Three Tips for Hiring a Contractor

11 Mar Three Tips for Hiring a Contractor

Thinking about building a new home or renovating your existing home?  It is important to do a little work on the front end to ensure you do not end up with an over budget and incomplete project.  Not all contractors are created equally.  Here are three tips to consider when hiring a contractor.

1. Do Your Research – Pick a Reputable Contractor

First things first, talk to people who live in the area where you are building.  This is especially important if you are building in a town where you do not live.  You want to make sure your contractor has a sterling reputation.  While you are talking to your neighbors, do a quick Google search for reviews of the contractor.  Look at prior projects the contractor has worked on. Talk to those homeowners to get their opinion of the contractor.  Good or bad, people are almost always willing to tell you about their experiences.

Finally, talk to your lawyer and ask him to check if the contractor owes money to the government or past customers.  Both of these items likely are big red flags.  If the contractor owes someone else money, it is very likely he will use the money you pay him for your project to pay off these debts.  Then, you will pay more money for your project and may not get the quality work you paid for.

2. Use A Contract – Get Everything In Writing

Insisting on a clear contract is not about mistrust.  Instead, it is about insuring a successful project. No matter how big or how small the job is, always put the terms of your agreement with the contractor in writing and have everyone sign and date it.  You may not need a formal document, but make sure your written agreement includes the following information:

            (a) Payment Schedule

It is important to work out a payment schedule ahead of time.  Payment schedules reveal your contractor’s financial status and work ethic.  A common issue we see in our area is the contractor asking for a large initial deposit.  There is no need for a large payment, because the contractor only has a few small expenses to start your project.  For example, permitting and ARB fees.

If your contractor asks for a large down payment up front, this may be a sign that the contractor has financial problems or is worried that you will not pay the full price after you have seen the completed work.  Do not ever pay the contractor the full price of the project if there is still work to be done, or you are not satisfied with the final product.  This is very important.  Owing the contractor money during the construction project provides you with leverage and will protect you in the event that you have to bring a lawsuit against the contractor to force him to complete the work.

Another item to determine in the payment schedule is when you can withhold payment from the contractor.  If the project was not completed to your satisfaction, you may not have to pay your contractor.  Talk to your lawyer about this topic at the beginning of the project, so you are prepared if an issue arises.

            (b) Proof of Insurance

Ask your contractor to attach proof of insurance to the contract to ensure that your contractor has both worker’s compensation and liability insurance.  These forms of insurance may protect you if someone gets hurt working on your project or your contractor does faulty work.

            (c) Start Date and Projected Completion Date

Be sure to talk to your contractor about your expectations of the timeline of the project.  This conversation is important because it ensures that both you and your contractors have agreed upon and realistic dates for the start date and projected completion date of your project.  While it is inevitable that delays will occur throughout the project, establishing these two dates in the beginning helps you and the contractor handle delays.

            (d)  Using Specific Materials and Products

It is important to be up front with the contractor about your budget and the specific materials you want to use in your project.  In fact, you should include these items in the contract.  For example, if you want reclaimed wood beams from a farm in Wyoming, include that specification in the contract.  Stating these terms ensures that the contractor is aware of your expectations from the beginning of the project.

            (e) How To Handle Changes

Your contractor should document all changes in the project plan with a written change order.  Make sure the change order clearly describes any changes in the completion date or price.

            (f) Requirement that Contractor Obtain Lien Releases

If your contractor, or one of his subcontractors or suppliers, does not get paid in full for their work on your project, they can file a lien against your property.  A lien is a notice attached to your property telling the world that someone thinks you owe them money.  Prior to each payment, the contractor should provide you with a release stating that he will not file a lien for the work he has completed so far.  You should also ask for a release from all the people the contractor hired to work on the project, like subcontractors and suppliers.  A release ensures that no one files a lien against your property.

3. Keep Records

Keep all of your documents regarding this project in one place.  Make copies of the contract, any change order, and all correspondence with the contractor.  It is especially important to keep a record of all payments you make to the contractor or for the project.  Finally, never pay your contractor in cash.  Always use a check or credit card.  Then you will have a record of all the payments you made during the project.

There is no way to guarantee that you hire the perfect contractor for your job, but following these tips will help you avoid issues with your project.  Just like most things in life, doing a little bit of work on the front end will save you from disaster on the back end.  And remember, if you are unsure, you can always consult your lawyer.

Lauren Williams is an attorney with Russell P. Patterson, P.A. in Hilton Head, SC. She can be reached at (843) 341-9300 or lauren@russellpattersonlaw.com.

Information or interaction on this page should not be construed as establishing a client-attorney relationship or as legal advice.  For advice about your specific situation, please consult one of our attorneys.