With the value of residential properties in Bermuda at or near all-time highs, the number of renovations taking place is on the rise as homeowners seek to upgrade their properties.

Upgrading can be difficult enough for homeowners without getting into a dispute with the contractor doing the work.

Almost inevitably, however, such disputes arise over issues such as cost overruns, shoddy workmanship or missed deadlines. Often, such arguments arise as a result of misunderstandings between the contractor and the homeowner about the work that was to be undertaken and for what cost, usually because the parties only entered into an oral contract confirmed by a handshake.

Such disputes can be reduced significantly by a contract signed by both the contractor and the homeowner that will ultimately protect both parties.

In the absence of a written agreement, determining whether a contract has come into existence is often a recipe for disaster and can easily turn into a war of ?he said, she said? before a judge or arbitrator.

No job is too small for the parties to enter into a written contract.

In such a contract, it is important for the parties to, at the very least, confirm the exact work to be undertaken, the cost of the project (split into materials and labour), outline a payment schedule, and create a time line to completion of the project.

Both parties should sign and date the contract and each party should retain an original copy.

If the project is not to be at a fixed cost then an hourly rate for the contractor should be specified.

If the contractor is requested to undertake additional works outside the scope of the contract then the contractor should ensure that the homeowner is made aware that charges will accrue.

Ideally a second contract should be created between the parties that will define the additional work to be undertaken.

Although this may be tedious it will confirm that a new contract exists that is quite separate from the work specified in the original contract.

This will avoid the typical dispute of a homeowner saying that the contractor had already agreed to undertake that additional work in the original contract.

While this approach is sufficient for smaller renovation jobs, a more comprehensive contract is advisable for larger projects such as gutting and rebuilding several rooms to a house or indeed building an extension onto the home.

Key terms in such contracts include those as above but will also include such items as what the parties should do in the event of a dispute i.e. whether the aggrieved party pursue remedies in court or in arbitration.

Most parties choose the latter since such proceedings are kept confidential, which is obviously of great benefit to the contractor who will want to ensure a reputation is not tarnished by court proceedings.

In addition a comprehensive contract might include a penalty clause should the contractor fall behind schedule whereby a set amount is paid by the contractor to the homeowner for failures to perform obligations under the contract.

During contract negotiations, many terms and conditions are discussed prior to the parties entering into what will become the legally binding document.

To avoid confusion, the parties should make clear that the intention is not to create legal obligations by declaring that what is being discussed is ?subject to contract?.

On a more practical note, both parties should retain receipts of all materials purchased in relation to the contract.

In this way, disputes can be easily avoided regarding who purchased what in fulfilment of the contract.

In the instance of a contract based on the number of hours being worked, a logbook should be kept by the contractor and provided to the homeowner at regular intervals, accurately recording the number of hours worked, by whom and on what particular task.

The contractor should provide detailed receipts to the homeowner, indicating what work has been paid for. Such relatively simple procedures save time and unnecessary disputes, which are all too common in Bermuda.

If a dispute does arise then parties should only consider litigation as a last resort due to the expenses involved.

If an aggrieved homeowner is not interested in damages and is seeking specific performance of the terms of the contract, then they should remember that the action must be brought in the Supreme Court.

This will be the same for damages of $25,000 or more.

If you are drafting your own contract either as a contractor or homeowner, it is always advisable to let a trained pair of eyes review the terms.

Most lawyers will charge a reasonable fee for reviewing such contracts. It is a precaution that may prevent a costly dispute in the long run.

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