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Hello -
I'm about to embark on a major bathroom remodeling (i.e. gutting that
part of the house). This is in a *single* bathroom house and so it's
going to be a big disruption to our life for the period that the
bathroom is not available for our use. The project is probably going
to cost around $25000.
I've seen and heard the horror stories of contractors who take forever
to finish projects. So, applying good old capitalist principles, I
want to make in the contractor's best interest to get it done quickly
and on schedule. To that end, I'm willing to put up an extra pile of
money (say, $3000) and then have a cluase that says that after a
previously agreed-upon period of contruction during which we have no
bathroom (i.e. 2 weeks), that pile gets smaller by $500 a day.
Further, after that pile has been eaten a way (after 6 days, in this
case), there *continues* to be a $500/day penalty against the final
payment. Once we're able to use the bathroom ("use" being strictly
defined), the bleeding stops.
I'll be using a reputable contractor, registered with NARI/etc, but I
still want something in writing that protects me or at least gives the
contractor an obvious incentive to get it done, besides him just
wanting to collect on the final 10% payment.
Can someone point me to precedents for this? How can I word this
clause best so that I get the incentive behavior I want but it's not
so onerous (or weird) that nobody will accept the terms?
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Use "liquidated damages" instead of penalty.
Courts don't like penalties.
But if 2 parties agree on a per day damage amount before signing a
contract (that is known as "liquidated damages" they will enforce it.
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Hello -
I'm about to embark on a major bathroom remodeling (i.e. gutting that
part of the house). This is in a *single* bathroom house and so it's
going to be a big disruption to our life for the period that the
bathroom is not available for our use. The project is probably going
to cost around $25000.
I've seen and heard the horror stories of contractors who take forever
to finish projects. So, applying good old capitalist principles, I
want to make in the contractor's best interest to get it done quickly
and on schedule. To that end, I'm willing to put up an extra pile of
money (say, $3000) and then have a cluase that says that after a
previously agreed-upon period of contruction during which we have no
bathroom (i.e. 2 weeks), that pile gets smaller by $500 a day.
Further, after that pile has been eaten a way (after 6 days, in this
case), there *continues* to be a $500/day penalty against the final
payment. Once we're able to use the bathroom ("use" being strictly
defined), the bleeding stops.
Illegal here in this state..IIRC..
HOWEVER, you CAN put in a clause that states a given amount, not to exceed
XX per day will be subtracted from the final payment..
I'll be using a reputable contractor, registered with NARI/etc, but I
still want something in writing that protects me or at least gives the
contractor an obvious incentive to get it done, besides him just
wanting to collect on the final 10% payment.
FINAL 10%?????
Wow...your states got some nice contractor laws....here, by law, we are only
allowed to get a deposit of 5%...and remainder upon completion..
Can someone point me to precedents for this? How can I word this
clause best so that I get the incentive behavior I want but it's not
so onerous (or weird) that nobody will accept the terms?
Trick is finding a contractor that lets YOU set the terms....
None here will...
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Chris Campbell wrote:>>
Hello -
I'm about to embark on a major bathroom remodeling (i.e. gutting that
part of the house). This is in a *single* bathroom house and so it's
going to be a big disruption to our life for the period that the
bathroom is not available for our use. The project is probably going
to cost around $25000.
I've seen and heard the horror stories of contractors who take forever
to finish projects. So, applying good old capitalist principles, I
want to make in the contractor's best interest to get it done quickly
and on schedule. To that end, I'm willing to put up an extra pile of
money (say, $3000) and then have a cluase that says that after a
previously agreed-upon period of contruction during which we have no
bathroom (i.e. 2 weeks), that pile gets smaller by $500 a day.
Further, after that pile has been eaten a way (after 6 days, in this
case), there *continues* to be a $500/day penalty against the final
payment. Once we're able to use the bathroom ("use" being strictly
defined), the bleeding stops.
I'll be using a reputable contractor, registered with NARI/etc, but I
still want something in writing that protects me or at least gives the
contractor an obvious incentive to get it done, besides him just
wanting to collect on the final 10% payment.
Can someone point me to precedents for this? How can I word this
clause best so that I get the incentive behavior I want but it's not
so onerous (or weird) that nobody will accept the terms?
That's done on a fairly routine basis. But in your case, you should lower
the "fine" to a $100 a day.
At 500 a day, that's gonna show you being paid by the contractor in short
order.
If the contractor has quite a bit of experience in this area, he'll
understand what your needs are.
A bathroom makeover should not take two weeks.
After all, a team of five people can completely remodel a house in 5 days,
and we're only talking of a bathroom here.
Unless your bathroom is ten times the size of a standard one.
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The contractor will generally have a standard form of contract and it will
usually make provision for liquidated damages - with a daily amount to be
included. You need to find that provision and negotiate on the rate.
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Chris Campbell wrote:
Hello -
I'm about to embark on a major bathroom remodeling (i.e. gutting that
part of the house). This is in a *single* bathroom house and so it's
going to be a big disruption to our life for the period that the
bathroom is not available for our use. The project is probably going
to cost around $25000.
I've seen and heard the horror stories of contractors who take forever
to finish projects. So, applying good old capitalist principles, I
want to make in the contractor's best interest to get it done quickly
and on schedule. To that end, I'm willing to put up an extra pile of
money (say, $3000) and then have a cluase that says that after a
previously agreed-upon period of contruction during which we have no
bathroom (i.e. 2 weeks), that pile gets smaller by $500 a day.
Further, after that pile has been eaten a way (after 6 days, in this
case), there *continues* to be a $500/day penalty against the final
payment. Once we're able to use the bathroom ("use" being strictly
defined), the bleeding stops.
I'll be using a reputable contractor, registered with NARI/etc, but I
still want something in writing that protects me or at least gives the
contractor an obvious incentive to get it done, besides him just
wanting to collect on the final 10% payment.
Can someone point me to precedents for this? How can I word this
clause best so that I get the incentive behavior I want but it's not
so onerous (or weird) that nobody will accept the terms?
go to a local lender that does alot of home building loans.. they gonna
be the ones that have the contracts written up with no loop holes.. i
know 30 yrs. ago when i had my home built and borrowed money from them
for the project, they had the builder(general contractor) by the balls
and had everything covered.. it was $100 a day at that time, dont know
what it would be nowdays... but i am sure they have some blank contracts
that you can look at or get some advice.. let them think that you going
to them to borrow money, but you are not sure how much or what and see
what they say?????
hope this helps...
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What are you talking about ?
The contractor will generally have a standard form of contract and it will
usually make provision for liquidated damages - with a daily amount to be
included. You need to find that provision and negotiate on the rate.
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Hello -
I'm about to embark on a major bathroom remodeling (i.e.
gutting that
part of the house). This is in a *single* bathroom house
and so it's
going to be a big disruption to our life for the period
that the
bathroom is not available for our use. The project is
probably going
to cost around $25000.
I've seen and heard the horror stories of contractors who
take forever
to finish projects. So, applying good old capitalist
principles, I
want to make in the contractor's best interest to get it
done quickly
and on schedule. To that end, I'm willing to put up an
extra pile of
money (say, $3000) and then have a cluase that says that
after a
previously agreed-upon period of contruction during which
we have no
bathroom (i.e. 2 weeks), that pile gets smaller by $500 a
day.
Further, after that pile has been eaten a way (after 6
days, in this
case), there *continues* to be a $500/day penalty against
the final
payment. Once we're able to use the bathroom ("use" being
strictly
defined), the bleeding stops.
I'll be using a reputable contractor, registered with
NARI/etc, but I
still want something in writing that protects me or at
least gives the
contractor an obvious incentive to get it done, besides
him just
wanting to collect on the final 10% payment.
Can someone point me to precedents for this? How can I
word this
clause best so that I get the incentive behavior I want
but it's not
so onerous (or weird) that nobody will accept the terms?
$500 a day might be a bit steep, but it is your
inconvenience to measure as it is your house and your
deprivation of use.
The biggest problem often attendant to delay penalties is
their not being equitable or a balance between contract
considerations. You have described a penalty that does in a
sense reward the contractor for timely performance but you
have stated it in a manner that does not explicitly state a
reward for timely performance. I know, you have the money
on the table, but once signed on the line, nearly anyone
would consider that the contract price. Period.
A good penalty clause contract has penalty offsetting reward
terms. If deprivation of your bathroom is worth $500 a day
to you, then use must also be worth $500 a day to you. (Not
likely, which is why I said I thought it a bit high on a
$25,000 contract.) If so, then the logical argument is that
finishing a day early is worth an extra $500 to the
contractor. Right? Most government contracts, as example,
have monitored schedules, adjusted for conditions as the
work progresses, wherein the contractor pays a penalty for
"unearned" delay and gains a bonus for "earned" early
delivery. For your stick, you should have an equal carrot.
Also, remember, you must monitor the progress. You must
allow for certain delays (historically, far more likely
caused by the homeowner than the contractor) and, less
frequently, the contractor must allow for some opportunities
to shorten the reasonable duration (the homeowner yields to
a more available, necessary product choice). Now, on large
government contracts, this is a worthwhile endeavor . . .
from both perspectives, the government and the contractors.
Monitoring the ongoing process is a significant investment
to both parties, but the loss or gain is even more
significant.
I do not think your $25,000 bathroom is worth the effort.
Not on your part and not on the contractor's part. You
might select a contractor on a separate basis and then
discuss your concerns with him. Reach a mutually acceptable
agreement (in writing) at that time. Do not include such a
provision in your "Invitation to Bid." You will prevent the
better contractors from being at all interested in the
headache (including you, for that matter), and some less
worthy contractor may well see an opportunity to sucker you.
Jim
our
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I'm about to embark on a major bathroom remodeling (i.e. gutting that
part of the house). This is in a *single* bathroom house and so it's
going to be a big disruption to our life for the period that the
bathroom is not available for our use. The project is probably going
to cost around $25000.
Doesn't anyone else find it curious that someone is going to spend $25,000
to remodel the bath of a house with only one bath? Does this make sense?
Sounds pretty stupid to me.
I smell a troll when (among other things) I see the following:
1) Questions involving implausible situations.
2) The OP's lack of participation after first post.
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The contractor will generally have a standard form of contract and it will
usually make provision for liquidated damages - with a daily amount to be
included. You need to find that provision and negotiate on the rate.
A standard contract that volunteers liquidated damages?
hehehehe That's a good one! Ever consider stand up?
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Hello -
I'm about to embark on a major bathroom remodeling (i.e. gutting that
part of the house). This is in a *single* bathroom house and so it's
going to be a big disruption to our life for the period that the
bathroom is not available for our use. The project is probably going
to cost around $25000.
I've seen and heard the horror stories of contractors who take forever
to finish projects. So, applying good old capitalist principles, I
want to make in the contractor's best interest to get it done quickly
and on schedule. To that end, I'm willing to put up an extra pile of
money (say, $3000) and then have a cluase that says that after a
previously agreed-upon period of contruction during which we have no
bathroom (i.e. 2 weeks), that pile gets smaller by $500 a day.
Further, after that pile has been eaten a way (after 6 days, in this
case), there *continues* to be a $500/day penalty against the final
payment. Once we're able to use the bathroom ("use" being strictly
defined), the bleeding stops.
I'll be using a reputable contractor, registered with NARI/etc, but I
still want something in writing that protects me or at least gives the
contractor an obvious incentive to get it done, besides him just
wanting to collect on the final 10% payment.
Can someone point me to precedents for this? How can I word this
clause best so that I get the incentive behavior I want but it's not
so onerous (or weird) that nobody will accept the terms?
Liquidated damages for delays are common on large projects and providing an
early completion incentive prevents a purely adverserial relationship before
the contract is signed. A good idea, I think, is to ask for a detail
schedule so you can follow along and help the schedule where you can.
The issue you will probably run into are owner caused delays. It may not
take much for the contractor to claim a day lost was your fault, therefore
he gets an extra day. Some possible causes of these delays could be any
owner furnished material being late, any late selection of finishes, any
finishes requiring special order, any finishes no longer available and
needing reselection, any lead time for special orders, etc. These items
should appear on the schedule and be accounted for except those that are
truly outside of the contractor's control.
Similarly, you should factor in the permit and inspection process. The
schedule should account for inspections and if you pulled the permit, this
could be your delay.
Sincerely,
Donald L. Phillips, Jr., P.E.
Worthington Engineering, Inc.
145 Greenglade Avenue
Worthington, OH 43085-2264
dphillips@worthingtonNSengineering.com
(remove NS to use the address)
614.937.0463 voice
208.975.1011 fax
http://worthingtonengineering.com
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In article <c31fa7b1.0308041424.71119183@posting.google.com>,
Christopher Green <cj.green@worldnet.att.net> wrote:
OP's interest in a penalty clause of $500/day is counterproductive. No
contractor worth hiring would agree to it, and the others would never
have the resources to pay it when they flaked out -- at which point OP
would find out that they were judgment-proof and the subs and vendors
were filing mechanic's liens.
We agree. The clause would eliminate the very contractors he wants to
hire.
--
Lyle B. Harwood, President
Phoenix Homes, Inc.
(206) 523-9500 www.phoenixhomesinc.com
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You are really full of it.... I would not even take my skill saw to a job where
I am the "one to be hanged" before the job even starts....
What one must do is to find a reputable and professional contractor and work
with them to produce the desired result. This adversary BS from the getgo is
going to run off any reputable high level contractors.... holding back 50% of
the job..... you're nuts....
Jim Fincher
Penalty clauses and liquidated damages clauses have some problems. First,
the clause has to be drafted carefully so that the court interprets the
clause as a liquidated damages clause rather than a penalty. That means
make sure a local attorney experienced in construction matters drafts it or
reviews it, and advises on the amount. Second, if you have a liquidated
damages clause, that's all you get if there is a breach involving failure to
complete on time. It may be less than you would get in actual damages.
Third, it might be difficult to find a contractor who wants the job badly
enough to sign up for liquidated damages.
The second most important thing you can do is revise the payment schedule so
that 50% of the price is not paid until completion. 10% is a proper amount
if there are progress payments tied to actual progress. A retainage that
small is ok if there is an architect reviewing the percentage of completion
with every progress payment request. 10% is not the appropriate amount of
retainage in a bathroom remodeling contract. If you can't get the builder
to accept 50%, you could go down to 40%, I suppose, but if the builder
insists on 10%, find a new builder.
The most important thing you can do is insist on a performance bond. The
price of the bond will be added to the contract price, but it's worth it.
If the contractor doesn't do the job on time, write a letter terminating the
contract for breach, hire another contractor to finish, file a claim against
the bond. The bonding company will go after the contractor for
reimbursement. The bond will provide plenty of incentive.
If you have any trouble negotiating a contract with a performance bond and a
high retainage, the easiest way to handle it is to borrow the money from a
bank. Use the bank's rules about contract format. Experienced, reputable
builders will have no objection to either of the clauses you want, and will
be accustomed to bank rules. You can reduce the interest expense by
repaying the bank early.
McGyver
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Some very good points here Jim.... the OP's entire posting makes this GC shudder
as to what one would be getting into with a contract to build that bath.... what
most of these owners forget is that the entire building process should be a
partnership between the owner and builder... this person's approach certainly
casts it differently...
Jim Fincher
gutting that
and so it's
that the
probably going
take forever
principles, I
done quickly
extra pile of
after a
we have no
day.
days, in this
the final
strictly
NARI/etc, but I
least gives the
him just
word this
but it's not
$500 a day might be a bit steep, but it is your
inconvenience to measure as it is your house and your
deprivation of use.
The biggest problem often attendant to delay penalties is
their not being equitable or a balance between contract
considerations. You have described a penalty that does in a
sense reward the contractor for timely performance but you
have stated it in a manner that does not explicitly state a
reward for timely performance. I know, you have the money
on the table, but once signed on the line, nearly anyone
would consider that the contract price. Period.
A good penalty clause contract has penalty offsetting reward
terms. If deprivation of your bathroom is worth $500 a day
to you, then use must also be worth $500 a day to you. (Not
likely, which is why I said I thought it a bit high on a
$25,000 contract.) If so, then the logical argument is that
finishing a day early is worth an extra $500 to the
contractor. Right? Most government contracts, as example,
have monitored schedules, adjusted for conditions as the
work progresses, wherein the contractor pays a penalty for
"unearned" delay and gains a bonus for "earned" early
delivery. For your stick, you should have an equal carrot.
Also, remember, you must monitor the progress. You must
allow for certain delays (historically, far more likely
caused by the homeowner than the contractor) and, less
frequently, the contractor must allow for some opportunities
to shorten the reasonable duration (the homeowner yields to
a more available, necessary product choice). Now, on large
government contracts, this is a worthwhile endeavor . . .
from both perspectives, the government and the contractors.
Monitoring the ongoing process is a significant investment
to both parties, but the loss or gain is even more
significant.
I do not think your $25,000 bathroom is worth the effort.
Not on your part and not on the contractor's part. You
might select a contractor on a separate basis and then
discuss your concerns with him. Reach a mutually acceptable
agreement (in writing) at that time. Do not include such a
provision in your "Invitation to Bid." You will prevent the
better contractors from being at all interested in the
headache (including you, for that matter), and some less
worthy contractor may well see an opportunity to sucker you.
Jim
our
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On Long Island there are 50 year old houses with one bath that are
worth $300k to people who live and work there. $25k to fix one is
nothing. Might take $50k or more.
The point is, if you're going to sink that much into a bath wouldn't it be a
higher priority to add a 2nd bath?
BTW, putting 25k into the only bath of a house worth 300k doesn't sound
rational to me.
$25,000
sense?
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OP's interest in a penalty clause of $500/day is counterproductive. No
contractor worth hiring would agree to it, and the others would never
have the resources to pay it when they flaked out -- at which point OP
would find out that they were judgment-proof and the subs and vendors
were filing mechanic's liens.
I agree.
He mentioned sweetening the deal with an extra $3K to make it happen.
Besides the fact that dumping an extra 12% into the deal also raises the
troll red flags, it would be much more productive to find a way to have
temporary facilities during construction -- or go to a motel for a week or
two.
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I'm just posting to thank you all for the excellent responses,
remarkably free of the "you're an idiot!" posts one often gets on
Usenet these days.
I will take all of this advice under consideration, and I do plan to
get review by a lawyer when it comes down to the final contract.
Thanks again.
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The point is, if you're going to sink that much into a bath wouldn't
it be a
higher priority to add a 2nd bath?
What if the only bathroom just happens to be 300 square feet??? : )
BTW, putting 25k into the only bath of a house worth 300k doesn't
sound
rational to me.
I have 2 1/2 baths in my home (and a rough in for when I like in the
basement). I'd REALLY rather 1 1/2 baths with a HUGE main bath.
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On 4 Aug 2003 17:22:53 -0700, chris-google@pobox.com (Chris Campbell)
wrote:
I'm just posting to thank you all for the excellent responses,
remarkably free of the "you're an idiot!" posts one often gets on
Usenet these days.
I will take all of this advice under consideration, and I do plan to
get review by a lawyer when it comes down to the final contract.
Thanks again.
Oh my! Just read this whole thread. Gets sillier and sillier.
Liquidated damages, performance incentives, performance bonds , yada
yada, yada. By the time your lawyer talks to my lawyer ... the
damn bathroom could have been finished.
Get serious! You're remodelling a bathroom, not building an
airport. Pick a contractor you like, talk with the owners of the
last two bathrooms he's done... and make your decision.
Doesn't matter whether it costs five thousand, 25 thousand or 100
thousand ... it's a bathroom.
Contractors are people ... they know they're taking your only bathroom
out of service ... and they'll bend themselves out of shape to move
the job along.
If you have so little faith in the contractor (and in your own ability
to judge people), why are you hiring him/her?
Ken
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On 4 Aug 2003 17:22:53 -0700, chris-google@pobox.com
(Chris Campbell)
wrote:
Oh my! Just read this whole thread. Gets sillier and
sillier.
Liquidated damages, performance incentives, performance
bonds , yada
yada, yada. By the time your lawyer talks to my lawyer
.... the
damn bathroom could have been finished.
Get serious! You're remodelling a bathroom, not
building an
airport. Pick a contractor you like, talk with the
owners of the
last two bathrooms he's done... and make your decision.
Doesn't matter whether it costs five thousand, 25
thousand or 100
thousand ... it's a bathroom.
Contractors are people ... they know they're taking your
only bathroom
out of service ... and they'll bend themselves out of
shape to move
the job along.
If you have so little faith in the contractor (and in your
own ability
to judge people), why are you hiring him/her?
Ken
Although I don't agree that the thread is silly, I do agree
with the premise of this response.
For the OP's peace of mind (and there are lots of folks out
there who have a great mistrust of anything and everything,
so they must live with that . . . thankfully, most of us do
not), he should run the agreement by his attorney.
He might also string have his attorney point out any areas
of likely misinterpretation or needless liability on his
part . . . listing them or margin=noting them. Then, he
should discuss this with his builder. If that gets into a
contest, he likely will be looking for another builder. If
his attorney insists on rewriting the agreement, he is
assured of looking for another builder . . . likely for a
long, long time . . . or else find a very hungry builder,
which would be a catastrophe for both parties.
An attorney or an accountant looking over a contract for a
party is being paid. He wants to do something for his pay.
Keep that in mind. Also, a contract can not protect either
party for every contingency. Keep that in mind. In a small
project, a "small" agreement is likely best. Every lawyer
will agree, a handshake is the very best contract.
Unfortunately, they are not speaking literally.
Jim
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