As reported by Consumer Reports in June 2009, 54% of homeowners were planning a remodeling project over the next twelve months, and at least two-thirds planned to do at least some of the work themselves. The report points out the importance of preparing a budget and planning for the unexpected. With regard to hiring contractors, Consumer Reports recommends not going for the low ball offer, since the contractor could make up the costs in labor and other areas. It also recommends getting a written contract and asking the contractor for copies of up-to-date license, insurance, and a lien waiver.
From a contractor’s standpoint, QuoteItNow.com points out that all remodelers should carry builder’s risk, general liability, and workers’ compensation insurance coverage. The builder’s risk insurance covers property under construction, materials in transit, property stored on the site, and the value of the property being constructed. General liability insurance covers the risk of negligence or omissions that result in injuries or property damage. And workers’ compensation insurance covers the contractor’s employees for work-related injuries while on the job.
Kelly Smith writing for Suite101.com recommends specifying all the details of the work in writing. The contractor may provide a signed bid in a standard format that includes the overall scope of the work and the total cost. Robert Rubenstein, PA, in an article for FindLaw.com, points out that the contractor’s bid constitutes a binding offer and if accepted results in a legally enforceable contract. Whether the bid is used as the basis for the work or a separate contract is needed may depend on the scope of the work and the amount of detail included in the bid.
Kelly Smith points out that the precise details of the work to be done and the materials to be used should be specified in writing. In addition to the total cost of the work, it is important to specify the terms of payment. This may be a schedule of payments based on completion of the work. Depending on the remodeling job, payments could be contingent on city inspectors signing off on the building permit, such as for electrical, plumbing, and heating, ventilation and air conditioning.
Due to the thousands of complaints it receives each year involving disputes between homeowners and home repair contractors, the Illinois Attorney General provides homeowners some advice, which can be applicable anywhere. First, it is important to be aware of, and avoid home repair scams and contractors who offer to do work not requested. The state attorney general’s office, the local township, and the Better Business Bureau can provide information on license requirements and whether any complaints have been filed against the contractor.
It’s important to get recommendations from friends, family and other people for whom the contractor has done work, and to ask the contractor for references. The attorney general recommends getting at least three written estimates from contractors who have come to the home to evaluate the work that needs to be done. It’s also important to find out whether the contractor will be using subcontractors and to check their references as well.
Managing payments on a home remodeling project is important for budget purposes and also to avoid contractors’ liens being placed on the home. A contractor can place a lien on the property for unpaid invoices. And if subcontractors are used, they can also place a mechanic’s lien if the contractor does not pay them. According to the Illinois Attorney General, a mechanic’s lien could be placed by a subcontractor even when the homeowner has paid the general contractor in full.
Contractors’ Liens Costly for Owners – Los Angeles Times
Home Repair and Construction – Illinois Attorney General
Insurance for your Remodeling Company – QuoteItNow.com
Kelly Smith, “Remodeling Contracts that Protect Both Contractor and Homeowner” – Suite101.com
Robert Rubenstein, PA, “10 Things to Think About Before Signing a Construction Contract” – FindLaw.com
Top 5 Remodeling Headaches and How to Avoid Them – Consumer Reports