Everybody has heard the news stories about the unscrupulous contractor that ripped off the 80 year old lady. They are usually isolated incidents, but every time one of these stories comes to light, the industry as a whole, gets another black eye.
Hiring a home improvement contractor can be an intimidating task. Many homeowners have not had a lot of experience in hiring a contractor, and other who have had ended up with having bad experiences.
Many states require that contractors become licensed. Not only are they given tests to prove their competency, they are subjected to background and credit checks. Contractors who hold a license will not jeopardize the license by operating their business in an unethical or illegitimate manner.
Homeowners that live in areas where licensing is not required are more susceptible to becoming victim of the unscrupulous contractor. There are several measures that a homeowner can take to protect themselves and ensure that they are hiring a reputable contractor.
1) Get the names and phone numbers of at least 3 customers that the contractor did work for. Call the customers and find out if they were satisfied with the work, and if they would recommend hiring them.
2) Ask for a list of 3 building supply companies that they will be purchasing materials from for your job to ensure that the contractor pays the bills in a timely fashion. Also ask the company if it is their policy to place liens on the delivery property to insure that they get paid.
3) Ask if the contractor is going to have employees on the job, and if so, ask for proof of workman’s compensation insurance policy. If a worker gets hurt on your project and is not covered, the homeowner could be liable.
4) Have the contractor provide you with a certificate of liability insurance binder with your name listed as “an insured”.
5) Get a written contract, which states:
a) The company name, address, and phone number of the company.
b) Your name, address, and the location where the work will be performed.
c) A complete description of the work to be performed, along with details identifying specific materials that you want used for the project.
d) The financial terms of the contract, including the down payment, a schedule of draft payment (for larger jobs), and the final payment.
e) The hourly labor rate in the event that there is an “unforeseen existing condition” that requires work above and beyond the terms of the contract.
f) The start date and the completion date.
g) The name of the bank and the escrow account number that any advance payments will be placed in. A contractor is only allows to use the portion of a deposited amount that they have either earned or spent for materials.
6) Never sign a contract where more than 50% of the contract price is requested in advance.
7) Before you make the final payment, check with the county clerk’s office in your county to find out if any liens have been placed against your property. It is a common practice in some areas that contractors and material suppliers file liens against a property as soon as a contract has been signed to ensure them that they are going to get paid.
In the event that a lien was filed against your property, related to your home improvement project, you must get a release of lien from the lien holder before you make the final payment.
While it might seem a little extreme to require all of this information, it is always better to have a clear understanding upfront before you sign a contract rather to have a situation arise in the middle of a project and find yourself at odds with the contractor.