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Ethics in Home Improvement Contracts

shutterstock_180965714-450Homeowners should always be cautious of unethical business practices by those working to gain access to homes and utilizing high-pressure sales or scare tactics to up-sell services to homeowners.

Many complaints to California’s Contractors State License Board (“CSLB”) are from the elderly who are falling victim to unlicensed individuals upselling unnecessary home service needs. Examples provide by the CSLB include homeowners being persuaded to sign over their home or being convinced of unnecessary repair work, for example replacing all of the home’s ductwork.

The CSLB provides the following points in locating and negotiating with a home improvement contractor:

  • Be wary of telemarketers offering special deals for air duct cleaning or seasonal HVAC tune-ups. Many make multiple calls until a homeowner takes the bait for a service call.
  • Always ask for the state contractor license number before considering any offer.
  • Make informed decisions about hiring a contractor or company by first checking CSLB’s website and review the contractor’s detail page to assure the license is in good standing.
  • If you are not sure about a company’s offer, get a second opinion from a different, licensed contractor or company.
  • Make sure the contract contains the notice about the three-day right to cancel.

Points to remember in entering into a Standard Home Improvement Contract

  • The contract is not for urgent service and repair, and negotiations to enter into a contract can be initiated by the contractor or the customer.
  • The total price for labor and materials is $500 or more. (The work is not for an emergency replacement or repair of $750 or less.)
  • A home improvement contract is an agreement between a contractor and a property owner or tenant that includes descriptions of all labor, services, and materials to be furnished and performed.
  • The customer has until midnight of the third business day after signing the agreement or purchase to cancel the contract.
  • The down payment may only be 10 percent of the total contract price or $1,000, whichever is less. Only pay for portions of the home improvement project as they are completed.

Benefits of a Design-Build Relationship When Entering Into a Home Improvement Contract

shutterstock_139620959-450There are two common homeowner and contractor relationships when it comes to home improvements: owner-builder or hiring an architect and contractor. Concerning the latter option, the ideal relationship is a design-build hybrid.

The California’s Contractors State license Board (“CSLB”) issues the following ALERT: “Be wary of ‘consultants’ or unlicensed individuals who will try to talk you into becoming an owner-builder as a way to save money. They are usually the ones who illegally profit from this arrangement.”

The benefit of a design-build relationship is not only economical but it is related to the overall efficiency of a project from design through construction completion. By enabling the designer and contractor to join forces from day one, the project owner is creating a stronger opportunity for long-term success.

Owner-Builder Risks — What is an Owner-Builder?

An owner-builder is a person who owns the property and acts as their own general contractor on the job, and either does the work themselves or has employees (or subcontractors) working on the project.

The work site must be their principal place of residence that they have occupied for 12 months prior to completion of the work.

The homeowner cannot construct and then sell more than two structures during any three-year period.

Rules and regulations concerning owner-builders can be found in California Business & Professions Code section 7044.

Owner-Builder Responsibilities When Handling Their Own Construction Project:

When you sign a building permit you assume full responsibility for all phases of your project and its integrity, you must pull all building permits and your project must pass codes and building inspections.
You are responsible for ordering materials and making sure all suppliers are paid.

You are responsible for supervising, scheduling, and paying subcontractors. If you use anyone other than your immediate family or a licensed subcontractor for work, you may be considered an “employer.”

Owner-Builder Risks:

Unless you are knowledgeable about construction, mistakes can be costly and take additional time to repair or correct.

Subcontractors and suppliers who are not paid on schedule may file mechanics liens against your property.

Illegal contractors can botch a job or leave with the down payment, leaving the owner-builder to deal with the consequences.

You can be liable for injured workers on your property.

You assume full responsibility for all phases of your project and its integrity.

Design-Build Hybrid

Controlling costs in a construction project is always a top priority. Usually project owners end up limiting their ability to manage costs by separating the design process from construction.

Design/build projects, on the other hand, link the two together at the start.


The process ensures that the contractor is able to provide input to the architect on critical decisions that will determine a project’s efficiency.

The architect and contractor can foster a relationship that maximizes both trust and communication.


Licensed contractors must demonstrate knowledge of their craft, be tested, fingerprinted, bonded, and undergo an FBI background check before they are licensed to work in California.

The process ensures that the plumbing, mechanical and electrical systems meet and do not exceed the owner’s requirements, which can cause unnecessary additional fees.

Can ensure that the latest energy efficient products are installed, which will contribute to the overall lifespan of the building and control recurring costs far past project completion.

Allows for open dialogue, thoughts and ideas to flow between teams.

When a project owner is comfortable with the team as a whole, they can avoid potential for shoddy workmanship that could result from a lowest bidder platform.

Implementing this project delivery system will also reduce change orders on an owner’s next project.