Glossary of Terms

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ACH -  An ACH (Automated Clearing House) transfer is the electronic transfer of funds processed by the National Automated Clearing House Association, an electronic network of financial institutions. This is sometimes referred to as an eCheck or just as an electronic transfer. For more information on what an ACH transfer is read more about it on our <a href="">blog</a>. <hr>
Allowances -  An allowance is an amount specified and included in the construction contract (or specifications) for a certain item of work (e.g., appliances, lighting, etc.) whose details are not yet determined at the time of contracting. The actual costs for the item may be higher or lower than the allowance amount in which case the base contract amount should be increased or decreased by the difference in the two amounts and by the change, if any, to the contractor's costs. <hr/>
Bonding -  Bonding is a contractor’s way of guaranteeing their work will be done on time and to the homeowners satisfaction. Bond limits are set in advance and are usually high enough to cover the cost of the job. <hr>
Bonding Company -  A properly licensed firm or corporation willing to execute a surety bond, or bonds, payable to the owner, securing the performance on a contract either in whole or in part; or securing payment for labor and materials. <hr/>
Building Code -  The legal requirements set up by the prevailing various governing agencies covering the minimum acceptable requirements for all types of construction. <hr/>
Building Inspector/Official -  A qualified government representative authorized to inspect construction for compliance with applicable building codes, regulations and ordinances. <hr/>
Building Permit -  A written document issued by the appropriate governmental authority permitting construction to begin on a specific project in accordance with drawings and specifications approved by the governmental authority. <hr/>
Certificate of Completion -  A document certifying that a construction project has been completed in accordance with the terms, conditions, and specifications contained in the job contract. Sometimes a homeowner may want this document issued by an architect, engineer, or other qualified inspector to attest that the project has been completed in conformity with all plans and specifications if they feel they are not qualified to make that judgment call. From the contractor’s perspective it brings closure to the project. <hr/>
Change Order -  A written document between the owner and the contractor signed by the owner and the contractor authorizing a change in the work or an adjustment in the contract sum or the contract time. A change order may be signed by the owner for such procedure and that a copy of such written authority is furnished to the contractor upon request. The contract sum and the contract time may be changed only by change order. A change order may be in the form of additional compensation or time; or less compensation or time known as a Deduction (from the contract) the amount deducted from the contract sum by change order. Change order management is a critical aspect of any construction job, as change orders frequently change the cost of the job, usually in an amount in excess of what might otherwise be expected. Many subcontractors bid jobs at break-even prices in order to secure the work, confident that numerous change orders will provide the profit necessary. <hr/>
Change Order Proposal -  A change order proposal is the written document before it has been approved and effected by the Contractor and Owner. A change order proposal can be issued by either the contractor or the owner. The change order proposal becomes a change order only after it has been approved and effected by the Contractor and Owner. <hr/>
Codes -  Prevailing regulations, ordinances or statutory requirements set forth by governmental agencies associated with building construction practices and owner occupancy, adopted and administered for the protection of public health, life safety and welfare. <hr/>
Construction/Contractor Escrow -  Differing from what would be considered "normal" escrow, construction or contractor escrow is when a neutral third party securely holds money specifically to be used for a home improvement project. Once an agreed upon condition has been met, the escrowed money is released to the construction company or contractor. <hr>
Contract Sum -  The total agreeable amount payable by the owner to the contractor for the performance of the work under the contract documents. (see Change Order) <hr/>
Contractor -  Short for “general contractor” a contractor is a properly licensed individual of company that agrees to furnish labor, materials, equipment and associated services to perform the work as specified for a specified price. The contractor is hired by a homeowner or an architect to oversee work that is being done on a home. Sometimes the work will be done by the contractor, but often times the contractor will hire subcontractors to do some or all of the work. For a more detailed explanation of contractors and their responsibilities read more about it on our <a href="">blog</a>. <hr>
Contractor Payments -  Otherwise known as a draw, this is a partial payment that a homeowner makes to their contractor. A contractor payment amount and schedule should be agreed upon in advance and should never be more than 15% upfront with a maximum of $2.500 or more than half the total project at any time other than at completion. <hr>
Draw -  A draw is a request by a contractor for a portion of the total bill. Draws are common in larger homeowner/contractor transactions and can be at the beginning of the project but are more likely to be at one or more stages of completion, depending on the scope of the project. <hr>
Escrow Account -  Accounts that are usually used in the context of mortgages. The escrow is a separate account from the mortgage account where funds are deposited, typically on a monthly basis with the homeowner’s mortgage payment for disbursement by the escrow agent who is charged with the responsibility to pay certain expenses on behalf of the borrower . <hr>
Escrow Contract -  This is a separate contract from the project's contract that states both the homeowner and the contractor agree to put the money for the project in escrow. <hr>
Escrow Service -  A service established for the administration of escrow accounts and are typically used in the context of mortgages where the mortgage company establishes an escrow account to pay property tax and insurance during the term of the mortgage. Since a mortgage lender is not willing to take the risk that a homeowner will not pay the property tax and insurance, they require a designated escrow agent who has the duty to pay these expenses. This service is usually required under the mortgage terms. This can be contrasted with SafePact’s SurePay Payment Processing is dedicated specifically for use with home improvement projects to mitigate performance and payment risk in completing home improvement projects. <hr>
FDIC Insured account -  An FDIC insured account is a deposit account that is insured for up to $250,000 by the government. If something were to happen to the money because of the economy or a bank failure than you would be protected up to $250,000. For a more detailed explanation on FDIC account, read more about it on our <a href="">blog</a>. <hr>
Fixed Schedule -  This is the information provided on design drawings specifying the details on plumbing and lighting fixtures, appliances, cabinetry, countertops, flooring and tile choices. It would also include the finishes to be applied to floors, walls, and ceilings for each location. This is sometimes referred to as a specification sheet. <hr/>
Home Improvement Project -  A home improvement project is anything associated with improving, maintaining, or renovating your home. This is the specific reason that you hired the contractor and the job that they are completing. <hr>
Home Improvement/Home Remodeling Contracts -  Home improvement or remodeling contracts are legal documents that explain the scope of work, the schedule of work and the payment terms. Scope of work is putting on paper exactly what the job will entail, and who will be doing what. Schedule of work is putting on paper beginning times, end times, and target dates for the job. Payment terms are when and how much money is due to the contractor at what stage of completion. <hr>
Homeowner -  Usually the name-on-the-mortgage/pays-the-bills person, the homeowner is the one who contracts the contractor to do a job. They are the point person for Safepact on things like funding the transaction, approving the work, and if using SafePact’s SurePay Payment Processing releasing payment to the contractor.<hr>
Insurance -  Just like home or car insurance this is insurance the contractor takes out to safeguard against potential pitfalls from the job such as injury or destruction of the homeowners property. These are purchased and supplied by the contractor and is something your contractor must have.<hr>
Job -  A job is a term for whatever tasks are in the contract for the contractor to do. These are generally more specific than “home maintenance” and usually are broken down into a scope of work which contains each individual task such as plumbing, electrical, or drywall.<hr>
Liability Insurance -  This is insurance that protects the homeowner in case the contractor accidentally breaks something or destroys something in the house. This is direct destruction such as breaking a lamp, but also what’s called “indirect cause” which is if a contractor seals a pipe incorrectly that floods into your basement. The contractor didn’t directly cause the damage, but it was still his fault.<hr>
Licensing -  Just like a driver’s license certain contractors must be licensed to do particular jobs associated with your home improvement project. Plumbing and electrical licenses are two of the main licenses to keep track of. Also like a driver’s license the requirements to gain a license vary from state to state, so make sure your contractor is licensed in your state. Some counties and even municipalities can require licensing.<hr>
Lien -  A Lien is when somebody, usually the government, places a restriction on a piece of property that you own because you cannot, or choose not, to pay a debt that is owed on that piece of property. This is usually most common with things such as taxes, mortgages, or property. A lien on your property makes it near impossible to sell your home or that piece of property unless the debt is paid off. <hr>
Lien Waiver -  A lien waiver is provided by the contractor and given to the homeowner to guarantee that any future lien payments are waived and they aren’t the homeowner’s responsibility. In the lien waiver the contractor attests that he has paid for all labor and materials on the job. This protects the homeowner from liens that are placed on their home, even though they fully paid the contractor because the contractor went bankrupt or mismanaged his own funds.<hr>
Online Payment -  This is any amount of money that is being transferred over the internet. This can be a payment from a homeowner to a Safepact SurePay Payment Processing account, or a Safepact SurePay Payment Processing account being paid to the contractor. This would also be payment for online shopping as well.<hr>
Online Service -  An online service is a web based service. All aspects of the business are done on the internet and therefore online.<hr>
Payment Bond -  A written form of security from a surety company to the owner, on behalf of a general contractor or subcontractor, guaranteeing payment to all persons providing labor, materials, equipment, or services in accordance with the contract. The government makes these mandatory for projects over $30,000.<hr>
Performance Bond -  This is a specific bond provided by a bond company related to the performance of the contractor in relation to the job at hand; if the job isn’t completed on time or to the specifics of the contract the homeowner is then owed for the financial impairment incurred as compensation.<hr>
Punch List -  A checklist of all items on a construction project that are unfinished or incomplete, have not been done at all, require replacement or repair, or require additional work to achieve an acceptable level of workmanship. This list is established as a result of an inspections at the time the job is deemed to be substantially complete.. All items must be corrected by the contractor in a timely fashion so that the finished construction job conforms to the contract documents. The contractor is bound by the contract to complete a punch list of uncompleted contract items in order to receive final payment from the owner. <hr/>
Retention -  The withholding of a portion (usually 10%) of a periodic payment to a contractor, by prior agreement, for work completed. The retention is held for a stipulated time period after the acceptance of the completed work by the homeowner. This method of quality control is used extensively in commercial construction and sometimes in residential projects. <hr>
SafePact’s SurePay Payment Processing -  This is an online service designed to provide financial protection for both homeowners and contractors involved in a financial transaction by acting as an independent third party to ensure both parties deliver their commitments. It’s only after the two parties agree on a final outcome that the money gets released.<hr/>
Sample Home Improvement Documents -  These are sample documents that SafePact makes available to their users for illustrative purposes. SafePact does not warrant or assume any liability for the implied merchantability and fitness for a particular purpose or application of any of these documents. By providing our users access to the documents it is not meant to be, nor does it constitute legal or business advice. None of the contracts, forms, and templates should be used without appropriate customization and advice from properly licensed legal counsel familiar with the law that may apply to your circumstances.<hr/>
Scope of Work -  Scope of Work is a document describing what work is to be done, what equipment and material is to be provided, items or labor that is excluded, and any other pertinent information pertaining to a list of all the tasks included in a specific company's contract. <hr/>
Secure Online Payment -  This is on online payment made to a company that takes extra security measures to encrypt the data and make it harder for online hackers to access the data. The most often used method of data encrypting is using an SSL certificate. To learn what an SSL certificate read about it on our <a href=""> blog</a>.<hr>
Specifications -  A detailed, exact statement of particulars, especially statements prescribing materials and methods; and quality of work for a specific project. <hr/>
Start Date -  The date that an activity or project begins.<hr/>
Subcontractors -  These are individuals hired by a contractor to do the work on a home improvement project. Subcontractors are usually tradesman such as plumbers, electricians, or roofers. <hr/>
Substantial Completion -  The date at which the project is sufficiently complete, in accordance with the construction contract documents, so that the homeowner may use or occupy the project for the intended use for which it is originally designed . Typically punch list items are completed after the date of substantial completion. From this date a number of other provisions are started such as warranty, guaranties, and liabilities.<hr/>
SurePay Payment Processing Account -  This is a FDIC insured, designated account that SafePact uses for the sole purpose of holding money as an independent neutral third party for homeowners until the terms and conditions of their agreement with their contractor is met and then releases these funds upon their approval.<hr/>
T&M -  An abbreviation for a contracting method called Time and Materials. A written agreement between the owner and the contractor wherein payment is based on the contractor's actual cost for labor, equipment, materials, and services plus a fixed add-on amount to cover the contractor’s overhead and profit.<hr/>
Terms of Use -  These are the terms that any user of SafePact’s services must agree to be bound by to use our service. They are the rules, so to speak, that everyone must follow.<hr>
U. B.C. (Uniform Building Code) -  The Uniform Building Code is one of the family of codes and related publications published by the International Conference of Building Officials (ICBO) and other organizations, such as the International Association of Plumbing and Mechanical Officials (IAPMO) and the National Fire Protection Association (NFPA), which have similar goals as far as code publications are concerned. The Uniform Building Code is designed to be compatible with these other codes, as together they make up the enforcement tools of a jurisdiction.<hr/>
Work -  The successful performance of the entire scope of the project being performed for a specific construction project including labor, materials, equipment, and other associated items necessary to fulfill all obligations under the contract.<hr/>
Workers Comp Insurance -  This is protecting the homeowner from having to pay if a contractor, or one of his workers, injures himself on a job. Whether it’s falling off a ladder or smashing his thumb with a hammer the homeowner isn’t responsible to pay the medical bills. <hr/>
Zoning -  Restrictions of areas or regions of land within specific geographical areas based on permitted building size, character, and uses as established by governing urban authorities.<hr/>
Zoning Permit -  A document issued by a governing urban authority permitting land to be used for a specific purpose. <hr/>

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