Amy D: Welcome to our special mini series called Home Truths. We’re gonna be talking about some common misconceptions in the world of renovating, bust some budget myths, and basically shine the light on how to avoid a stressful renovation. If you’re thinking about renovating or about to start, or you’re right in the middle of it, this is for you.

Welcome back to Home Truth today’s episode is one people often skip but absolutely shouldn’t! We’re talking about contracts insurance and the legal foundations of your build. The boring bit the paperwork bit and the bit that maybe feels a bit awkward but also the bit that quietly protects your entire project. Jane why do you think people resist this stage so much?

Jane: Um, because it feels uncomfortable. It can feel like you are introducing a kind of a mistrust into you’re building this relationship with your contractor and you are kind of getting to know them and then all of a sudden you are disrupting that by bringing something quite official into it that feels, maybe, feels like you are introducing mistrust into that.

but contracts and insurance,and all that kind of legal stuff you need to do aren’t about distrust. They’re about making clarity and they protect both sides. So it’s not just for you, it’s for your contractor too. And I mean, we would say almost, almost all of the project disputes that we’ve seen could have been avoided with clearer paperwork at the beginning.

Amy D: Yeah absolutely I guess, traditionally people maybe Have met builders who are like oh let’s just handshake on it Like my word is my

Jane: Mm-hmm.

Amy D: Why would you recommend not doing that or why does that go

Jane: Um,I guess in that moment where you meet your contractor, you know, everybody’s optimistic about the project. You know, we all have our best intentions. We all think everything’s gonna go well, and everything’s gonna go great. And there’s no reason to think that anything’s gonna go wrong at the beginning.

But once you’re on site, then you have these extra pressures of time and money and stress, and you have the complexities of often building with an existing building where, unexpected events happen, weather, you know, there’s all types of things,that will disrupt that flow. So without something written down.

You’ve got nowhere to refer to because your contract is a little bit like your, your rules of play, isn’t it? It’s, it’s something you would refer to like, okay, something’s happened here. I thought that was included. The contractor’s like, oh, we were gonna add that in as an extra cost, or we didn’t realize that you wanted that finished.

Amy D: Yeah but the other thing is that I dunno about you but you just always think oh we’ll remember that my trust in my own memory is like very Unfounded because I can’t remember stuff And you just think it’s so important that Of course both parties will remember what’s being said and what’s being agreed and yeah I think it’s absolutely essential to have it written up. UmSo it’s notabout expecting things to go wrong it’s about recognizing that construction as a process is really complex

Jane: Yep, renovation is full of different variables, so you need that framework for when something,changes or goes wrong on site.

Amy D: Okay And so just to get like really practical what would you say needs to be written down

Jane: So there’s four basic things that you need. So your contract in itself is a document that should be filled out,and in there are documents that get referred to in that contract, and they are the drawings, the specification, which is,what the type of works that you’re going to be doing, any schedules of work.

So that might be,what products you’re using,what the windows are. a list of doors. You know, all of the items you’re gonna be using in your project and any exclusions. So what’s not included and are you supplying your bathroom fittings? Are you supplying your kitchen? Those things need to be clear.

and written down so that there’s no confusion because ultimately ambiguity is expensive and also very stressful.

Amy D: And what other things need to be included?

Jane: So your contract is really good at, causing you to sit down and decide the key things about your,about your works, which you maybe wouldn’t have thought about writing down. So things like the program. When will your project start? How long does everybody think it’s gonna take? What happens if it is later than expected?

And it overruns. What are the mechanisms that come into play there? Does your contractor get extra money because you know they have overheads? Do you get extra money because you thought it was gonna finish and actually you have rent to pay? So it’s not just about dates, it’s about sequencing and expectations and if delays happen, who bears the cost, and,what is a legitimate delay?

And what’s the process if you have to extend your project? So without that written down, the frustration you can see could build very quickly.

Amy D: I guess another one is payment terms

Jane: Yeah.

So how, how are you going to organize payments for the project? Are you gonna pay a deposit, if any? What are the, are you doing it in staged payments? are they just equally broken down over the course of the project? Or are you going through a valuation process where, you know, every couple of weeks or a month, you’re going to see how much work is done?

And what is the process of that valuation? Are you having a retention, which is keeping back a little bit of each payment, say 5% that you keep for six months after the project’s finished, to put right anything that,needs rectifying after the official kind of leaving of site and,final payment.

when does that happen?

Amy D: Yeah

Jane: you don’t wanna be Talking about these things mid-project, as that thing arises, if you decide in this time before when everybody’s, you know, clear and friendly and nothing has gone wrong yet, then that’s a really good time to all be happy with the structure that you’ve chosen and means that you don’t have to have those awkward conversations later on.

Amy D: I guess just for people who are doing renovations for the first time are there any kind of payment terms that you would avoid or you would steer clear off?

Jane: Um, definitely, paying a huge deposit and that seems over and above,you know, a big proportion of your budget upfront isn’t, shouldn’t be necessary,because your contractors should have cash flow that they can, Start the project without a big sum of money upfront. And some contractors do ask for a small deposit so that they can guarantee that you, you’ve like booked them in.

So that’s kind of to save the date and to show your commitment to them. But asking for, 20% of the project or more upfront should maybe strike a few alarm bells because it shouldn’t really be necessary. Another kind of. you know, if you break down your project into equal payments throughout the project, say it’s a four month project and you’re gonna be paying a quarter each month,of an equal amount.

That can get kind of tricky. It’s not unheard of and it keeps things simple. And I guess it depends on the complexity of your project, but if you imagine you don’t really know how much you’re not paying for the work that’s actually been done, it’s not related to the work, it’s related to, you know, an arbitrary figure that you’re, you’re paying.

It’s always, if you can, it’s safer to just pay for the materials and the work that have been done up to that point so that if anything does go wrong, you’ve not, you know, overpaid ahead of time for things that haven’t happened.

Amy D: And I guess it’s worth saying that obviously we’re architects so we’re probably a bit biased in this regard but having a professional on site to do valuations which is what you are saying is somebody who monitors okay this has been done this proportion of this part has been done, okay so the builder is allowed to have X amount like that kind of process, protects the clientand I guess the value of an of an architect or a professional on site can really help because it’s like a third party person who is helping make it fair for both you and the contractor

Jane: Yeah.

Amy D: good to say that that only really works as well if you do already have a broken down scope of works with prices against different elements. You know, you can’t, you can’t pay for what’s a proportion of what’s been done if you dunno how much that thing was in the first place.

Jane: The only positive to paying equal amounts is that sometimes there is a lot of investment early in the project buying steels and doing structural works. And so if you didn’t have, the costs of what those items are, you might be in a situation where a contractor is saying, oh, well we’ve, you know, there’s loads of set up costs.

And you also don’t want to end up in that position. So you can only really do that if you have a broken down scope of work.

Amy D: One other thing that the contract is useful for is how to cope with variations. So any changes that people ask for or any hidden issues that appear I guess projects do evolve and so this is one that maybe people forget but it’s so common isn’t it that you will need to change things and what is the mechanism in which that happens

Jane: and those changes can come from both sides, can’t they? So the contractor might discover something on site that says, oh, you know what? we just dug down and building control says we need deeper foundations now. Or it could be you saying, you know what, we’ve changed our mind about this.

We’re gonna have under floor heating upstairs as well, and we want to add that in, or, or take something out. So those things are totally,normal and they happen on every project. So the contract should state how the changes are to be instructed how they’re to be priced,how they get approved and, and when they’re paid for.

So it’s giving you that kind of little rule book to say, how do we manage this situation? If you don’t agree how pricing is gonna be organized before you start, then you are kind of at the whim of,whatever your contractor wants to do on site, because there’s no rule book for how that’s supposed to happen.

Amy D: Okay so to summarize the contract should be summing up kind of the scope the program the payment terms and also how variations are gonna be controlled. Would you say that’s the foundation?

Jane: Yeah, everything about the works kind of builds on those elements.

Amy D: Okay And I guess what would be helpful for people is about the contract types so we would always say that people should use a formal contract but do you want to explain maybe like the options that are out there for people

Jane: Yeah, so there are pre-made contracts that you can use that are called standard form contracts, which means that basically they’ve been written by particular bodies in the construction industry, and they’re written to be fair for, you know, the homeowner and the contractor.

All contractors should know JCT and be familiar with their contracts. It shouldn’t be a surprise if you mention that to them. there is a JCT homeowner contract,which is really common for residential works and it’s written in accessible language,but it does provide a legal structure, so it’s supposed to have the best of both worlds.

It’s supposed to be easy for a, you know, a homeowner who’s not used to navigating contracts to read, but it should have all that basic structure that we’ve just talked about that’s gonna help your project. Sometimes we see that contractors say, oh, we have our own contract, or we’ve just made our own terms and conditions, which, maybe they have particular things about the way that their practice or company works, which is fine.

but it shouldn’t stop them signing a, a standard formed contract. And if, if they’re nervous about that, that should ring alarm bells because really those contracts have made to be fair.

Amy D: Yeah we could actually link to some contracts right in the show notes. Maybe that would be helpful for people

Jane: Yeah, definitely.

Amy D: Yeah let’s move on to insurance which feels more boring! But it’s probably more criticalDo you want to explain why we need it and who covers what kind of thing

Jane: I think one of the great things about the contract also, just to kind of tie into the insurance, is that the contract is structured so that it asks you to check that you have all of these things. So it’s almost like a to-do list. You have to, it says you have to write in the amount of insurance that your contractor has, for example.

So,it really prompts you to ask that question and get that ball rolling, which is a good excuse. Somehow to ask, can I see your,insurance documents? Seems a bit,forward, but you are like, oh, the contract, the contract says that we have to ask this.

That’s how I would go about it.so basically there, you know, you should have insurance as the homeowner and your contractor has insurance and they cover different things. So you can phone up your regular home insurance.

But usually if your,works are substantial,you, they usually won’t provide the cover that you need. So you might have to go to a specialist renovation insurance to take out insurance that’s gonna cover your property during the works, because it’s a bit of an unusual situation, you know, it’s quite, I guess, quite risky.

and so you could go to an insurance broker that specializes in that and they will be able to cover you for your works, and you tell them all about the project and whether you are living on site or not. And, and they will know the details. Um, on the other hand, your contractor has other types of insurance, so,they will have insurance to cover their works as in,the part of the building that is being built.

If something happened to your extension when it was halfway built, that would cover the rebuild of, of that part of the works. They will have cover probably for,their tools and,their equipment. They will also have insurance for their staff, like,their team who are working on site.

So they will have employers liability insurance, which is if somebody is working on site and gets injured, even if it’s a subcontractor, they, they should have insurance to cover that. And they should also have public liability insurance, which protects,injury or damage caused during the works.

So if that’s a bit of scaffolding falling off onto a neighbor’s car,or if there was somebody who was walking past the site and got injured,that insurance covers,the them and the project for that.

Amy D: I guess one thing we should say that we actually partner with Renovation Plan so we will link to that too, you can get a discount off your insurance plan with them

Jane: think they’re, what’s really good is obviously because they specialize in renovations, you can talk to them. We actually have a really good webinar with them that explains this in much more detail.

One of the extra things that,a specialist insurance broker can do is,is, is provide a joint names insurance, which is basically where your name, and the Contractor’s name, both go on the same insurance. and I won’t go into all the details, but what that basically protects you against is if something goes wrong that the insurance aren’t kind of playing ping pong, going back between you and the contractor and, and blaming each other.

It just means that you’re both named on the plan. So if there’s an issue, it makes it much more straightforward to get that resolved. So that is another reason to kind of investigate that. And I would, I would definitely advise looking into that.

Amy D: So guess a lot of this can feel really transactional and I guess at the heart of a renovation there’s a relationship between you and the contractor do you feel like it it can corrode that relationship or damage it?

I really don’t think so. I think that it protects the relationship. Doing this work at the beginning of a project, it really sets expectations. It removes any ambiguity and it creates a framework for resolving those issues that we’ve spoken about in kind of a calm and non-stressful way. So it actually allows you to focus on the build and not, and not on, you know, this creeping in of mistrust of like, oh, this happened.

Jane: ironically, the strongest working relationships are often built on the clearest contracts. and so putting that time, I know we’re kind of in the process of it right now, where you are kind of, it feels like you’re sprinting towards the start date on site and you are like, you know, getting all those loose ends tied up and sorted out can feel that there isn’t really enough time.

But I would say, you know, it’s absolutely a hundred percent pushing for getting those contract signs, working out what’s included with them. And, and this process really just, it, it forces everybody’s hand to get this all sorted. so it is definitely worth the final push to, to make that happen.

Even if it feels like it’s, you know, a step too far and you’ve got so much on your plate,you really, really push ahead with that ’cause you’ll both be grateful for it.

Amy D: And I guess this goes back to our last conversation which is just if your contractor is really resisting this that is a warning sign,I feel like you need to really interrogate why do you not want to sign a contracts because like you say it is protecting both sides

Jane: I think sometimes homeowners think, oh well. I’m never gonna take them to court or they’re never gonna take us to court or, you know, we’re never gonna get to that point where we’re suing each other and, I’m inclined to agree with that. Like it’s rare that things get escalated

you know, sometimes small claims happen and things like that. But I would say like, you know, 80, 90% of having a contract isn’t about whether you are gonna take somebody to court. it’s about that process of gaining the clarity. So having the contract in itself. It takes away that risk of potentially being in court because you’ve already agreed so much of the stuff.

So I guess if a small contractor was, sees it as some kind of, you somehow looking for a legal kind of angle to, to come at them, it’s actually not about that. It’s just about having that moment of clarity to really sort out those details that otherwise, like you say, would get lost or forgotten, or,

Amy D: Hmm

Jane: You know, three months later, you can’t remember what you agreed about something. It’s just having that moment where everything gets set, set in stone.

Amy D: Um if someone listening is about to start a renovation what’s the one thing you would say

Jane: Get a contract. And also you don’t have to wait for your contractor to, you know, just follow the link. They’re not uber expensive. so, and you can download and have a look at a draft of one before you even have to pay for them. So get on there, download it, have a look at what’s included in it, and just get your head around.

Like what it means, because it really isn’t as scary. You know, the homeowner contracts aren’t scary at all, and once you read through them in detail, you’ll just start to see that it’s actually common sense. The idea is that it’s giving you a framework for some common sense decisions. So I would just get on there and take a look.

Amy D: Yeah and I guess also just it’s worth saying that contracts and insurance aren’t about expecting the worst Like you were saying earlier they really are about building

Jane: Mm-hmm.

Amy D: legally financially relationally Clarity at the beginning is gonna prevent conflicts in the end which is what it’s all

Jane: I agree.

Amy D: Um will leave it there So in next week’s episode we’re gonna be diving into life on site. We’re gonna be talking about communication, conflict and how not to fall out with your builder and probably also your partner that’s another one so if you’ve got any questions about contracts or insurance please send them in you can message us on Instagram or to our email [email protected]

Anything else

Jane: we’re always happy to answer your questions and look forward to chatting next week.