Can I get out of a renovation contract if the work hasn't started?
- It's common to feel overwhelmed by a renovation—think carefully about breaking the contract
- Without a termination clause in the agreement, you may be liable for the contractor's damages
In this scenario, one solution might be to ask the incoming buyer if they want to hire your contractor to do the job.
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I signed an agreement with a contractor to do work on my co-op with 10 percent upfront but no termination clause or start date. My neighbor offered to buy the apartment as it is. Am I liable if I want to cancel the renovation contract?
If you want to get out of a renovation contract even though work has not started, you may still be liable, our experts say. Typically, if there is no right to terminate for either the owner’s convenience or for cause, “an owner seeking to terminate an agreement with a contractor may be responsible to pay the contractor for damages,” says real estate attorney Eric R. Garcia, a partner at DL Partners.
This may include the cost of materials purchased in advance or time spent on permit applications or other potential work opportunities lost because the contractor had committed to your project. Garcia says the damages may include “any expenses incurred by the contractor in the performance of duties under the agreement.”
Getting out of a renovation contract
When you are evaluating a bid from a contractor, transparency is important. If the contract’s underlying structure sounds vague and outright unfavorable to you, you’re likely to be liable if you cancel it, says Anna Karp, CEO and founder of design build firm Bolster (and a Brick Underground sponsor).
“In order to legally terminate a contract without cause, there must be a termination for convenience clause specifically stated,” she says. The exception to this is what’s called the notice of right to cancel policy, which allows you to cancel a contract within three business days of signing it. This is also known as the cooling-off rule, allowing you to change your mind about the commitment. Karp says this should be included in a construction contract.
If you have grounds for canceling the contract due to lack of professional licensing, breach of contract, unfair practices, or fraud, you’ll need evidence and detailed documentation to prove it, she says.
Finding solutions when breaking a contract
One resolution might be to see if the co-op buyer is interested in having the work done by the contractor. “Provided the incoming buyer is interested in performing renovation work, that could achieve an amicable resolution for all parties,” Garcia says.
Karp suggests reconsidering whether canceling the renovation and selling to your neighbor is the right call. “It’s not uncommon for first-time renovators to get cold feet and feel overwhelmed by the process,” she says. If you invested time researching contractors, planning your renovation, and locking it in place with a contract, why not realize those goals? “Obviously you were motivated by the bigger picture, whether it’s a bespoke home or increasing your co-op’s resale value,” Karp says.
However, if you are committed to the sale and are not able to come to an agreement with the incoming buyer about taking on the renovation contract, any damages on the part of the contractor would need to be substantiated. “If the contractor did not incur any expenses, an owner may be able to terminate without cost and seek the return of the down payment,” Garcia says.
Going forward, Karp suggests, when you enter a contract, “have clear timelines, tied to deliverables and payment tranches, which will give you clarity on start dates, completion dates, and measurable progress.”
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