Commercial renovation Contracts will eliminate costly misunderstandings

Preparing the contract documents for a restaurant, office renovation or retail store renovation projects can be a time consuming process. However, if you don't wish to create a renovation nightmare, it's well worth the effort.

What actually needs to be in an Agreement (renovation services contract )?

As your lawyer* will tell you, a basic contract between (at least 2) parties, consists of only (3) necessary parts.

They are:

1) The Offer

This is quite simply, the goods or services that are being offered by one party to another. In the case of a commercial renovation project, a trades person or supplier is offering to provide you with a specific amount of project services. This could be a plumber, offering to install the bathroom pipes, fixtures and drains, etc. Or, it could actually be a General Contractor offering to supply all the materials and labor required, to complete your entire renovation project. You could also be offered materials or individual components from a supplier or manufacturer. An example of this type could be the mill-work shop that would provide your cabinets or display fixtures.

2) Acceptance

After an offer has been made by one party, a second party would need to accept that specific offer. For acceptance to be accomplished, there should be a clear understanding by both parties that this has actually occurred. This component frequently becomes the source of misunderstandings and confusion, both during and after a renovation project. A contractor's work order is frequently written in very vague terms. It was usually prepared for the contractor, to ensure that the customer would be forced to pay for any and all services performed. By signing the work order, you agree to pay an agreed amount of money for whatever they do! The single biggest problem with this type of document stems from the lack of specific project details. Although the contractor's terms of payment are clearly described in detail, the actual project specific services are usually hand-written, (in general terms only). If you wish to actually accept an offer of services from any contractor, be sure that EVERYTHING that you want done, is exactly what they are offering to do. Having them go away to write their work order clearly makes some service providers, very nervous. They know that given some time to think about their offer, you could change your mind and tell them No, thank you. Being pressured into a quick signature, is too often explained as only a scheduling agreement and not the actual contract. Don't sign, unless your lawyer explains your rights and responsibilities... first. When they produce the signed work order in court, you'll probably be ordered to pay the final invoice amount, despite your protests.

3) Consideration

Usually an amount of money. Consideration is also described as the actual value of the agreement. Never agree to sign a work order for a specific amount of money, that also contains either an hourly, or vague percentage figure for unforeseen extra work. Changes to the agreement, should always involve a re-consideration and some negotiation. Some renovation services contractors use the unforeseen work to add significant costs to a project. By producing accurate, detailed project specifications for your agreement, unforeseen extras should be very minimal.

What does CWS suggest, be in your Agreement or renovation services contract?

For everyone involved in your project to have a clear understanding of their rights and responsibilities, everyone needs to see a complete picture. Accurate, detailed drawings (plans) and written specifications (for each trade component), must form an integral part of every agreement. By describing the project in detail, both you and your service providers will understand what will be done, when and the final project result. Major commercial projects use this procedure to ensure complete project cost control is maintained. You can accomplish the same result if you carefully follow the process. By writing the agreement to include the drawings and specifications, you can take the documents to your lawyer in a semi-completed form. By not wasting their time (to prepare the documents), you can get an efficient use of their professional expertise. Allowing them to edit the agreement is always a more cost-effective method, than asking them to compose from your verbal explanations.

If you are hiring a General Contractor, to look after all the sub-contractors on your renovation project, including a termination clause for non-performance, is both reasonable and prudent. If the General fails to perform as agreed, you can stop the project and hire someone to replace them. This incentive creates and maintains the sense of urgency for all the parties involved. Commercial renovations are always very time sensitive and can cost you a lot of money, if your contractors take too long to complete your project.

* Please note:

The preceding information, is provided as a free as is service and should not be considered as legal advice. We advise all of our clients to seek additional information and advice, before entering into any contractual agreement.

Renovation project specifications are actually part of the contract

Until you specify exactly what you require from each trade and service provider, you can't possibly expect them to specify exactly what it will cost! Many commercial tenants are so concerned about all the various cost components to open their business, that they settle for verbal estimates to prepare their renovation costs (tenant improvements) budget. Talk is cheap. After they hire the contractor with the lowest price estimate, they are shocked by all the additional costs that the contractor is including in the actual project. This is the point where many tenants panic, accuse the contractor of deception and start the contractor hunt all over again! But... who was actually practising deception? You asked the contractor for a cost estimate on a hypothetical renovation project. He gave you a hypothetical price. Once the project becomes real, real costs are involved. Professional renovators are never prepared to do the work for free!

Preparing a detailed quote can take a few hours or a few days, for even a relatively small commercial renovation project. Do you honestly believe that any professional contractor will expend the hours required to prepare an accurate quote, when the project isn't clearly defined? Every change will require a re-examination of the costs and procedure. This is why the Free Estimates game is so profitable for amateur contractors. They do a quick survey of the project, come up with a plausible number and wait for your response. If you don't like that number, they start changing the project to lower the price or they justify all the unknown costs as the reason for the high price estimate. This can be a financially dangerous game to play. Unless you define and specify the entire project, component responsibilities and a completion schedule, you are completely vulnerable to the contractor (or contractors) that you hire.

Sample project specifications - retail store renovation

Note:

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Project Specifications and Completion Schedule

re: abcde specialty store - tenant improvements renovation project

Unit #305 - 1000 Main street, Coquitlam, BC

(located in the Small Business Success Centre)

General

PLEASE DO NOT MAKE CHANGES TO THE ATTACHED DRAWINGS

(attach a note indicating the items in question)

General Project Outline

The tenant improvements to this site do not include any load bearing alterations. The store owner will provide the wall preparation, painting and flooring requirements.

Partition and utility chase framing (Rough-in Completed before December 2, 2004 ) (Drawing sheets 1, 2 & 6)

Relocate 3-0 x 6-8 passage door from reception area to front office to the first consulting room (as indicated). Fill with steel studs as per original detail. Supply and install 1/2" G.W.B to both sides. Frame chase and column (as indicated). Cover with 1/2" G.W.B after plumbing and electrical inspection approval.

Plumbing (Rough-in Completed before December 3, 2004 ) (Drawing sheets 5 & 2)

Note: Slab cutting, trenching and concrete repair to be done by others. Plumbing permit to be obtained by the plumbing contractor. (rough-in plumbing inspection to be called for at Building Permit issuance)

Supply and install rough plumbing (as per drawing) to supply (3) hand basin sinks. Supply and install under slab waste line connected to existing main waste line. Replace existing (5 gal.) electric Hot Water tank (located in T-bar ceiling cavity beside washroom) with a new 25 gal. electric hot water tank. Provide additional seismic support for new tank (as required). Re-connect sinks (owner supplied) at finish date of December 28, 2004. Note: Sink "waste line" diameter to be 2" ABS from the final sink connection (including "y") to 4" main waste line. Note vent line installation size and location, including fire stop provision at fire separation breach. Pressure lines will be 3/4" (type L) from tie-in point (above washroom), to beyond the first sink distribution point. All other pressure lines to be 1/2" (approved grade) copper.

Although we have confirmed the layout a piping with the Coquitlam Plumbing Inspector, the plumbing contractor will be responsible for verifying the plumbing code compliance prior to installation.

Electrical (Rough-in to be Completed before December 10, 2004 )

Note: Electrical permit and inspections to be the responsibility of the electrical contractor.

Remove and dispose (or relocate) 4-40 drop-in fluorescent fixtures as per Drawing sheet (3). Switching as per drawing. Install only, low voltage halogen tracks and variable control switching, as indicated. The (8') track in the "reception area" to be "constant on" night-light. All other tracks to be controlled by variable switches. Drawing sheet (4) - Supply and install (4 - 15 amp. circuits to each consulting room) (1) split-dedicated receptacle on each side of cabinet and (1) split receptacle in a quad box. Supply and install a single split receptacle (to share circuits with other split receptacles.) to side wall of front and rear consulting rooms. Relocate emergency lighting (as indicated). Contractor to supply all BX cable, boxes, breakers and finish components (accept as indicated). Please note the 20 amp. (110v.) surface mounted receptacle in storage room and the fire stop detail for the electrical and plumbing chase on West wall.

HVAC alteration (Completed before December 10, 2004 ) (Drawing sheet 4)

Relocate ceiling diffusers as indicated. Rebalance air flow after completion. Check and service rooftop HVAC unit and advise re: repair and maintenance schedule.

Store Owner's declaration

___________________________________

Mr. I.M. Smart, store owner      Date:__________________________

abcde specialty store

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Notice to Contractors

Note:

You must post a conspicuous notice, advising all trades and suppliers of the legal responsibilities of all parties concerned with the property and project. If you fail to do so, you could have a surprise lien affect your tenant allowance payment.... or worse!

Dated: November 1, 2004

re: abcde specialty store - tenant improvements renovation project

Unit #305 - 1000 Main street, Coquitlam, BC

General

All contractors will provide proof of Workers Compensation Board registration, proof of Contractors General Liability insurance coverage and a City of Coquitlam Business License, prior to commencing any site work. The Landlord (Mega Properties Ltd.) will accept no responsibility for any liens or ensuing encumbrances, arising from work performed on this tenant improvement (renovation) project. This project will be registered with WCB. Any contractor not providing proof of WCB registration, will have an appropriate deduction made from the final invoice amount, to cover the store owner's cost of premiums. It is the responsibility of each contractor to obtain (or verify existing coverage) the required permits to cover the work described in their agreement. Site access will be given and controlled by the store owner for the work on an "as scheduled basis." Delivery by third party suppliers and sub-trades will only be accepted on site with prior notification by the contractor to the store owner. Although every effort will be made to schedule each trade separately, cooperation between all on-site workers is required. Clean-up of all debris (and any unused materials) on a daily basis by each trade working on site, is mandatory.

_______________________________ Mr. I.M. Smart, store owner

abcde specialty store

This notice shall remain conspicuously posted on site, until completion of all trades work.

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Services Agreement... (sub-trade sample contract)

Page 1 of 3

An agreement between I.M. Smart, hereafter known as "the Store Owner" of abcde specialty store located at #305 - 1000 Main Street, Coquitlam, BC and Accurate Mechanical Services Inc. of 1500 - 80 A Avenue, Surrey, BC, hereafter known as "the Contractor".

This agreement shall be for the sole purpose of having the Contractor provide plumbing trade services to the Store Owner as per the attached project specifications and (Schedule "A"). The Contractor declares that all work performed, shall conform to a "substantial and workman like," plumbing code and City by-law legal standard. The Contractor further agrees to provide the Store Owner with all information requested in Schedule A. The Store Owner hereby agrees to pay promptly to the Contractor as per the following payment schedule:

Deposit on signing:   $   600.00 ------------------(on net contract price: $2860.00)

On installation (and final inspection) of all components: -------------$ 2460.20

TOTAL PRICE (including GST of $ 200.20) --------------------------------$    3060.20

Final Payment shall be made, subject to a Final Inspection Approval by an independent Third Party Inspector and upon the return to the Store Owner, of the completed Release of Claim from each party authorized to supply materials or perform work for the contractor.

Signed at Coquitlam_______________, BC this ______ Day of November, 2004

____________________          _________________________

I.M. Smart, store owner               Peter Plumber, President

abcde specialty store                Accurate Mechanical Services Inc.

___________________________

Witness to both signatures

___________________________

Please print name of witness (or affix seal)

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Page 2 of 3

Schedule "A"

SCOPE OF WORK TO BE PERFORMED

The following Companies or Individuals are hereby authorized to perform work in accordance with this Agreement, of which this schedule forms a part and to which it is attached.

NAME: Accurate Mechanical Services Inc.    PHONE: 604-555-5555

TYPE of WORK: Plumbing     WCB reg.#: 552678 BG

Any work performed by persons authorized by the contractor, other than those listed above, shall be deemed to be in substantial breach of the "The Agreement," unless agreed to in advance. All additions or amendments to the above list must be made in writing, at least (24) hours prior to the commencement of installation work. The Store Owner accepts no financial responsibility whatsoever, for any liabilities incurred by the Contractor on their behalf, to any persons not listed above. In addition, the Contractor shall be liable for any damages or actions arising from any omission or deception concerning this authorization.

To be initialed by the Owner _________ and "Contractor" __________ Both parties acknowledge receipt of the completed copy.

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Page 3 of 3

General

All work performed, shall substantially conform to "an acceptable and substantial workmanlike standard and the (BC) Provincial Plumbing Code". Upon substantial completion of installation, the Contractor shall perform "a final clean-up" of their debris (prior to payment, as indicated in the specifications attachment).

From the attached project specifications:

Plumbing (Rough-in Completed before December 3, 2004 ) (Drawing sheets 5 & 2)

Note: Slab cutting, trenching and concrete repair to be done by others. Plumbing permit to be obtained by the plumbing contractor. (rough-in plumbing inspection to be called for at Building Permit issuance)

Supply and install rough plumbing (as per drawing) to supply (3) hand basin sinks. Supply and install under slab waste line connected to existing main waste line. Replace existing (5 gal.) electric Hot Water tank (located in T-bar ceiling cavity beside washroom) with a new 25 gal. electric hot water tank. Provide additional support for new tank (as required). Re-connect sinks (owner supplied) at finish date of December 28, 2004. Note: Sink "waste line" diameter to be 2" ABS from the final sink connection (including "y") to 4" main waste line. Note vent line installation size and location, including fire stop provision at fire separation breach. Pressure lines will be 3/4" (type L) from tie-in point (above washroom), to beyond the first sink distribution point. All other pressure lines to be 1/2" (approved grade) copper.

Delivery and Installation Schedule

Commence work on/or before November 24, 2004. Rough-in, as per drawings and specifications dated December 3, 2004. Finish installation to be completed on January 4, 2005.

Summary

Work performed in the premises, shall be scheduled between the hours of 7:00 A.M. and 11:00 P.M. as per the City of Coquitlam by-law. The Store Owner shall provide the contractor with a key for access and performing work, during the above times.

The preceding scope of work is intended as a general guideline only. Should additional work be required, it should be noted and brought to the attention of the Store Owner. DO NOT PROCEED to include the work, or charge for any extras without prior, written acceptance. Both parties further agree, that any dispute arising regarding this agreement, will be resolved through mediation.

BOTH PARTIES SHALL INITIAL EACH OF THE (3) PAGES AND ANY CHANGES OR AMENDMENTS

To be initialed by the "Owner" _________ and "Contractor" __________ Both parties acknowledge receipt of the completed copy.

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RELEASE OF CLAIM

I the undersigned, hereby acknowledge that I have no further interest pending, with respect to materials delivered or the work I/we performed at #305 - 1000 Main Street, Coquitlam, BC. All monies owing to me have been paid in full.

Signed at__________________________, BC this ______ Day of _______________, 2005

_________________________________

Peter Plumber, President

Accurate Mechanical Services Inc.

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Contract and Specifications Summary

The above Project Specifications and Agreement are for a small (fictitious) retail store renovation project. Although they are a simplified version, they far exceed the usual Work Order & Contract that most contractors use. This agreement protects the interests of both parties, clarifies the responsibilities and costs and reduces the stress and confusion that normally exists with this type of project.

Making Changes during a renovation project

Change orders are an inevitable (and expected) part of most renovation projects. So what are they changing?

Change orders are designed to help everyone maintain control. If you need (or want) to make changes during the course of construction, the services contract will need to be changed as well. If you have been careful to design, plan and document the project, the changes should be minor in scope and cost. This is not the time to revert to verbal agreements! Contractors often make the most profit on changes. Some even create changes to increase the final invoice amount. By documenting the change with "a change order", you are simply adding something to the existing contract. Your project and cost control is still intact. A simple written change order can simply be a piece of paper that says Move hallway door.... $75.00 that both you and the contractor sign. When the final invoice is presented, any change orders should be noted and added to the original contract price. Simple and straight forward (with no hidden surprises).

Making design and specifications changes during the quote stage

When you make changes to the design, specifications or schedule after you distribute the plans and specifications for contractor quotes, you should inform ALL CONTRACTORS of the changes and give them new documentation. Taking the time to finalize your project plans BEFORE you ask for quotes, can save a considerable amount of time, money, confusion and stress for everyone. Professional contractors get nervous about customers who can't decide what they actually want. They know (from bad experiences) that the customer will expect the "quoted price" to remain constant, even though the project keeps changing! This is not only a poor business practice on the customers' part, inevitably the Contractor will either charge you for the additional aggravation, or simply refuse to sign a contract to do your project.

Contractor Watchdog Services was formed because the current system simply doesn't protect commercial tenants and Landlords from:

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We provide commercial tenant improvements renovation project planning and design services to lease space clients in Vancouver, North Vancouver, Burnaby, New Westminster, Coquitlam, Port Coquitlam, Port Moody, Delta, Richmond, Surrey, White Rock, Langley, Maple Ridge and Pitt Meadows, BC.

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