For homeowners who haven’t already ripped out a tired-looking bathroom vanity or applied for a municipal building permit, this may be the year.
After peaking in 2007, the market for home-remodeling projects recorded a 12 percent decline from 2007 through 2009, but it’s poised for a rebound. That’s the word from the Joint Center for Housing Studies of Harvard University, which predicts a compounded annual growth rate of 3.5 percent for home-improvement spending over the next five years.
But before planning that long-awaited remodeling, homeowners might want to heed what can best be described as a cautionary tale.
In 2004, K. Miller Construction Co. was hired by Joseph and Frances McGinnis to convert a Chicago three-flat into a single-family home, and they entered into a $187,000 verbal contract. According to the Elmhurst-based company’s suit, the McGinnises, who had previously used Miller, subsequently dramatically increased the scope of the work, which raised the project’s cost to about $500,000.
Miller said after the close of the project, in July 2006, the couple refused to pay more than $300,000 due to the company, and Miller shortly thereafter filed a lawsuit against the couple, alleging that it was entitled to a lien on the property, that it was due the sum owed it because the McGinnises breached an oral contract and that it was due compensation for the reasonable value of its labor, material and services. The McGinnises sought to dismiss the complaint because there was no written contract for the project.
That was more than four years ago. After working its way through the legal system, the case landed before the Illinois Supreme Court, which last fall sided with Miller. The case has been sent back to Cook County Circuit Court for trial and, according to the McGinnises’ attorney, a settlement conference is scheduled for March.
Technically, Miller violated the Illinois Home Repair and Remodeling Act, which requires that a person engaged in home-remodeling work of more than $1,000 get a signed contract or work order from the customer. But the state Supreme Court ruled that Miller still could seek payment.
Home remodeling is very much a word-of-mouth business. You know somebody who had work done by a particular contractor they liked, and you’re expecting the same good experience. But when it goes awry, as it did in this case, it can be a very expensive, draining lesson for all involved.
Richard Stavins, Miller’s attorney, suggests homeowners take a few steps to protect themselves and their investment.
“The cautionary way to do it for the little guy, the homeowner who’s doing some home remodeling, is to do it the way the big guys do it,” Stavins said. “No. 1, have a written contract that specifies exactly what is to be done and what the obligation of the general contractor is as far as what is the work, who’s getting permits and the periodic payments.”
But that’s just the first step, Stavins said. Once the contractor is in a home, most homeowners decide to tack on extra work to the project or to make changes. Make sure all those extras become a written change order.
It’s also important, said Stavins, for a homeowner using a general contractor to make sure that all subcontractors on a job are getting paid as well. A subcontractor who isn’t paid by a general contractor can, unbeknown to the homeowner, file a lien against a property.
Two forms to consider are a contractor’s affidavit of payment of debts and claims and a contractor’s affidavit of release of liens.
“It’s the most important document for the homeowner to get, and 98 percent of them don’t get it,” Stavins said.
A new home: Starting next week, my weekly real estate column will have a new name and locale. Look for the column, The Home Front, in the Sunday Money and Real Estate section beginning Feb. 6.
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