The purpose of a remodeling contract is to protect both parties when things go wrong. The problem is that most residential remodeling contracts are written by the contractor and optimized, consciously or not, to protect the contractor.
Reading a contract before you sign is not about distrust. It is about knowing what you agreed to so you can hold the right party accountable when something unexpected happens.
Here are the eight clauses that determine whether your contract protects you.
1. Scope of work
What it should say: A complete, specific description of what will be built, removed, replaced, or changed. Room by room. Material by material. Finish level by finish level.
Red flags:
- “Kitchen remodel per our discussions” with no detail
- References to a verbal agreement not attached to the contract
- Vague finish specifications (“standard hardware,” “builder-grade tile”)
What to do: Attach the project drawings, specification sheet, and finish selections as exhibits to the contract. Write “per Exhibit A” next to any scope reference and staple it in.
The contract should answer: exactly what cabinets, exactly what countertop material and thickness, exactly what tile size and layout, exactly what fixtures. Specificity prevents change orders that inflate your cost by 20–30%.
2. Payment schedule
What it should say: A milestone-based payment schedule tied to completion events, not calendar dates.
The industry standard: 10% deposit at signing, draws tied to completion of demolition, rough framing, mechanical rough-in, drywall, cabinet installation, and final punch list. Final 10% held until certificate of occupancy.
Red flags:
- Deposits over 30% upfront (illegal in California; red flag everywhere)
- Monthly payment schedule not tied to milestones
- Final payment due before CO (certificate of occupancy) is issued
- “Progress payments as determined by contractor”
What the payment schedule tells you: A contractor who needs more than 30% upfront to fund a job either has cash flow problems or is asking you to take on their project financing risk. Established contractors have accounts with suppliers and manage draws.
3. Change order procedure
What it should say: All changes to scope, schedule, or cost must be approved in writing by the homeowner before work begins. The contract should specify the form: a written change order signed by both parties before the work proceeds.
Red flags:
- No change order clause (meaning the contractor can claim any extra work is authorized)
- “Changes may be made verbally with written confirmation to follow”
- No provision for what happens if homeowner rejects a proposed change order
Why this matters: Change orders are the primary mechanism through which remodeling costs escalate beyond budget. The contract should give you the right to approve or reject any change before it happens, not after the work is done and the contractor is asking you to pay.
4. Lien waiver provisions
What it should say: The contractor must provide a conditional lien waiver with each draw request and a final unconditional lien waiver upon final payment. The same requirement applies to any major subcontractor or material supplier.
What a lien waiver does: A contractor who is paid but doesn’t pay their subcontractors or material suppliers can result in those parties filing mechanic’s liens against your property. A lien on your home can prevent you from selling or refinancing. Lien waivers from every party who contributed labor or materials protect you from this.
Red flags:
- No lien waiver requirement
- Lien waivers from the general contractor only (not subs and suppliers)
- Final payment due before lien waiver is provided
What to do: Request a list of all subcontractors and material suppliers before work begins. Track lien waiver delivery against each draw payment.
5. Insurance requirements and verification
What it should say: The contractor must maintain general liability insurance (minimum $1M per occurrence) and workers’ compensation coverage. The contract should require proof of coverage and name you as an additional insured.
Red flags:
- No insurance provision
- “Contractor carries insurance” with no amounts specified
- Certificate of insurance not required before work begins
What to do: Request a Certificate of Insurance (COI) from the contractor’s insurer before the first work day. The COI should name you (the homeowner) and your property address as certificate holder. Call the insurer to verify the policy is current.
The stakes: An uninsured worker injured on your property may have legal claims against your homeowner’s insurance. An uninsured contractor who causes property damage may leave you holding the repair cost.
6. Permit responsibility
What it should say: The contractor is responsible for obtaining all required permits, scheduling inspections, and obtaining certificates of occupancy or completion. Work will not proceed without required permits in place.
Red flags:
- “Homeowner responsible for permits”
- No mention of permits in the contract
- Language that makes permit pull optional (“if required by jurisdiction”)
Why this matters: Unpermitted work can prevent you from selling your home, require costly demolition to legalize, or void your homeowner’s insurance claim on covered damage. The contractor who does the work should be the contractor who stands behind the permit.
7. Dispute resolution
What it should say: A defined process for handling disputes, typically starting with written notice, followed by mediation, and finally arbitration or litigation.
Red flags:
- Mandatory binding arbitration with the contractor’s preferred arbitrator (common in franchise/large contractor contracts)
- No written notice requirement before dispute escalation
- Language that limits your right to seek legal remedies
The nuance: Arbitration itself is not bad. What matters is whether the arbitration is fair (neutral arbitrator, reasonable fees, both parties have equal standing). Read who selects the arbitrator and what rules govern the process.
8. Completion and what triggers final payment
What it should say: Final payment is due when all of the following are complete: punch list signed off by homeowner, all inspections passed, certificate of occupancy (or completion) issued, and unconditional lien waivers delivered.
Red flags:
- “Substantial completion” triggers final payment without a punch list
- Final payment due at a calendar date
- No provision for what happens if final inspection fails
The punch list: Write a joint punch list with your contractor before final payment. This is a written list of every incomplete or deficient item. Final payment is released when the punch list is cleared. Without a punch list, “done” is whatever the contractor says it is.
The one clause most homeowners skip
Warranty and call-back provisions. Most residential remodeling contracts include a one-year workmanship warranty. Read it carefully:
- Does it cover labor only, or also materials?
- Is there a process for submitting warranty claims?
- What is the response time obligation?
- Does the warranty exclude “normal wear and tear” in ways that let the contractor disclaim everything?
A contractor who expects their work to hold up long-term will stand behind a clear, unconditional workmanship warranty. A vague or heavily qualified warranty clause signals how the contractor will respond to a call-back six months after completion.
What to do before you sign
- Read the entire contract, every clause, including the payment terms and scope
- Attach all specification sheets, finish selections, and drawings as named exhibits
- Request proof of license and insurance before signing
- Get lien waiver language added if it’s not there
- Confirm all verbal agreements are in writing, “we also agreed to” belongs in the contract, not in a text thread
The firms in our network provide contracts reviewed for homeowner clarity, payment schedules tied to milestones, lien waiver requirements, and specific scopes. If a contract doesn’t match what was discussed, you have the right to ask for revisions before signing.