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Choosing a Builder

Brad Vauter, Attorney
Legal Hotline for Michigan Seniors

Spring is here and everyone’s fancy turns to . . . home repairs and remodeling? Well maybe not everyone’s, but spring is a common time to get in the “fix up” mood. Since your home and money are involved it’s smart to plan first and avoid being rushed.
This article will cover some “pre-contract” steps you should take before hiring a contractor. Next month’s article will cover some actions to consider if the work goes badly or the contractor flakes out.

What can you do in the beginning or pre-contract stage of a project? Follow the tips below and be careful, cautious and clear. While you may not need to consider all these tips for a $200.00 job, you should be more careful as the stakes get higher. Remember, the more you have at stake, the more you should do to protect yourself from the very start and with a job of say $2,000 or more, you simply must attend to these details. These tips come from various respectable sources like Michigan’s Department of Labor and Economic Growth, AARP, the Federal Trade Commission and others and also from the wisdom and experience of the Legal Hotline for Michigan Seniors.

Get estimates/bids from different contractors to compare prices. Remember, the cost and quality of materials will affect the estimate/bid. A low bid based on inferior materials may not be a bargain, so consider more than the price alone. Cheapest is not always best.

Be sure the estimate/bid specifies the total price, the terms of payment, the kind of materials to be used and the expected time it will take to complete the job. Vague terms, and incomplete contracts/bids, estimates or orders, often come back to bite you. Simple, small jobs are usually not detailed—even so, both sides should know what is expected and when the work gets done. A simple writing or memo might do in this case. More expansive work should have detailed job specifications that include a description of materials, a list of all costs spelled out clearly, any architect or engineer drawings required, permit information and start and completion dates. Reasonable delays are acceptable but retain the right to withhold payment if work slows down for no apparent reason.

Be wary of contractors or salespersons offering “special prices” because of left over materials, other jobs in the neighborhood, or discounts if you agree to get other customers or serve as a “demonstration” home. These are often gimmicks used to get you to buy emotionally and/or designed to appeal to a consumer’s lust to get a great deal.

Ask for the name and address of previous customers and check to see if the work was satisfactory, or try to check out the contractor’s reputation with others like banks, other builders, and so on. Ask the customers if they would hire the contractor again.
For big jobs, where a lot of money will be laid out on supplies and materials or labor or subcontractors, check the contractor’s credit reputation with local banks or suppliers.
Check with your own homeowners insurance company or agent about your policy. If someone is hurt working on your roof—are you covered? Request proof of the contractor’s liability insurance and Workers Compensation coverage, in case of accidents on the job. On big jobs the contractor should be bonded.

Hire a contractor with a permanent business location and telephone number. You may need to follow up or find them later. It is not uncommon for various names to be used loosely—but often your right to sue or demand a job be done right can only be made to the legal entity with whom you have contracted.

Learn whether you are dealing with an individual, partnership or a corporation. Remember, a warranty, or a guarantee, or promises regarding “return inspections or courtesy installation follow-ups or check-ups” are only as solid or strong as the individual, company or partnership with whom you have contracted.

As to warranties and guarantees—find out what they really mean. They are often used as a selling point without really providing much protection. Check for yourself or ask. Does it cover the actual siding or furnace or roofing materials or whatever is involved? Does it cover the labor or workmanship? Is the warranty pro-rated over time? Is the warranty actually offered by the contractor or by the suppliers and manufacturers?
For many jobs, permits or variances are required. When you actually contract with someone, include that all required building permits, and variances, will be obtained by the contractor--before work is begun. The building permit is for your protection. An inspector will make sure the finished job meets all codes and makes the contractor responsible for corrections. Such leverage can work in your favor. Be leery of those who ask you to pull your own permit as the homeowner—they leave you more exposed and it often signals the contractor you are dealing with is not actually licensed.

Contractors offering to do work which totals $600 or more in labor and materials generally must be licensed. A Residential Builders license allows a contractor to build a complete residential structure and to do maintenance & alteration (remodeling) work on a residential structure. A Maintenance & Alteration license indicates that the holder has met requirements for one or more of the following trades: basement waterproofing; carpentry; concrete; excavation; house wrecking; insulation; masonry; painting and decorating; roofing; screen and storm sash; gutters and siding; swimming pools; tile and marble. The license lists the trades the contractor is qualified to practice. A state license must be displayed in the place of business and all contractors and their salespersons must carry a card that you can ask to see. If they cannot show you a license, check the Michigan Department of Labor and Economic Growth’s License Information database at http://cis.state.mi.us/bcs_free/default.asp or call the Verification Unit at (517) 241-9288.

Plumbers, electricians and mechanical contractors are required to have licenses. Anyone wanting to verify the license of one these tradesmen, or check the status of a permit or inspection, can access the information, anytime, online through the BCCFS web site at www.michigan.gov/bccfs. You can also call to check: Electrical: (517) 241-9320; Plumbing: (517) 241-9330; Mechanical (heating and ventilating and air conditioning): (517) 241-9325.

Insist on a written contract that contains everything you expect of the contractor. Don’t rely on oral agreements, never sign forms with blanks, and don’t be rushed. If the contract has things you don’t understand, or if you are told it’s “all standard” take time to read it over, or even discuss it with a trusted friend or an attorney. Keep a completed copy for yourself. Generally, you are bound by what you sign!

If you have signed the contract in your home, you have three days to cancel the contract if you change your mind. You must send the contractor a registered letter stating you wish to cancel. After that, changing your mind may mean a breach of contract suit.

Changes along the way should be made clear to everyone and may require delays, more money, more time and an amended contract.

Once you get started, never pay for the entire job in advance. You loose all leverage and may loose all your money too. Instead, arrange for partial payments—say a third or a quarter at a time--and then make scheduled payments as work progresses. Reasonable deposits when work begins, to cover materials and startup costs, are acceptable. When possible, pay by credit card--as you may have recourse or charge-back rights with a credit card payment. If you pay by check, pay only to the company name and ALWAYS get a receipt. No excuses and no exception.

Make the last or final payment when EVERYTHING is done as promised, the permit or inspection process is complete and you are satisfied with the work. Don’t be pressured into paying even when the contractor says they are “almost done.” And don’t sign any document agreeing that everything is completed or satisfactory if it is not.

Finally, keep a little file for yourself regarding the work—you might need it later. Save the paperwork, mark down key dates, keep notes that could jog your memory, and if you think you need to, take pictures of the work and/or any problem areas in particular.

The Legal Hotline for Michigan Seniors gives advice and information about the legal aspects of home repairs and contractors and can answer questions you have. You can call any weekday between 9AM and 5PM to make an appointment to speak with a lawyer. There is no charge. Their number is (800) 347-5297.