What is an escalation clause?
No one likes to have a price change during their remodeling project. The Design-Build Team at The Cleary Company strives to be transparent with you throughout the estimating and development process. Our goal is to Educate, Collaborate & Connect with you and your family from beginning to end of your project. We feel it is our responsibility to review every part of your contract and to ensure you understand the wording.
There is one clause that tends to give some of our clients a bit of hesitation and takes time for us to explain, in more detail, what it is and why it is in there. The Escalation Clause. It is taken, in part, from the Ohio Revised Code. Read more detailed information about this section of the code here.
The Escalation clause, as written in our contract:
Some of the materials and portions of the Work priced herein are based on bids received from materialmen and subcontractors that will be used on this project, and understanding that such bids are typically only good for 30 days and understanding that their services may be requested after this 30-day, period, there is the possibility that the costs for these materials and services may increase for reasons beyond the Remodeler’s control. Owner acknowledges this risk and agrees to be responsible for any increases, subject, however, to the notice requirements set forth in Section C(1) below dealing with extra or excess costs.
Section C – Excess Costs and Written Change Order Procedure.
1. As required under Ohio Revised Code Section 4722.02(B)(2), Remodeler is providing Owner with the following notice of the procedures for excess costs and change orders:
IF AT ANY TIME A HOME CONSTRUCTION SERVICE REQUIRES EXTRA COSTS ABOVE THE COSTS SPECIFIED OR ESTIMATED IN THIS CONTRACT THAT WERE REASONABLY UNFORESEEN, BUT NECESSARY, AND THE TOTAL OF ALL EXTRA COSTS TO DATE EXCEEDS $5,000.00, OVER THE COURSE OF THIS ENTIRE CONTRACT, OWNER (YOU) HAS THE RIGHT TO AN ESTIMATE OF THOSE EXCESS COSTS BEFORE THE REMODELER BEGINS WORK RELATED TO THOSE COSTS. SUCH ESTIMATES SHALL BE IN WRITING AND GOVERNED BY THE PROCEDURE OUTLINED IN THIS SECTION. HOWEVER, OWNER IS HEREBY NOTIFIED THAT IN THE EVENT OWNER FAILS TO APPROVE SUCH EXCESS COST(S), THE COMPLETION OF WORK MAY NOT BE POSSIBLE AND OWNER MAY BE CHARGED FOR THE COSTS INCURRED BY REMODELER FOR ANY DISASSEMBLY, REASSEMBLY, OR PARTIALLY COMPLETED WORK DIRECTLY RELATED TO THE ACTUAL LABOR OR MATERIALS INVOLVED.
What does this mean for you?
The escalation clause explains that it is a possibility that some of the pricing could change during your project. If there is a dramatic increase in a product required for your project, that cost increase is passed on to you, the client. In this situation, the overall cost of the project will then increase.
This is a common clause in remodeling contracts. It’s there, in part, to protect companies from unexpected increases in materials and/or labor costs. As we have seen in the last 18+ months, supply chain issues, workforce shortages, material costs and other variables, have all impacted what we can buy and when it is available. It is never our intention to randomly increase prices. When a situation does occur that impacts costs, we will communicate with you and obtain your approval.
Another reason this clause exists is to protect our company. For example, when a client selects more expensive fixtures or finishes after the budget is finalized or requests a costly change order. And in some rare cases, concealed structural conditions found during demo that will change the budget.
Our Team strives to conduct open communication, create a budget that works for you, and brings your vision to life. We don’t want there to be surprises along the way, but we also know, with our 27+ years of remodeling experience, that there can be issues with any project.
Find out more about what to expect during your home remodel in this blog. Interested in the phases of a Renovation Lifecycle? Click here.
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