If you're in a hurry to start a project, first take a moment to understand what it is you're signing
Whether your roof is damaged or you’re eager to start a remodel project, it can be tempting to sign a letter of intent. While a letter of intent for construction can outline project details and allow the contractor to move forward with certain steps, it’s only useful in limited contexts. That’s why it’s critical that you understand an agreement’s terms and conditions before you sign the dotted line.
Even if your project is urgent—like a roof repair after a storm—ensure you get quotes from at least three different contractors or local roofers. Vet each contractor, gather information, read reviews, and follow up on references before signing any documents.
A letter of intent for construction outlines general project details and expresses that you and a contractor intend to work together and sign a formal contract. The letter often allows the contractor to begin work, which may entail drafting detailed plans, preparing the site, sourcing materials, and scheduling a work crew. After a letter of intent is signed, the homeowner and contractor should work together to finalize a contract.
A letter of intent should not be used as a formal contract and should only be signed in limited contexts. For example, if there are long lead times on materials, a contractor might want a letter of intent to proceed with an order. But some contractors use a letter of intent to convince a homeowner to choose them or agree to a certain price. If you feel pressured or are told you have limited time to lock in a price, you're better off walking away.
Each state has its own laws about whether a letter of intent is a binding contract and it depends on what’s included in the letter. If a court finds the letter binding, you may have to compensate the contractor for some or all of the agreement.
A letter of intent should only be a starting point for further discussion and not the final or only written agreement. If you decide to sign a letter of intent, talk with an attorney about including a clause that says the letter is not binding unless and until a formal contract is in place. Contact your state attorney general's office to understand consumer contracts in your state before settling on any agreements.
Remember that a letter of intent is only useful and necessary in certain contexts, such as if the contractor needs it to secure supplies or subcontractors ahead of time. Talk with your contractor about why a full contract cannot be completed now. If you sense any red flags when working with a contractor, don't make any commitments and look for someone else.
Once you’ve vetted at least three local contractors and selected who you’d like to work with, you may be ready to sign a contract. Unlike a letter of intent, a contract is often binding and outlines all the project components, payment terms, and financial commitments. Before signing, ensure all the details are mapped out.
Price: All costs should be clearly detailed, plus any potential extra charges.
Scope of work: Understand what work will be covered under the contractor from start to finish.
Permits: The contract should state that the contractor is required to obtain all permits.
Subcontractors: Ask if subcontractors will be used. Ensure the agreement includes the promise of a lien release from subcontractors and suppliers. You don’t want to be on the hook to cover the cost of subcontractors and supplies that your contractor didn’t pay for.
Payment schedule and terms: Outline any down payments and when the final amount is owed (it should be after the work is complete and has been inspected).
Project schedule: A general timeline should be set, such as project start and end dates. Consider including penalty terms for delays.
Materials: Your contractor should state what materials will be used, including details like trim type and color.
Contractor info: Make sure their license (if required for the profession) is listed, along with their street address and phone number. Ask for other contractor documents like their bond and insurance paperwork.
If your roof or home gets damaged in a storm, file an insurance claim first. While it can be tempting to sign a contract or letter of intent to secure a contractor, wait until the adjustor assesses the damage. Your insurance company won’t pay more than the costs to fix or replace your roof or other damage. Consider having your contractor meet with the adjuster, if possible, to help describe the full scope of work and costs.
If you decide to sign a letter of intent or contract before you hear from your insurance company on what they’ll cover, consider including a clause that states the project is contingent upon payment from the insurance company.
