How to finish the apartment before it financially exhausts you? Here's how to avoid hidden costs
Only in the period of January-March 2022, developers commissioned 54.7 thousand. new apartments in Poland [1] . This means that every month, on average, several thousand happy buyers of their "M" arrive in our country. First, the purchase of an apartment that exists only on paper, and then receiving the keys to your own new apartment is a dream come true for many, but when the first emotions subside, it turns out that we face another, no less demanding task: finishing and interior design. The budget that needs to be allocated for this purpose is, next to the purchase, another large cost, the more so that the prices of the necessary materials and services are growing at an astronomical pace. Example? In March 2022, compared to the same period last year, the prices of the most popular building materials are on average 28% higher [2] and still growing! The situation is also not improved by record double-digit inflation, higher interest rates on mortgage loans, rising electricity and gas prices. Bills for the former are already 24 percent lower. higher than in 2021. [3] All this means that the amounts that newly minted apartment owners have secured for the finishing and development of their premises are melting overnight. If we are not careful enough, we can easily fall into unplanned debts! About how to avoid it in the next Intrum material from the series "I get the finances"!
An unfavorable contract with the finishing team or its absence, an ill-considered custom project that becomes a bottomless piggy bank, and even fines that many of us do not know about can force us to unexpectedly spend all our savings to finish the premises and stay without a financial cushion for a rainy day. Then, often the only way out is another loan, but when we pay off the one for an apartment, incurring further liabilities threatens to fall into a spiral of debt. How to prevent it and where can financial pitfalls lurk? In the face of the ongoing economic crisis, if there is any universal financial advice for people planning to finish their apartment right now, it is forethought:
– When currently planning large expenses, which are spread over time, just like extensive finishing projects, we always have to take a financial "stock". Securing an amount of even 20-30% more than assumed will minimize the risk of sudden financial stress, because, unfortunately, it is precisely planning the budget "rigidly" for such large projects that often leads to the fact that we get into debt later - emphasizes Patrycja Karolczak, Intrum expert.
The contract with the finishing team is essential!
When planning finishing works, which there are countless in the new premises, we can rely only on our own skills or hire professionals. If we decide on the latter solution and we need a standard scope of finishing works, i.e. painting, putting finishing coats, tiling, preparing electrical connections, or installing doors and window sills, we should sign a contract for specific work with professionals, often also referred to simply as a renovation contract – unlike construction [4] .
We usually look for a team on recommendation, which is of course a very good step, because from the very beginning, thanks to the opinions of friends or family, we know that we are dealing with professionals who will do the job reliably and on time. Usually, confirmation of credibility is enough for us and we do not sign an appropriate contract with specialists. Some also see it as an apparent opportunity to save money: informally "agreeing" with contractors, without a contract, the repair company avoids paying the tax, and tempts us, customers, with a lower price than on the contract. But will it really guarantee us savings? We must be aware that the lack of a contract is a very big security threat to our budget! After all, it may happen that the team will receive an advance payment and instead of starting work ... will disappear. And we will not be able to do anything, because the parties are not bound by any formal arrangements! And if we hire several separate teams: e.g. specializing in a specific type of work, e.g. painters, tilers or carpenters, then we may lose even a few advance payments. It will also be necessary to find other contractors, and usually professionals "caught" at the last minute are those for whom there are no queues of volunteers and with such a service there is a high probability that we will have to pay extra for corrections...
– Let us bear in mind that signing the contract is always in our interest, because it is the basic protection of our money and any subsequent claims, e.g. free repair of defects or return of the advance payment. A solid and honest professional should never avoid writing a contract. Remember that we can also conclude it with a person who does not run a business. If a contractor is trying to convince us that a contract is not necessary, this behavior should be a red flag for us. Lack of a contract is a huge risk that our already strained budget will be burdened with further costs, which, with rampant inflation, rising prices of materials and finishing services, will quickly undermine our financial liquidity and threaten us with debts that we will not be able to repay - emphasizes Patrycja Karolczak, Intrum expert.
You have to watch out for these costly "tricks" in contracts with renovation teams!
A contract with an individual professional or a team, and even more so many teams, is indispensable. But the trick is not only to sign a "some" contract, but a GOOD contract, i.e. one that will not be just any form downloaded from the Internet, containing only general terms and conditions, but will be tailored individually to our situation, the scope of work performed and the financial risks associated with it related. What should be included in the contract for specific work for finishing works and what should be especially observed?
Designation of the parties in the contract: here the data and signatures of both parties are important. Note: if we sign a contract with a company, its name must be entered here, and the signature must be made by an authorized person - there may be many of them in such companies, but if we do not have the signature of an authorized person, the provisions of the contract can then be easily undermined!
– Before signing a contract with a contractor who conducts a sole proprietorship, it is worth verifying it in the Central Registration and Information on Economic Activity. If the contract is to be signed on his behalf by a person other than the one appearing in the register, we should demand that the power of attorney be presented in writing. This is very important for our financial security, because when the contract bears the signature of a person who does not have the right to represent the entrepreneur and there is a situation that the service will be performed incorrectly or will not be started at all, we will have a huge problem with recovering the money. This is because first in court it will be necessary to determine from whom we can pursue our claims at all. Unfortunately, this will entail further expenses, because we have to reckon with a long-term process, and its costs may entangle us in further financial problems - warns Patrycja Karolczak, an Intrum expert.
The exact scope of work, i.e. the subject of the contract: let's list step by step what needs to be done, in which rooms. Avoid generalities such as: "sewage system", write instead, for example: "distribution of the water and sewage system and installation of bathroom equipment (fittings, bathroom ceramics, shower cabin)". And when we order, for example, custom-made furniture from a carpentry team, make sure that the price also includes their assembly - if we do not have such a record, it often turns out after the fact that you will have to pay extra for this service! On this occasion, it is worth attaching a detailed project to the contract as an attachment, of course also with the signatures of both parties.
Deadlines: The contract should include both start and end dates for the work. It is worth paying attention to the provisions such as: "the contractor reserves the right to postpone the declared date of commissioning the work", because such an "insurance" annotation may mean that the works will drag on indefinitely. If during the works it turns out that we want to commission additional works, they should be included in the annex, which should also include a specific date for their completion.
Remuneration, advance payments and contractual penalties: for various types of finishing services, prices may be quoted per meter of work (e.g. for laying tiles), the amount may be a lump sum or the applicable fees will cover subsequent stages of work. If the latter case concerns us, let's make sure that the contract also includes a schedule, with dates and prices for the stages.
Purchase and quality of building materials: it often happens that we personally buy only "large" elements for finishing: bathroom tiles, floors or a shower cabin, but we forget about small ones: e.g. electrical sockets, joints, glues, wires. During the commenced works and with deadlines chasing us, we usually rely on their selection and purchase by professionals. If we decide to do this and give them a "free hand" in this regard, let us insist that everything is written down on an ongoing basis in the cost estimate, which we have access to, so that in the end it does not turn out that we are paying overpriced sums for seemingly small elements: the prices of similar products, depending on the quality and manufacturer, may vary by up to several hundred percent!
Warranty: in the case of renovation and finishing works, the warranty is usually granted for a period of 2 years [5] and this period is regulated by the Civil Code.
- First of all, let's make sure that the contract necessarily includes a provision about the guarantee that we are entitled to under the law, because it is this guarantee that will protect us from spending money out of our own pocket if any costly defect is revealed after the work has been completed. Secondly, if we agree to make an advance payment, let us demand receipts, and then settle only for fully completed works, never before. Such steps will allow us to maintain control over finances throughout the duration of the work. And when we have already invested money in finishing and the team is constantly delaying the completion of the ordered service, we are also not defenseless. With a well-written contract, we can also claim compensation [6] . It is true that enforcement of it is usually not immediate, but when we have already managed to "freeze" a large amount of our current funds in the costs of purchased materials and paid advance payments, the compensation obtained may help to save our budget in the event of debt - says Patrycja Karolczak, Intrum expert.
Custom interior designs can turn out to be… a bottomless piggy bank
Following the trends, more and more people are also considering hiring an interior designer, which is not surprising. Undoubtedly, this speeds up the whole matter and allows you to use the full potential of the premises and make the rooms as comfortable as possible to use and tailored to individual needs. But also in this case, you need to approach the matter with special care for our finances. As with any other professional, you should take care of the contract.
In this case, special attention should be paid to the permissible number of project corrections: the contract should contain information on how many such changes and when we can introduce them as part of the written arrangements and the amount paid. Let's also clarify with the architect what is an amendment and what is a change that interferes with the design to such an extent that it will require an additional payment. Let's also check if there is a clause in the contract regarding insurance against design errors. In the case of smaller offices or one-person businesses, this is still rare. Such insurance gives us a guarantee that the financial costs of possible errors will be covered by the designer, but of course such insurance increases the price of the service. But the element that can currently increase costs particularly drastically are materials, and specifically the problems with their availability, which have been more and more noticeable in recent months. If the architect includes in the design materials from, for example, limited collections, the ends of the collection or those from the "higher shelf", it may turn out that the elements and materials planned in the project are nowhere to be found or have surprisingly high prices. Therefore, when accepting the final version of the visualization, we should also demand a full material specification. Often you can also agree with the architect that we will receive a complete list of stores where we will get the materials we are interested in. The architect can also prepare technical drawings and guidelines for contractors for us. Thanks to this, we will avoid a situation where, due to shortages in materials, the project will have to be made anew and ... pay for it again.
High price… renovation waste
If we have successfully completed the finishing works or, on the contrary, the whole process is prolonged, we must pay special attention to the issue of garbage resulting from the renovation. Both too long storage and improper disposal can also cause unplanned expenses.
Items such as building rubble, elements of electrical or sanitary installations cannot be thrown into an ordinary bin. According to the law, we can get rid of them in two ways: either we take them to the so-called PSZOK (point of selective collection of municipal waste) or rent a container or the so-called big bag, i.e. a large industrial bag, and then order the transport of waste to a team that is finishing our apartment or another team specializing in construction waste management. Let's be vigilant when it comes to choosing a company, check the opinions, because unfortunately there are dishonest "professionals" who, instead of disposing of garbage legally, drop it, for example, in the forests. This is a serious offense that may result in a penalty not only for the con artist, but also in some situations for the "client" who commissioned it, and the fines are not small, because they can reach up to PLN 5,000! [7] It also happens that owners of apartments in blocks of flats store garbage, for example, on lawns or in their own parking spaces. And here's a warning: both are breaking the law! Because although it might seem that in the second situation, since the parking space is a private area (because it was purchased by the resident), it is still subject to the administration of the estate/housing community, so it is a public place. If the waste stored by us lingers for too long, obstructs traffic or threatens safety, e.g. of children playing nearby or passing cars, we may be fined PLN 500, in accordance with the Code of Offenses [8] . The same penalty is also imposed by throwing away a container of paints or varnishes into regular municipal bins. In addition, if, for example, renovation waste thrown away by us when emptying municipal containers damages the garbage truck - which applies to, for example, tiles or fittings - its owner has the right to claim the cost of repairing the vehicle from us.
– If we are punished with a fine by the police or city guards, or if the administration of the estate imposes a fine on us, then even if it is a small amount initially, in the long run we can get into serious financial problems. If we ignore the penalty, failure to pay on time will result in interest being charged and formal enforcement proceedings may be initiated against us. Then the arrears, which we did not pay voluntarily, will certainly be collected by force, together with interest and all costs of the proceedings arising in the course of the proceedings - says Patrycja Karolczak, an Intrum expert.
Finishing an apartment is often a time-consuming process that requires long-term financial planning. However, the more of the above factors we take into account before starting it, the greater the chance that along the way we will be surprised by costs that we did not include in our plan.
[1] Central Statistical Office, Housing construction in the period January - March 2022.
[2] PSB analysis: Dynamics of building materials prices - March 2022.
[3] Data: Central Statistical Office.
[4] The construction contract applies to major projects, e.g. demolition and construction. This type of contract is also a type of contract for specific work, but due to the seriousness and value of the investments to which it applies, it is defined by separate provisions (Article 647 et seq. of the Civil Code).
[5] Art. 568 § 1 of the Civil Code.
[6] Art. 471 of the Civil Code.
[7] Art. 24 of the Code of Petty Offenses.
[8] Art. 145 of the Code of Offenses.
