The best way to avoid problems in your basement finishing project is to follow these ten steps, and to cover all details in your contract.

  1. The Contract – Don’t sign anything—until you understand & agree
    Although you might assume that a “contract” should look like a contract, anything you sign could be used by a contractor as authorization to go forward with your project. This means that any bid you sign may become the contract. Do not sign anything until you completely understand what you are signing, and agree to all the terms.Be sure to ask questions until you fully understand the contract and what the work will look like.Get it in writingOne of the best ways to stop problems before the job begins is with your contract. The contract binds you and the contractor to the project. Since a written contract protects you and the contractor, all agreements should be put in writing. It should include everything you have agreed upon and the extent of work to be done. Get all oral promises in writing, and spell out exactly what the contractor will and will not do. If you intend to do some of the work yourself or hire another contractor to do it, this also should be written into the contract. Be as specific as possible.Never sign a blank or partially blank contract. Get a copy of the contract as soon as you sign it, and keep it for your records. Both you and the contractor are bound by everything set down in the contract, so read it carefully before you sign. If you have any questions or don’t understand something, ask before you sign.Be sure the financial terms of the contract are clear. The contract should include the total price, when payments will be made and whether there is a cancellation penalty. On any home improvement job, you should expect to make a down payment.


    Be sure to get any warranty offered by the contractor for labor and materials in writing. It should specify which parts of the work are covered and the duration of the warranty. You should also request any written warranties offered by the manufacturers of materials or appliances installed by the contractor.

    Scheduling the Work

    Your contract should specify an approximate starting date and completion date for your project. For example, the contract should read “Begin approximately April 20 and end approximately April 30,” not “Complete the job in 10 days.” This eliminates the possibility that the contractor will take 10 days to finish the job but spread them out over the span of a year. However, external factors such as the weather or the availability of supplies might cause delays.

    Scheduling the Payments

    Make sure the payment schedule is based on the contractor’s performance. Never let your payments get ahead of the contractor’s work, and make sure the contract provides for“retention” — a percentage of each payment or of the total job, ordinarily 10 percent, which you retain until the job is completed.

    Never sign a completion certificate until all the work called for in the contract has been properly completed. Lenders usually require a signed completion certificate before they will release the last payment.


    In most cases you will be living in your home while work is being done on it. You should be aware of the many inconveniences that may occur. Exterior walls may be taken down, water and/or power shut off, or bathroom and kitchen facilities temporarily disconnected. Dust and debris might also damage your furniture or other personal possessions. Before work begins, ask your contractor what inconveniences will occur, and then plan for them. That way, both you and your contractor can avoid conflicts when inconveniences do occur.

    Keep a Job File

    You should keep a file of all papers relating to your project. It should include:

    • The contract and any change orders.
    • Plans and specifications.
    • Bills and invoices.
    • Canceled checks.
    • Lien releases from subcontractors and material suppliers.
    • Letters, notes, and correspondence with your contractor.
    • Pictures of the job in progress.

    It is also a good idea to keep a record of each subcontractor who works on your project, the work performed, and length of time on the job. When material suppliers make a delivery, write down the name of the company, the date, and a general description of what they delivered. When you receive preliminary notices from subcontractors or suppliers, make sure you receive lien releases. Check them against your list. That way you will have a record of who has and has not been paid.

Read part 4 “During Construction and Inspections”