Remodeling Contracts: What to Include in Your Client Agreement to Protect Your Business

The Quick Answer

Your remodeling contract must include: scope of work (detailed and specific), total contract price and payment schedule, draw schedule tied to milestones, change order process (written, signed, priced before work begins), start and completion dates with delay provisions, material selection deadlines, lien waiver language, dispute resolution (mediation before litigation), right to stop work for non-payment, warranty terms, and insurance and license information. Do not use a one-page template from the internet for any job over $10,000 — have your contracts reviewed by a construction attorney licensed in your state.

Scope of Work: The Most Important Clause

A vague scope of work is the root cause of most remodeling disputes. Your scope must specify exactly what you will do — and what you will not do. Include: specific materials by brand, model, and finish; exact dimensions for tile work, cabinetry, and countertops; what demolition includes and excludes; which subcontractors you will manage vs. which are the homeowner's responsibility (e.g., custom furniture, appliance delivery); and explicit exclusions ('This contract does not include painting of adjacent rooms, HVAC work, or structural modifications beyond the items listed'). The more specific your scope, the more protected you are against scope creep. Consider attaching your proposal, material schedule, and design drawings as exhibits to the contract — 'Exhibit A: Project Scope,' 'Exhibit B: Material Schedule,' 'Exhibit C: Design Drawings.' If it's not in the contract, you can be asked to do it for free.

Draw Schedule and Payment Terms

Your payment terms and draw schedule are directly linked to your cash flow survival. A standard residential remodeling draw schedule: 10–25% deposit upon contract execution (never start without a deposit), 25% upon demolition and rough-in completion, 25% upon mid-project milestone (cabinets installed, countertops templated, etc.), 25% upon substantial completion, and 5–10% upon final walkthrough and punch list completion. The final retainage (5–10%) incentivizes the client to complete the final walkthrough promptly — holding it until every last item is resolved leaves you performing punch list items for free. Define in your contract what constitutes 'substantial completion' (the point at which the space is habitable and functional, even if minor items remain). Also specify payment method (check, ACH, credit card — note that credit cards carry 2.5–3% processing fees; decide if you'll absorb this or add a surcharge) and late payment penalties ($75–$150/day after a 5-day grace period).

Change Order Process: Your Margin Protection

Change orders are the most common source of lost margin in remodeling. A client adds a tile niche, upgrades to a farmhouse sink, or decides to add a second towel bar — each is a legitimate add-on, but if you don't document and price each change in writing before executing it, you may be working for free. Your contract must specify: 'All changes to the scope of work must be documented in a written Change Order signed by both parties prior to commencement of the changed work. No verbal agreements regarding scope changes will be honored.' Each change order should include: description of the work added or changed, material cost, labor cost, impact on project timeline, and new total contract value. Buildertrend and CoConstruct both have digital change order features that email change orders to clients for electronic signature — this process eliminates disputes over whether a change was authorized. Build a habit: stop work, write the change order, get it signed, then proceed. Every time.

Lien Rights, Lien Waivers, and Protecting Yourself

A mechanic's lien is a legal claim a contractor, subcontractor, or material supplier can file against a homeowner's property if they are not paid. Understanding lien law protects both you and your clients. As a general contractor, you have lien rights if a homeowner doesn't pay you — this is one of your most powerful collection tools. As the GC, you are also responsible for ensuring your subs and suppliers are paid — if they file liens against your client's property because you failed to pay them, your client can withhold payment from you and sue for damages. Include these provisions in your contract: a requirement for conditional lien waivers from subs and suppliers before each draw is paid to you, an unconditional lien waiver from all parties upon final payment, and a clause stating that the homeowner's obligation to pay each draw is not contingent on any third-party approval (no 'I have to ask my spouse' delays). Lien laws vary dramatically by state — have a construction attorney review your lien waiver language.

Dispute Resolution, Right to Stop Work, and Warranty

Three more essential clauses: First, dispute resolution. Litigation is expensive and slow. Your contract should require mediation before any lawsuit — most construction disputes settle in mediation, saving both parties $20,000–$100,000 in legal fees. Specify a mediator selection process (both parties choose a neutral from a list of AAA or JAMS certified mediators). Second, the right to stop work for non-payment. If a client misses a draw payment by more than five business days, your contract should give you the right to stop all work until payment is received, without penalty or breach of contract. This is your most powerful tool for managing non-paying clients. Third, warranty terms. NARI recommends a one-year written warranty on workmanship for residential remodeling. Specify what's covered (your labor and installation work), what's excluded (manufacturer defects in materials — covered by the manufacturer), and the claim process. A clear warranty builds trust and reduces post-job disputes.

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