What essential precautions should I require in a contractor contract before work begins?

Short answer

Before work starts, require a signed, detailed written agreement that includes: scope of work with specs and drawings; start/completion dates and milestones; a clear payment schedule with retainage and lien waivers; proof of licensing and insurance (GL, workers’ comp, auto) with limits; who pulls permits and handles inspections; a written change-order process; site protection, dust control, and safety rules; material brands/allowances/substitution policy; warranties and closeout requirements; and dispute resolution/termination terms. Attach certificates of insurance and all exhibits (plans, finishes list, schedule of values, waiver templates).

What to include and why it matters

1) Scope, plans, and specifications

• Attach the plan set, finish schedule, and any manufacturer cut sheets. Vague scope invites disputes.
• List demo limits, framing, MEP (mechanical, electrical, plumbing), finishes, and exclusions (e.g., landscaping, painting).
• Include tolerances and standards (e.g., TCNA for tile, NWFA for hardwood, ASTM for drywall).

2) Timeline and milestones

• Set a start date, substantial completion date, and key milestones tied to inspections.
• Consider modest incentives/penalties for schedule adherence if both parties agree.

3) Payment terms that protect you

• Keep deposits modest (often 10–20%, or as allowed by your state).
• Tie progress payments to verified milestones, not time.
• Hold retainage (5–10%) until final inspection, punch list, and lien waivers are complete.

Example payment structure:

Deposit: 10% at signing
Draw #1: 25% after rough framing passes inspection
Draw #2: 25% after rough MEP passes inspections
Draw #3: 20% after cabinets/fixtures set
Retainage: 10% after punch list + final inspection + unconditional lien waivers


4) Licensing and insurance

• Verify the contractor’s active license. Require copies up front.
• Require insurance certificates naming you as certificate holder (and additional insured if appropriate).

Suggested minimums:

General Liability: $1,000,000 per occurrence / $2,000,000 aggregate
Workers’ Compensation: statutory; Employer’s Liability $500,000
Auto Liability: $1,000,000 combined single limit
Additional Insured: Owner on GL with Primary & Non-Contributory; Waiver of Subrogation


5) Permits and inspections

• Specify who pulls permits (usually the contractor). Payment milestones should reference passing inspections.
• Require permit card posted onsite and inspection reports shared in your project folder.

6) Change orders (COs)

• No verbal changes. All COs must state scope, cost, and schedule impact, signed by both parties before work proceeds.

7) Lien waivers and payment chain control

• Require conditional lien waivers with each payment and final unconditional waivers from the GC and all subs/suppliers before final payment.
• Optionally request a list of subs/suppliers before mobilization.

8) Site protection, dust control, and housekeeping

• Specify surface protection (e.g., Ram Board on floors, plastic containment/zip walls), daily cleanup, and dumpster/haul-away.
• For occupied homes, require HEPA vacuums and negative air if cutting/grinding indoors.
• Pre-1978 homes: contractor must be EPA RRP certified for lead-safe work.

9) Safety and access

• Work hours, utility shutdown notice, locked areas, pet/child safety, and restroom arrangements (portable toilet if needed).
• Require OSHA-compliant practices and PPE for the crew.

10) Materials, allowances, and substitutions

• List exact makes/models/finishes. If using allowances, state amounts that reflect market reality.
• Define substitution rules (must be equal or better, with owner approval and credit if cheaper).

11) Warranties and closeout

• State warranty period (commonly 1 year labor; longer for roofing, windows, or manufacturer warranties). Spell out what’s covered and response times.
• Closeout package: permits, inspection sign-offs, manuals, warranty cards, as-builts, paint/finish schedules, final lien waivers.

12) Dispute resolution and termination

• Include a clear process: escalation, mediation, then arbitration or court per your preference.
• Termination clause for cause (non-performance, safety violations), with cure periods and payment for work in place.

Step-by-step setup before work begins

1. Verify license status and collect insurance certificates with required endorsements.
2. Attach plans, specs, and a finishes list to the contract.
3. Build a milestone-based payment schedule with 5–10% retainage.
4. Insert change-order, lien waiver, and permit/inspection language.
5. Add site protection, dust control, and daily cleanup standards (brand examples: ZipWall poles, Ram Board, HEPA shop vacs).
6. Confirm schedule: start date, substantial completion, working hours.
7. Review and sign; share a cloud folder for permits, COs, photos, and inspections.

Helpful tools and materials

• Contract checklist (printable or app)
• Smartphone for photo documentation and scans
• Shared cloud folder (Google Drive, OneDrive) and e-sign app (e.g., DocuSign)
• Blue painter’s tape for punch-list marking, measuring tape for verifying clearances
• Jobsite lockbox if access is needed without you present

Safety considerations

• Lead/asbestos testing for older homes if disturbing paint, flooring, or popcorn ceilings.
• Require GFCI-protected temporary power, cord management, and capped gas lines when appliances are removed.
• After HVAC work, ensure new filters and verify CO detectors are installed and functional.

Tips for best results

• Take pre-construction photos of every room and exterior face.
• Keep allowances realistic to avoid surprise overages.
• Require weekly progress updates with photos and a 1–2 week look-ahead schedule.
• Walk the site with blue tape before final payment to create a punch list.

Common mistakes to avoid

• Paying a large deposit or paying ahead of completed work.
• Vague scope or no attached specs.
• Skipping lien waivers.
• No defined change-order process.
• Not verifying workers’ comp (puts you at risk if someone is injured).
• Ignoring dust control in occupied homes.

When to call a professional

• For projects over roughly $25,000, structural work, or complicated builds, have a construction attorney review the contract. Expect $200–$600 for a focused review—money well spent to prevent costly disputes.