2 money tips for home renovation to protect against accidents or defaults by contractors

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SINGAPORE - If you plan to undertake a major home renovation, you could consider getting insured to protect yourself against accidents or possible defaults by the contractors.

While the primary purpose of such "renovation insurance" is to cover damage such as work which causes an electrical fire that affects your home as well as your neighbour's, some policies have a "performance bond" component that will pay 10 per cent of your contract value if the contractor cannot complete the work.

SingCapital chief executive Alfred Chia, whose firm deals with such insurance, says: "Many home owners are not aware that such an insurance exists. It is not expensive but it provides some compensation if your contractor suddenly goes bankrupt and cannot finish the job."

Some of these policies cost about 2 per cent of the contract value, or $200 for a $100,000 project, and owners will get $10,000 if the work is left undone.

More importantly, the insurer screens the contractors to ensure they are licensed and financially stable before the policy is approved.

 

1. Negotiate a fair payment schedule

With or without insurance, you should always ask your contractors for a progressive payment schedule that is based on the stages of the work.

The Consumers Association of Singapore (Case) recommends this too. A sample contract that you can view on its website recommends that the first and last payments to be just 10 per cent each while the other 80 per cent will be paid in various instalments according to the work done.

Where possible, try not to agree to pay deposits of 30 per cent to 50 per cent of the costs at the start of the project.

To be fair to contractors, some have also encountered their fair share of bad customers who either delay payments or worse, refuse to pay after the tradesmen order the tiles and other materials for the project.

So if you want them to agree to your terms, you should also assure them that you are a good and honest customer by making an instantaneous bank transfer via PayNow each time a payment is due.

 

2. A model payment schedule

You can propose this to your contractor before you sign the contract:

First payment: 10 per cent upon signing. This is usually needed to show that you are a genuine customer. This is because after you pay, your interior designer will do various 3D artworks to show how your new home will look like.

Such work can be time-consuming and it is only fair that they do this after you make the first payment.

Second payment: 20 per cent when the work starts. For a major renovation, this is usually the noisiest and messiest part of the work because workers will hack and drill your beloved home into pieces. You are usually not advised to visit then because there will be concrete strewn everywhere and electrical wires hanging loose from the ceiling.

Your payment will ensure that the contractor has the funds to pay his workers and for pricey materials, such as tiles.

Third payment: 30 per cent when the carpentry work starts. After the walls and floors are done, the measurement for the various cabinets will be taken so that the carpenters can start building them off site.

These are built either locally or across the Causeway in some cases.

If you are in a hurry to ensure that your project finishes on time, you should insist that your designer takes the final measurement as soon as the tiling work is done because carpentry work for custom-made cabinets usually takes some time.

Fourth payment: 25 per cent for the last stage of work. This happens usually after all the cabinets are installed and it is time for the lights to go up and the painting to start. By then, you should feel very pleased and assured that your new home is ready to welcome you back.

Last payment: 15 per cent. Why set it higher than 10 per cent? This is meant to provide an incentive for your contractor to finish your home on time. Before you make this payment, make sure you have an agreement that your contractor will still come and rectify any minor defects that you detect after you move back in.

No matter how well done your home is, the tradesmen are bound to have missed some spots that only you will discover since you live there and not them.

Apart from the contractor's fees, there are other expenses, such as for new air-conditioners, lights, kitchen and toilet accessories, and curtains.

Try to pay for these directly to the respective suppliers so that you don't end up giving all your money to your contractor only.

More importantly, it is good to know as many household suppliers as possible so that you know whom to look for when your lights start to go on the blink a few years after the renovation.

Just like financial planning, you need to be astute in home improvement planning as well, as it is likely to cost about the same as other big investments you make.

 

Source: The Straits Times © Singapore Press Holdings Limited. Reproduced with permission.

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