The most commonly used pricing bases in renovation projects are hourly pricing and piecework rates. Agree on the price or cost estimate in writing.
When using hourly pricing , request an estimate of the time required for the project and include it in the agreement. Hourly prices must be indicated inclusive of surcharges and taxes.
Piecework rates are fixed contract prices which the contractor is not allowed to exceed, but the contractor also has no obligation to do the work at a price below that which was agreed.
A cost estimate is an estimate that may be exceeded by no more than 15%, and only when doing so is justifiable.
A maximum price is a fixed upper limit for the project price. The contractor may not charge more, even if the work turns out to be more costly than estimated. The price may, however, be lowered according to the amount of work performed or materials used.
As a general rule, no advance payments should be made for renovation projects. The safest option is to agree that invoices are paid only when the agreed work has been completed and approved.
Advance payments involve risks to the consumer. The worst case scenario is that the contractor disappears with the money.
If you agree to pay for renovation work in instalments, the schedule of payments should be designed so that the bulk of the payments come towards the end of the project. This way the payments follow the progress of work. This approach also helps protect the customer's right to withhold payment for defective work until the defect in question has been appropriately rectified.
If the contractor is compliant with the REYS-8 contract terms approved by the Consumer Ombudsman, agreeing on an advance payment may sometimes be considered. In such cases the terms are clearly specified in the contract.