home renovations, visit makeitright.ca.

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