7 Contract Clauses for a Colorado Home Renovation or Flip

A Colorado renovation contract needs seven clauses before the first wall comes down: a scope of work with product names, a payment schedule with a 10 percent holdback, a start date and a finish date, a written change-order process, lien and insurance protection, a warranty of at least one year, and a termination clause with a cure period. A contract missing any one of them is where a Denver metro kitchen, basement or roof project goes over budget.

The Kenna Real Estate Group at Keller Williams DTC sees the results on both sides of the closing table: sellers who finished a $40,000 basement on time and got the money back at the sale, and buyers who found unpermitted work on the inspection. This post covers the seven clauses, the Colorado rules behind them, and the Front Range costs. The preparing and adding value before selling page covers which projects to do at all.

Does Colorado license general contractors?

No. Colorado has no statewide general contractor license. Licensing happens city by city: Denver Community Planning and Development licenses contractors and requires a supervisor certificate for the person running the job, and Aurora, Lakewood, Arvada, Colorado Springs and Fort Collins each run their own licensing. Electricians and plumbers are licensed statewide through the Colorado Department of Regulatory Agencies (DORA).

Before you sign, ask for three things in writing: the license number for the city where your home sits, the DORA license numbers for the electrician and plumber on the job, and a certificate of insurance showing general liability and workers' compensation. Attach all three to the contract as exhibits.

Clause 1: Scope of work with product names

"Update kitchen" is not a scope. A Colorado scope of work lists every task, every product by brand and model, every room, and every item that is excluded. For a Front Range job, the scope also states:

• Roofing: shingle brand and impact rating. Class 4 impact-resistant shingles earn a premium discount from most Colorado insurers and matter in a hail season that runs May to September.
• Basement finish: egress window size for any bedroom, a radon mitigation system when the last test read 4.0 pCi/L or higher, and the floating-wall and slab detail, because expansive bentonite clay heaves basement slabs along the whole Front Range.
• Windows and doors: the U-factor and the low-E coating, because UV at 5,280 feet fades floors and furniture through plain glass.
• Exclusions: appliances, permit fees, debris hauling, and landscape repair after the work, each marked included or excluded.

Attach the drawings and the product list as Exhibit A. A product that is not in Exhibit A is a change order.

Clause 2: Payment schedule and holdback

Pay for work that is done, not work that is promised. The schedule on well-run Denver metro jobs:

• Deposit: 10 percent at signing, 15 percent when the job needs custom cabinets or windows ordered up front.
• Progress payments: tied to inspected milestones (rough-in passed, drywall hung, cabinets set), never to calendar dates.
• Holdback: 10 percent of the contract price, paid only after the final city inspection passes and the punch list is signed off.
• Lien waivers: a signed waiver from the contractor and every subcontractor and supplier with every payment.

Roofing has its own Colorado rule. Under Colorado's residential roofing law (Colorado Revised Statutes 6-22-101 and following), a roofing contract must be in writing, the roofer cannot pay or waive your insurance deductible, and you have 72 hours to cancel after your insurer denies the claim.

Clause 3: Start date, finish date, and a Colorado buffer

"Done when it's done" costs you money on every day the house is not listed. The timeline clause states the start date, each milestone date, the completion date, and a per-day amount the contractor credits back after the completion date passes. $100 to $250 a day is standard on Front Range residential jobs.

Build a Colorado buffer of 15 to 20 percent into each phase. Denver permit review runs two to six weeks for a basement finish or an addition. Roofers book out four to eight weeks after a June hailstorm. Exterior concrete and paint stop when the temperature drops below 40 degrees, which happens on the Front Range from late October through March.

Clause 4: Change orders in writing, signed before the work

Every change is a one-page form: what changes, what it costs, how many days it adds, and both signatures. No signed form, no change, no payment. The "while you are here" additions are where a $60,000 job becomes an $80,000 job, so set one rule for yourself: batch the wish list and price it once, in one change order, instead of ten.

Clause 5: Liens, insurance and permits

Colorado mechanics' lien law lets a subcontractor or supplier record a lien against your home when the general contractor does not pay them, even after you paid the general contractor in full. The lien claimant has to serve you a notice of intent at least 10 days before recording. Your protection is the lien-waiver requirement in Clause 2, plus these three lines in the contract:

• Permits: the contractor pulls every permit in the contractor's name and schedules every inspection. A permit in your name makes you the responsible party.
• Insurance: general liability of at least $1,000,000 and workers' compensation for every worker on site, with certificates delivered before the start date.
• HOA approval: the contractor supplies the drawings for the architectural review, and work starts only after written approval. In Highlands Ranch the HRCA reviews exterior changes; in most metro districts and HOAs a fence, roof color, window style or addition needs approval first. The Denver HOA rules and fees guide covers how those reviews run.

Denver historic districts and ADU projects add a zoning step. The Denver ADU, zoning and historic district guide lists it.

Clause 6: A warranty that transfers to the buyer

Ask for a written workmanship warranty of at least one year, two years on roofing and foundation work, and the manufacturer warranties on every product registered in your name and transferable to the next owner. A transferable roof warranty is a selling point on a Denver metro listing. A warranty from a company that has closed is worth nothing, so hire firms with a Colorado track record longer than the warranty.

Colorado law also sets the clock on construction defect claims: two years from the date you find the defect, and no later than six years after the work is completed (eight years when the defect turns up in year five or six). Photograph every stage of the work and keep the permits, so the record exists if a claim is ever needed.

Clause 7: Termination and how disputes get settled

The termination clause lets either side end the contract for cause after written notice and a 10-day cure period, states what you pay for work completed to that date, and requires the contractor to hand over permits, drawings and lien waivers on the way out. Add a dispute clause that requires mediation in the county where the home sits before either side files in court. Colorado small claims court handles disputes up to $7,500; anything larger goes to county or district court, where a written contract with signed change orders decides the case.

What do Front Range projects cost and how long do they take?

Get three bids on the same Exhibit A scope. A bid 25 percent under the other two is missing something, and the something shows up later as a change order.

Which projects pay back when a Colorado home sells?

Roof, sewer line, furnace and radon are the four inspection items Denver metro buyers use to reopen price talks, so money spent there protects the contract price. Kitchen and basement work returns 50 to 75 cents on the dollar at resale on the Front Range, which means the project has to earn its keep in years lived there, not at the closing table. The adding value before selling page ranks the projects, and the Colorado windows upgrade post covers the one most sellers skip.

Before you sign a contract for a pre-sale project, get a Smart Pricing Report. It shows the price of your home as it stands and the price of sold comps with the finished project, so the contract amount is measured against a real number.

Do I have to disclose the work when I sell?

Yes. The Colorado Seller's Property Disclosure asks about additions, structural changes, roof work and permits, and a seller who knows about unpermitted work discloses it. Buyers' inspectors pull permit history, and the Colorado Contract to Buy and Sell gives the buyer an inspection objection deadline to demand repairs, a credit or a lower price. A folder with the contract, the permits, the final inspection cards, the lien waivers and the warranties turns the project into a plus on the listing instead of a negotiation. The Colorado Home Seller's Guide lists every disclosure a seller signs.

What changes for a Denver fix-and-flip?

Everything above applies, plus the carrying cost. A flip in Aurora or Lakewood carries a hard-money payment of $3,000 to $6,000 a month on a $400,000 purchase, so the per-day credit in Clause 3 is not a formality. Flippers also write a cap on the total of all change orders (10 percent of the contract price is common) and a line stating the contractor installs nothing that is not in Exhibit A. The Denver fix and flip guide and the fix and flipping in Colorado guide cover the buy side and the resale numbers. The Denver inspection red flags post lists what the buyer's inspector checks on a flipped house.

Where to go next

• Preparing and adding value before selling
• Pricing your Colorado home to sell (Smart Pricing Report)
• Denver fix and flip guide
• Highlands Ranch HOA rules and renovation approvals
• Kenna Real Estate Group agents
• Search every home for sale in Colorado

Talk to the Kenna Real Estate Group

The Kenna Real Estate Group at Keller Williams DTC tells sellers which pre-sale project earns its contract price back and which one does not, and prices the home both ways with a Smart Pricing Report before a contractor is hired. Call or text 303-955-4220. A live person answers. Not a robot, not a phone tree. When the finished project is the one you are buying next, search every home for sale in Colorado.