Why Every Rehab Needs a Change Order Policy

August 30, 2025 • Estimated Reading Time: 4 minutes

Construction Tip: A Change Order Policy

In real estate rehab, surprises are inevitable.

Walls come down, problems come up. It’s rare to get through a renovation without finding something that wasn’t in the original scope. That’s why every rehab budget should include a contingency line item — and why every investor needs a clear, written Change Order Policy.

Here’s the truth:

If you don’t set the policy, your contractor will.

And their policy is probably: “I did the work, so you owe me.”

That’s not a system — that’s a lawsuit waiting to happen.

Instead, you need to communicate your policy in advance, put it in writing, and enforce it. It should be part of your construction agreement — no exceptions, no “we’ll figure it out later.”

A good policy protects both you and the contractor. It defines how changes are handled, how much they can cost without prior approval, and how they’re documented and paid.

Here’s a sample you can adapt for your own projects:

📄 SAMPLE CHANGE ORDER POLICY

OWNER may request or approve changes to the scope of work during the term of this contract. However, any such change must be documented in a written Change Order, signed and dated by both OWNER and CONTRACTOR. All Change Orders will be incorporated into this contract.

OWNER agrees to pay any cost increases in accordance with the payment schedule, as a result of any signed and dated Change Order. CONTRACTOR agrees to honor any decreases that may result. If the exact cost is unknown at the time of execution, CONTRACTOR shall make a good faith estimate, and OWNER will pay the actual, reasonable cost, not to exceed 20% over the estimate unless otherwise agreed in writing.

For unforeseen work that is mission-critical and under $500, CONTRACTOR may proceed without a signed Change Order only if they notify OWNER in advance and receive verbal or written acknowledgment. However, the maximum cumulative allowance for such work (including related or similar issues) is $500. Anything beyond this limit requires a signed Change Order.

Any non-critical changes, or any work exceeding the $500 allowance, must not be started without a signed Change Order. Work performed without proper documentation will be considered part of the original contract scope and will not be eligible for additional payment.

This one policy could save you thousands, hours of back-and-forth, and a whole lot of drama.

No surprises. No guesswork. Just clear expectations — and a smoother project.

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