Hiring a contractor can be both stressful and expensive for any homeowner. Frequently, a difficult hurdle for any homeowner is the first one: finding a contractor willing to do the job. This means that once the homeowner finds a contractor willing to do the job, the homeowner may be reluctant to ask for a contract or additional details in order to not slow down the process or because the transaction appears simple on its face. Moreover, the homeowner may trust the contractor to perform its craft and may not feel comfortable insisting on protections for themselves.
But, the truth is that contractors are generally used to paperwork: they apply for permits, hire subcontractors, draft lien waivers, file mechanic’s liens, and renew their license. This means asking for a contract or some extra paperwork would be anticipated by a credible contractor.
Common issues with residential projects include:
- Having no contract at all
- Using unlicensed contractors
- Failure to meet schedule (or misaligned expectations)
One way to address many of these issues is ensuring you have a contract in place for all work. Clarity before the work starts benefits everyone. It sets out expectations so that when problems arise there is no confusion. Therefore, before hiring a residential contractor, you may want to consider all or some of the following:
- Confirm your contractor is properly licensed:
Just because a business is an LLC or corporation or has the word “contractor” in its name, does not mean that they are a licensed contractor. So, the first step is to ask for the license number and confirm the status of the license with the appropriate agency. For example, Arizona contractors’ license information can be found here: https://azroc.my.site.com/AZRoc/s/contractor-search.
- Hammer out the following key details with the contractor, in writing, before money exchanges hands or work begins:
Be clear about what is and what is not expected of your contractor. For example, while “deck remodel” may seem intuitive based on prior conversations with the contractor, disputes can later arise about what “deck remodel” incorporated. Instead, it may be helpful to itemize the key components of the deck remodel. For example: (1) tear down old deck, (2) remove old decking, (3) pour concrete foundation for new deck, (4) build new deck made of [specify type of decking material], and (5) paint or stain deck. If there are drawings or specifications available, you may want to consider including them as an exhibit.
- How the job will be priced out
There are many different ways to price a construction project. Some jobs are cost of the work plus a fee, meaning you will be billed for the cost of materials, labor, and other items to perform the work, and then separately for the contractor’s profit and overhead. Pin down what costs are included in the costs of the work. For example, costs incurred to replace defective work probably should not be included in the cost of the work. Other jobs are “lump sum,” and the price will only change pursuant to a written change order if additional or a revised scope of work is performed. Certainty at the outset minimizes disputes later on.
As a homeowner, be aware of your obligation to promptly pay the contractor. Both sides should agree to a payment schedule and how detailed the request for payment needs be.
Nearly every project sees something change during construction. Consider how to document such changes. Typically, owners and contractors document alterations to the scope (e.g., size of the deck), schedule (e.g., when the deck will be ready), or price (e.g., how much the deck material costs) in a written “change order” signed by the owner and contractor. Again, outlining how to address changes before the project starts may make things easier down the road.
Agree with the contractor on when it will have all of the work done and when it will have completed specific portions of the work (e.g., the framing). You may want to consider including in your contract a specific day or deadline for the project to be complete. Also consider including reasons why that deadline may be extended (e.g., key material is unavailable).
Finally, determine how disputes should be resolved. It is easier to decide how to resolve a dispute before those disputes occur. For example, you may want to include a requirement that the parties hire a professional mediator to try and negotiate the dispute before filing a lawsuit. Mediation can be appropriate and helpful for both parties, especially when the attorneys’ fees to litigate the dispute would dwarf the amount in dispute.
Conclusion
This list is not exhaustive. Instead, it is illustrative of typical issues that cause frustration for everyone involved. Some contractors will have standard forms including some or all of these terms along with additional terms like the owner’s responsibility throughout construction, termination clauses, insurance requirements, and others. But if you have any questions about your specific project, you may want to consider discussing the issue with an attorney before you sign your contract.
