How to Read and Approve a Change Order

Why this matters

A change order is a written amendment to your contract: it says what work is being added or removed, why, what it does to the price, and what it does to the schedule. Almost every project of any size has at least one. A wall gets opened and the framing behind it is rotted, you decide you want a different tile, the inspector asks for something the plans did not show. None of that is a sign of a bad contractor. What turns a normal change into a dispute is the change that was agreed on in a hallway, started the same afternoon, and priced weeks later on the final invoice. The fix is simple and it is yours to insist on: nothing extra gets built until the change is on paper and signed.

This article walks one change order field by field, then shows two changes resolving in opposite directions. For reading the original estimate the change modifies, see related: How to Read a Contractor's Estimate. This is not legal advice; contract rules vary by state, and your contract and your own attorney govern.

The rule that comes before reading anything

Get it in writing before the extra work starts. Not after, and not "we'll write it up at the end." If a crew member tells you they found a problem and asks to go ahead, the answer is: stop on that item, write it up, and I will look at it today. A good contractor will already be doing this.

Some states make it a legal requirement for home-improvement work, not just good practice. California's home improvement contract law, for one, requires changes to be in writing and signed; many other states have no such statute and leave it to the contract. Either way, your own contract probably has a clause on changes. Read it now, before the first one arrives, so you know what it says about how changes are priced and approved.

One safety exception. If the change is about something that is a hazard now (a gas line found damaged, a live wire exposed, water leaking into an open wall), the contractor may need to make it safe immediately, such as shutting off the gas or the circuit, before any paperwork. That is making it safe, not doing the extra work. The repair itself still gets written up.

The change order, field by field

Here is a change order from a bathroom remodel. The tile had been removed and the plumber found the subfloor around the toilet soft and dark. P stands for the original contract price.

CHANGE ORDER NO. 2       DATE: 09/12
PROJECT: Hall bath remodel, 14 Elm St
CONTRACT DATED: 08/20

REASON
Concealed condition. Subfloor around
toilet flange rotted from long-term
seal leak. Found at tear-out 09/11.

WORK ADDED
- Remove and replace about 12 sq ft of
  subfloor, sister 2 joists as needed
- Replace closet flange
- Re-inspect framing before tile
WORK REMOVED
- None

PRICE
Original contract ........... P
Change order 1 (tile) ..... +0.03P
This change order ......... +0.05P
Revised contract total ...... 1.08P

SCHEDULE
Adds 2 working days.
Completion moves 10/03 -> 10/07.

PAYMENT: added to final payment.

OWNER: ______________  DATE: _____
CONTRACTOR: _________  DATE: _____

Read it in this order.

Step 1: Read the reason, and decide which kind of change it is

Changes come in three kinds, and they are priced and argued about differently:

• Owner-requested: you asked for something different (a better tile, an added niche, moving a light). You choose it, so you pay for it.
• Concealed condition: something hidden that nobody could reasonably see before work started, like this rotted subfloor. Who pays depends on your contract. Many contracts say hidden conditions are extra; some include a contingency or an allowance for them.
• Contractor error or omission: something the contractor should have included or did wrong. This one should not cost you more.

Why this matters to you: the reason line is where a change gets classified. "Additional work required" with no explanation does not tell you which kind it is. Ask for the reason in plain words and, for a concealed condition, ask for a photo of what was found before it gets covered or removed. See related: How to Photograph and Record a Problem for Your Contractor.

Step 2: Check the work against the original scope

Pull out your original estimate or contract and look for the item. Is the subfloor mentioned? Is there an exclusion ("subfloor repair not included"), an allowance ("allowance for subfloor repair, up to 8 sq ft"), or a contingency line? If the original scope already covered some of this work, the change order should only charge for the difference.

In this case the original estimate excluded subfloor repair in writing, so the change is genuinely new work. If it had included an allowance for 8 sq ft, a 12 sq ft repair would be a change for the 4 sq ft over the allowance, not for all 12.

Step 3: Check that the work is described specifically enough to check later

"Repair floor" cannot be checked. "Replace about 12 sq ft of subfloor, sister 2 joists as needed, replace closet flange" can. You should be able to stand in the room when it is done and see whether it matches. If quantities are estimates ("about", "as needed"), ask how the final price is settled if the quantity changes: a fixed price for the change, or a unit price per square foot or per hour.

Step 4: Check the price math, including every earlier change

The price block should show the original contract, every earlier change order, this one, and the new total. Add it yourself. Here: P plus 0.03P plus 0.05P is 1.08P, so the contract is now 8 percent above where it started, 3 points from the tile upgrade and 5 from this repair.

Keeping a running total matters because changes look small one at a time. Five changes of 4 percent each are 20 percent over the original contract, and on the final invoice that number is a surprise only if nobody added it up along the way.

Step 5: Read the schedule effect

A change that adds work usually adds time. This one adds 2 working days and moves completion from Friday, October 3 to Tuesday, October 7. Check the dates against a calendar: if your contract counts working days, the weekend in between is not counted, which is why two working days move the end date by four calendar days here.

Ask what else moves. A delay on the floor may push the plumber and the tile setter, and a crew that is booked elsewhere may not come back for a week. Ask whether the new date is firm.

Step 6: Read how and when you pay for it

Some change orders are added to the final payment; some are paid when the change is approved or when that work is done. Check that the payment terms match what your contract says about changes. If a change order asks for payment up front for a small change, ask why.

Step 7: Sign, date, and keep the signed copy

Both of you sign and date it. Keep your copy, the signed one rather than a draft, in your records file with the original contract, in order. See related: Your House Records File and What Goes In It. If the change affects work that needs a permit, ask whether the permit or the inspection needs to be updated. See related: What a Permit Means for You as the Homeowner.

Ask what happens if you decline

Before you sign any change order, ask: what happens if I say no? The answer shows you what you are really choosing between. The same question has very different answers depending on the change.

Case one: the rotted subfloor. The homeowner asked. The contractor's answer: the tile cannot go down over soft subfloor without cracking, the toilet seal would not hold, and they would not warranty the tile installed over it. So declining did not mean "save 5 percent." It meant either stopping the project or getting a floor that would fail. The real decision was not whether to fix it but whether the price was fair, so the homeowner asked how the price was built. The contractor showed it was about 9 labor hours plus materials at the contract's own rates. The homeowner signed the same day, and the crew lost no time.

Case two: an added shower niche. Two days later, the homeowner asked for a recessed niche in the shower wall. Change order 3 came back adding 0.04P and 1 working day. Asked what happens if they declined, the contractor said nothing: the shower is complete without it. That made it a pure choice. The running total with it would have been 1.12P (1.08P plus 0.04P), and the completion date would have moved again, from Tuesday, October 7 to Wednesday, October 8. The homeowner declined, wrote "declined" on the unsigned change order with the date, and kept it in the file too, so there was a record that it had been offered and turned down.

What separates the two: the first change was needed for the work already under contract to be done right; the second was an addition. The same question, asked the same way, gave the homeowner a clear answer each time. A contractor who cannot or will not answer it is a reason to slow down.

Situations that change the approach

• The contractor says the change is urgent and the paperwork can wait. Agree to whatever is needed to make a hazard safe right now, and ask them to write the change up the same day before the repair continues. A text message with the scope and price, answered "approved" by you, is far better than nothing if a formal form is not available that day; follow it with the signed form.
• The change comes from the building inspector. If the inspector requires something the plans did not show, it is usually a concealed condition or a design gap. Who pays depends on your contract and on whether the contractor drew the plans. Ask for the inspector's correction notice to be attached to the change order.
• A change removes work. A deduct change order should credit you for the work removed. Check that the credit is reasonable against the original estimate's line for that work, and remember that a credit is often smaller than the original line because some material may already be bought.
• You have a lender or an insurer involved. A renovation loan or an insurance claim may require the lender's or adjuster's approval of changes. Ask them before you sign, not after.

References

• See related: How to Read a Contractor's Estimate
• See related: Comparing Estimates That Do Not Match
• See related: Deposits, Payment Schedules and Lien Waivers for Homeowners
• See related: Your House Records File and What Goes In It
• California Business and Professions Code section 7159 (home improvement contracts), as one example of a state rule on written changes