Protective Measures

Remodeling is by its very nature a contentious process. But there is no magic bullet to protect against run-ins with customers or, worse, with their lawyers. The best protection, many remodelers agree, is as simple as establishing the rules and then making sure everyone follows them.

“It's when systems and procedures are not adhered to that problems occur,” says Randy Ruzanski, owner of Distinctive Design-Build, Remodel in Roselle, Ill. “It becomes a bargaining chip for the client at the end of the project.”

Dett Otterbeck of Otterbeck Builders in Castleton, N.Y., agrees. “We're not huge, but the fact that we have things like networked computers separates us from the little guy,” he says. “It helps protect us because we are better at tracking and systems.”

Client satisfaction and liability protection are intimately related, says Terry Wardell of Wardell Builders. He believes that “as long as you deliver a good product with integrity, you've just created 90% of your protection.” To that end, Wardell says that it's important to educate clients and to point out features of particular materials ahead of time.

When issues arise, it is better to immediately communicate with the client and state a course of action. “Some clients react badly, but a majority react better than if you had ignored their feelings of frustration,” Wardell says.

Before he implements new systems, Wardell asks two questions. First, does it relieve the staff's stress? “If the staff is happy, they are more likely to follow procedure and keep clients happy,” he says. Second, does it enhance the client experience? Wardell has learned that if the client is part of the process, they are more amenable to finding a fair solution. “That is as important as signed change orders, making sure subs have liability insurance, or a lawyer looking over the contract,” Wardell says.

Lawyer Judith Ittig of Washington, D.C., firm Ittig & Ittig, which specializes in construction law, says that there are two main junctures where problems occur. One is at the end of the design phase, where clients are not clear about the final product or the final budget (see “Design”). The second juncture is at the time of project completion, when clients bring up small items they did not address during the remodeling process. “They surface in a cumulative way at the end of the job,” she says, “and contractors have a hard time closing and collecting payment.” Ittig says that clients are often clueless about the extras they received during the remodeling process and do not factor that into their relationship with the contractor. She says that remodelers should communicate these extras to clients, and “make sure they know the value of that extra work” even if you're not charging them for it.

Sales

Many remodelers try to prevent future problems by vetting new clients. If Wardell notices “danger signals,” he will turn down work. “You can spend every dime of profit on a bad client relationship,” he warns.

Paul Sullivan says that he should have trusted his instincts when it came to one of the worst clients he ever worked with in his career. “I saw it at the first meeting. He was only giving me a limited amount of time. He was callous and rude to his wife,” recalls the owner of The Sullivan Co., in Newton Highlands, Mass. The remodeler is also careful about what he tells homeowners during a sales pitch. “Don't promise perfection. Don't promise something cheap or fast,” he warns. Set expectations when it comes to things like dust. “Tell them you do not promise a perfectly clean jobsite. Tell them you'll do your best to contain dust and then tell them how.”

“The longer and more legal language you use, the more people shy away from a contract,” says Mike Gervais of Burlington, Vt.-based Prime Construction. “People do not read them. We keep ours at 6 to 7 pages. Using basic language helps customers feel you are not pulling one over on them.”

Otterbeck, however, added to his contract as he learned from his experiences and now has a 17-page document. He includes a section explaining that clients will be charged on a time-and-materials basis for unforeseen problems. He also asks his customers to sign a release form from the cement subcontractor acknowledging possible damage to their property during delivery.

In his contract, Robert Vailes of Vailes Brothers lists what the company will do —and what it will not do. He also informs clients about additional costs. “I tell them there might be unknown variables and that they may want to have a $5,000 cushion for these things or to add to other features. If you tell them ahead of time, they are more receptive to changes,” the Fishersville, Va., contractor says.

Sullivan advises remodelers to have their contracts checked by a lawyer familiar with their state law. “Most states have individual laws that apply to building and remodeling. If you have a lawyer not versed in that, he could advise you improperly.” Sullivan also has an arbitration clause to avoid costly litigation in the event of a dispute. “If you have to take legal action or a client may take action against you, both parties have a right to submit the dispute to binding arbitration. I think this is fairer than going through the court system,” he says.

Otterbeck spells out the client's payment schedule in his contract, stating that the first payment is the deposit and that subsequent payments are at the completion of major portions of work. He asks for the final payment upon substantial completion. “That part causes issues with some homeowners. They think you'll only finish half the job and walk away,” he says. “We explain that this is so items on back order will not hold up our payment. They usually accept our explanation, but sometimes we'll just subtract that portion of the job from the final payment.”

Gervais uses layman's terms, not legal jargon, to explain the payment schedule on his contract. “It says pay us X now, X when we start, X when we start drywall.” The contractor prefers the payments at the start of each step. “We're sticklers for front-loading like this,” Gervais says. “It keeps us right on the cusp of being even or ahead of the game.”

In her work with contractors, Ittig has noticed problems during the end of the design phase when homeowners are often shocked that the final product is over budget. Because they have seen the higher-end project, they are unhappy with having to return to a more affordable version of their project. “Contractors try to qualify clients, but even people who are serious sometimes just get bogged down if the process, or their sense of what it should cost is off,” she explains. Ittig advises remodelers to carefully work within the client's budget during design.

To help customers understand their design, Vailes creates perspective drawings in addition to the usual floor plans and elevations. “They are especially crucial for cabinetry, so the client can get a 3-D view,” Vailes says. He asks clients to initial all the plans and drawings. “On all the fixtures and products involved, we put together a package with the pictures and have the client initial these as well so there are no misunderstandings.” He recalls one kitchen project where the client requested drawer cabinets on both sides of the sink. When the client saw the cabinets, she said that was not what she asked for. Vailes showed her the design she had signed. “She eventually paid us $3,000 extra to change it, but if we had not had the signed copy, we would have eaten the cost.”

To make sure he does not forget anything at his pre-construction meetings, Sullivan checks off items on a pre-construction form. “We review our policies and procedures line by line with our clients,” he says. The form also covers jobsite issues such as dumpster location, job signs, and work hours.

Vailes uses the pre-construction conference to introduce the lead carpenter to the homeowners and to cover all the details as a team. He requires anyone involved in the project to be present at this meeting. “Before the end of the meeting, the lead carpenter asks the client, ‘Is there any other work that you have discussed or were told that we would do for you that is not in the contract or on the additional work order?' Those changes are written on an additional work order form that the client signs. This puts the lead carpenter, salesperson, and client on the same page,” Vailes says.

Another protective measure used to document projects is taking before, during, and after photographs. Otterbeck equips his salespeople with digital cameras. His team views the photos on a split screen with their estimating program to reference the house and to create a thorough estimate. He also sends the photos to subcontractors at their request.

Vailes recalls a recent issue for a kitchen remodel that included moving the kitchen sink. “Over a year later, the clients found a water spot where the old sink used to be. We looked at the pictures of the plumbing lines that we took before we installed drywall. It was clear that the damage was not caused by our water line. It was actually a contractor who had installed an AC system that had tied the condensation line into an old pipe,” Vailes says.

Otterbeck advises remodelers to ask homeowners to sign a consent form for the photos taken during a remodel. “Since we use them for advertising, too, we have them sign a consent giving us the right to use the photos or video for promotional needs,” he says.

Gervais carefully documents phone calls and meeting notes during design and construction phases. “This is more important than any contract,” he says. He encourages his employees to keep notes on the job. “We get a buy-in from the employees by providing a profit-sharing plan. They know everything goes to bottom line,” he says.

Sullivan purchased daily job forms bound in a book. “We were advised by our attorneys not to use a loose-leaf book or something where the pages can be removed. If you have to use it in court, it needs to be bound,” he says.

Instead of a job log, Otterbeck asks employees to note daily work on a list of 27 tasks on their time cards. He and his salesperson also note any calls or conversations in the project folder. Vailes provides his lead carpenters with a notebook that includes drawings, floor plans, and specified products. The company checks products in its shop before sending them to the site, but as an added precaution, it includes details and a photo of each product in the lead's notebook so the lead can easily spot any discrepancies.

Both Otterbeck and Gervais ask clients to pay for change orders before the change occurs. “We used to ask for payment at the end of the job, and it was verbal. But after getting nickel-and-dimed over the change order total, we changed our policy,” Otter-beck says.

Gervais says he educates both his staff and subs about change orders. “I tell them we're all in this together, and we provide a good product for a fair price. These small things can add up,” he says. Wardell inputs signed change orders onto a spreadsheet that also includes proposed change orders. “How you communicate the data back to the client is important,” he says.

Wardell speculates that most liability claims happen on finished projects as clients notice details — once they are living in the space. Wardell Builders checks in with clients after 2 weeks, 6 months, and 11 months. He also provides a maintenance program that helps the company find issues before they become problems. “Managing clients is also where referrals come from,” he notes.

Vailes waits one month after completion to send his clients a quality audit. He says that provides him with an opportunity to address any issues. “As soon as we get the audit, we contact them to set up a time to fix any problems,” he says. Ruzanski gives clients a small gift along with the evaluation and delivers both in person.