How can homeowners protect themselves from unscrupulous home repair/remodeling contractors? Expert litigator Mark Van Donselaar outlines what homeowners can do before, during and after a home repair or remodeling to ensure that they are protected against home repairs gone awry. Van Donselaar has handled many home repair cases as an attorney with the Grayslake firm of Churchill, Quinn, Richtman & Hamilton (phone 847-223-1500).
Typically, homeowners who run into difficulties with contractors are angry, frustrated and feeling hurt when they decide to turn to an attorney for help. Such homeowners usually feel that they have developed a trusting relationship with their contractor and that trust has been violated when problems develop. Additionally, they are emotionally upset about the problems involving their home as well as the financial aspect of possibly spending more money to remedy the problem.
Van Doneselaar helps his clients identify the problems and options to fix those problems. Often times, clients have a repair job that is partially finished. There might be a number of ways to complete the project including hiring a new contractor, but as we shall learn, that might not be the best way to get the job done.
Many problems could be prevented at the outset before the work starts. For instance, how can we find a contractor? Get references from friends and relatives or use lists from reputable sources such as Angie’s List or the Better Business Bureau. It is also a good idea to ask potential contractors for references such as former clients; follow up and call those clients and references. There have been many more unscrupulous contractors since the recession and margins are very thin for contractors. This leads some contractors to underbid jobs as well as take on work for which they are unsuited.
Storm chasers are one category of unscrupulous contractors that homeowners need to be aware of. After a destructive storm, you may see a number unfamiliar contractor pick-up trucks in a neighborhood with lots of storm damage. It is always a good idea to be wary of unsolicited contractors who approach you for any kind of repair or remodeling work. Many times, an unscrupulous contractor will hand unsuspecting homeowners a piece of paper to sign that they claim is just a proposal but in actuality is a contract that is binding and may stick the homeowner with highly unfavorable terms and limit his or her ability to hire another contractor.
Homeowners can protect themselves before the work is started by making sure that they have a clear contract. Basic terms that should be included in such a contract are a completion date, an outline of the scope of the project and financial information. It is important to know that it is best to put everything in the contract as contract law is governed by what is written in the contract. Reliance on a contractor’s verbal promise to also add a few side jobs along with the contract work will not hold up in court. It must be in writing. As for the financial aspects of the contract, a down payment should not be more than 50% of the total contract price, and ideally, the down payment should be for materials only. The remaining payments should track the progress of the job. If a homeowner should pay the entire price of the contract upfront, there is no motivation or incentive for the contractor to complete a job. Finally, a homeowner should seriously consider hiring an attorney to review the contract. Paying an attorney $500 to review a contract for a $25,000 repair or remodeling job, is money well spent to avoid potential problems down the road.
What should a homeowner be aware of once work has started? Homeowners should keep tabs on what is happening; are the right materials being installed? If periodic payments are being made as the work progresses, make sure that the work you are paying for is actually being completed and is being done according to the schedule of the contract. Potential problems that can come up in the course of the contract include the work lagging behind schedule or something unexpected may come up in the course of the work. Though it is frustrating when the work is not being done on time, it can be even more frustrating and expensive to hire a new contractor as contractors usually do not like to come onto a half finished job and doing so will usually cost the homeowner more money. If something unexpected comes up that requires more time and money, it will depend on the circumstances as to who will bear the cost of such additional work. If it is something that the contractor could have foreseen when preparing his proposal, the burden should be borne by the contractor. However, if the circumstances are not foreseen, it might be best to split the costs proportionately between the contractor and the homeowner.
Once the job is complete, there are a few things a homeowner needs to keep in mind. Before the last payment is made to the contractor, the homeowner needs to be assured that the contractor has paid all his or her sub-contractors and suppliers. Most people do not know that if a contractor buys materials on credit for a job, the material supplier could come after the homeowner if the contractor does not ultimately pay the material supplier. The homeowner, before making that last payment to the contractor, should ask the contractor for a Sworn Contractor’s Statement. This is a notarized list of all sub-contractors and material suppliers for a job along with an itemization of how much they were paid and a balance owing to them. If any sub-contractors or suppliers are still owed money, a homeowner could hold back the amount owing to that sub-contractor or supplier from the contractor’s balance and directly pay the sub-contractor or supplier. Alternatively, the homeowner could request a waiver of lien for the amount owing. However, it is usually best to pay the sub-contractor or supplier directly from the remaining money owed the contractor. As an aside, a homeowner is obligated to request a Sworn Contractor’s Statement from the contractor before the completion of a job. Most homeowners do not know this and contractors do not usually tell their clients about this.
It is also important for a homeowner to be aware of mechanic’s liens. This is a secured interest in real estate, much like a mortgage which is done to help ensure that a contractor gets paid for work completed on a property. If a plumber did work on your property and was not paid, the plumber could file a mechanic’s lien on your property as the work they did improved your property. Such a lien puts a cloud on the title of the property and cannot be sold or refinanced until the lien is paid. A general contractor has 4 months from the date of the completion of the work to file a mechanic’s lien with the county where the work was done. A sub-contractor can also file a mechanic’s lien but must first file a Notice of Lien against the property within 90 days of the completion of work with the homeowner, any lender and the general contractor. The sub-contractor can then also file his or her lien within 4 months of the date of the work’s completion with the county where the work was done.
Many problems with home repair or remodeling work can be avoided if a good contract is written and reviewed by an attorney before it is signed by the homeowner. Once home repair work is begun, the homeowner must keep tabs on the work and make sure it follows the course of the contract. Finally, the homeowner must obtain a Sworn Contractor’s Statement prior to completion and final payment for the work to ensure that all sub-contractors and material suppliers have been paid so as to avoid having any mechanic’s liens filed against the homeowner’s property.