...more in the series of "Equipping you to Deal Knowledgeably with your Contractor...
Make sure that your contract does not say you will pay the contractor in full immediately upon substantial completion. Make sure that final payment will be due 30 days after Notice of Completion is filed with the proper authorities AND all work is completed to the satisfaction of the Owner. I can’t stress this enough. Subcontractors and suppliers have 30 days from the filing of Notice of Completion to file lien notices on your house. If no Notice of Completion is filed, they have 30 days from substantial completion – according to whom? If you have already paid the Contractor all the money and someone files a lien... you get to pay twice….
YIPPEE. Isn’t this fun?
It is always advisable to have any contract reviewed by an attorney. Attorney’s specializing in Construction are your best bet. They are easy to find on the web and will make sure YOU are protected. I am a big believer in spending protection money rather than fix-it money.
But if you aren’t going to do this, at least go to the Contractor’s State Licensing Board website ( www.cslb.ca.gov ) and get the bare minimum legal requirements of a contract.
Monday, September 6, 2010
Thursday, August 12, 2010
Tips & Tricks and Things to Look for when Reviewing your Home Remodel Construction Contract
Instead of my usual “read the contract” rants, I’ve decided to equip you, the reader, the DIY’er, the “I can manage my own project” guy/girl who also has a day job and a family who wants to use the kitchen this century, for crying out loud - to not only protect yourself from shady contractors (they’re more common than you think), but to protect yourself from the mistakes and pitfalls that come with the jobs from reputable, honest, genuinely good contractors. It’s not always about looking out for the bad guy - contracts and construction jobs are complicated projects to manage, especially for you, who will probably do a project this size once in your lifetime, twice if you’re ambitious and have a bad memory.
Over the following weeks, I will give you some tips that I’ve learned (sometimes the hard way) from over 15 years in the industry –working in management positions in a general contractor company, a developer, and yes, as a homeowner. I’ve worked on all sides of this, and know what to look for, have seen what happens when folks trust too much in the “professionals” (step 1. Make sure they’re licensed and bonded, please) and realize that they’ve put their own homes at risk based on the promises of a stranger.
The beginners guide to contracts…….
There is a “List of Documents to be Incorporated Into the Contract” section that NEEDS to state a Date of Plans. This may sound petty, but do you know how many sets end up getting printed as your Architect makes little changes here and there? If the Contractor ends up with an old set of plans and builds your house to those….too bad, so sad. Want those updated plan changes? Pay baby, pay.
Secondly, review the “Schedule for Progress Payments “ thoroughly. One guy had all the correct legal stuff in it, specifically bolded per law “It is against the law for a contractor to collect payment for work not yet completed, or for materials not yet delivered”. He also had bolded “the down payment may not exceed $1000 OR 10 percent of the contract, whichever is less”. Then on the same page asked for more than 10% as a deposit! Aye, aye, aye. He also then stated a sum of money that would be due “at the end of each week for the duration of the project”. Did you get that? Doesn’t say he had to have any crews on the job or that any work would be done. Just that you would pay him that money. What??
More later, digest now….
Over the following weeks, I will give you some tips that I’ve learned (sometimes the hard way) from over 15 years in the industry –working in management positions in a general contractor company, a developer, and yes, as a homeowner. I’ve worked on all sides of this, and know what to look for, have seen what happens when folks trust too much in the “professionals” (step 1. Make sure they’re licensed and bonded, please) and realize that they’ve put their own homes at risk based on the promises of a stranger.
The beginners guide to contracts…….
There is a “List of Documents to be Incorporated Into the Contract” section that NEEDS to state a Date of Plans. This may sound petty, but do you know how many sets end up getting printed as your Architect makes little changes here and there? If the Contractor ends up with an old set of plans and builds your house to those….too bad, so sad. Want those updated plan changes? Pay baby, pay.
Secondly, review the “Schedule for Progress Payments “ thoroughly. One guy had all the correct legal stuff in it, specifically bolded per law “It is against the law for a contractor to collect payment for work not yet completed, or for materials not yet delivered”. He also had bolded “the down payment may not exceed $1000 OR 10 percent of the contract, whichever is less”. Then on the same page asked for more than 10% as a deposit! Aye, aye, aye. He also then stated a sum of money that would be due “at the end of each week for the duration of the project”. Did you get that? Doesn’t say he had to have any crews on the job or that any work would be done. Just that you would pay him that money. What??
More later, digest now….
Friday, July 23, 2010
Entering Into A Contract for Your Home Remodel? Read it Closely.
IT'S UP TO YOU TO MAKE SURE YOU'RE PROTECTED.
Contracts are a funny thing. No one cares what’s in them until they need them in court. Then, surprise, surprise! You just found out you are not protected. Don’t be that homeowner. I will say that the courts do tend to lean toward the homeowner in cases of contractor “abuse”. They are supposed to be the professionals after all. But if you initialed all those places that gave the contractor special rights…well, you supposedly knew what you were doing. And why pay for courts and attorney costs…wouldn’t you rather have that money go into raising the value of your remodel investment?
I mentioned in my rant on T&M contracts that I had a contractor present a homeowner with a contract that had 4 illegal clauses in it. It also held absolutely NO protection for the homeowner, just all kinds of outs for the contractor. When I presented my required changes to the contractor, he said “no one ever reads these”. YIKES! Apparently neither does he. One of the most glaring (and embarrassing for him) entries was where his secretary had put personal notes to HIM (ie: “Fred, use your standard terms and conditions but eliminate No. 6,9 blah blah”). Since he never read the contract, which he later stated was new to him, he did not see her notes! I asked him how many other jobs he was doing with this exact contract and he just got embarrassed. He didn’t answer. Good thing…I’m pretty sure I did not want to know.
Moral of the story:
READ your contracts and look to see if you’re protected. If you can’t make heads or tails of it, FIND SOMEONE WHO CAN. The added expense for a set of experienced eyes is minimal compared to what you could be risking!
Contracts are a funny thing. No one cares what’s in them until they need them in court. Then, surprise, surprise! You just found out you are not protected. Don’t be that homeowner. I will say that the courts do tend to lean toward the homeowner in cases of contractor “abuse”. They are supposed to be the professionals after all. But if you initialed all those places that gave the contractor special rights…well, you supposedly knew what you were doing. And why pay for courts and attorney costs…wouldn’t you rather have that money go into raising the value of your remodel investment?
I mentioned in my rant on T&M contracts that I had a contractor present a homeowner with a contract that had 4 illegal clauses in it. It also held absolutely NO protection for the homeowner, just all kinds of outs for the contractor. When I presented my required changes to the contractor, he said “no one ever reads these”. YIKES! Apparently neither does he. One of the most glaring (and embarrassing for him) entries was where his secretary had put personal notes to HIM (ie: “Fred, use your standard terms and conditions but eliminate No. 6,9 blah blah”). Since he never read the contract, which he later stated was new to him, he did not see her notes! I asked him how many other jobs he was doing with this exact contract and he just got embarrassed. He didn’t answer. Good thing…I’m pretty sure I did not want to know.
Moral of the story:
READ your contracts and look to see if you’re protected. If you can’t make heads or tails of it, FIND SOMEONE WHO CAN. The added expense for a set of experienced eyes is minimal compared to what you could be risking!
Tuesday, July 13, 2010
Beware the Time & Material Contract!
My latest experience with a “Time and Material” contract explains why I have such a problem with them. I had a client who received 3 bids from 3 contractors, one of which had done some small work for them previously and so the client really wanted to go with him. When we received his contract it was “Time and Material”. What this means is that the contractor will bill you straight out for any time and any materials used on your job with an agreed upon mark up for profit and overhead. Sounds good, right?
I pushed back and the clients asked him for a lump sum contract. He said “why? I can come way under budget and why should you pay extra money?” I said “OK. If you know that you can come way under budget, put a ‘Not to Exceed’ price of their budget in it.” The contractor now hmmms and hahs and says “well, I can’t do that”. Now I got to ask “why? If you are so convinced you will come in under budget there is no risk to you here. We have 2 other bids that come in at budget and are lump sum.” He finally gave in and put the “Not to Exceed” into the contract. (The 4 illegal clauses in his contract that I made him revise is a whole other post!)
But the story doesn’t end here. If I had not been tracking his T&M billings throughout the project, no one would have caught the fact that he included material invoices for other peoples’ projects. Nor would they have caught that he made mistakes in the construction and charged the homeowner for the replacement materials and the labor to fix those mistakes. There were more things, but my heart rate goes up just trying to write this. In the end the homeowner negotiated merely a $50k overage to his “Not to Exceed” promise, down from the over $150k (not including legitimate change orders) he wanted to charge them. But, hey, no problem. He can come in waaaay under budget...
This story illustrates one of the reasons that I don’t recommend T&M contracts, but even more than that is that generally a contractor who has taken the time to REALLY bid your job has a much better idea of what he is getting into. The thorough bid is more likely to net a project with fewer hassles. And if the project can’t be done for your budget….you’ll know that before you ever start!
I pushed back and the clients asked him for a lump sum contract. He said “why? I can come way under budget and why should you pay extra money?” I said “OK. If you know that you can come way under budget, put a ‘Not to Exceed’ price of their budget in it.” The contractor now hmmms and hahs and says “well, I can’t do that”. Now I got to ask “why? If you are so convinced you will come in under budget there is no risk to you here. We have 2 other bids that come in at budget and are lump sum.” He finally gave in and put the “Not to Exceed” into the contract. (The 4 illegal clauses in his contract that I made him revise is a whole other post!)
But the story doesn’t end here. If I had not been tracking his T&M billings throughout the project, no one would have caught the fact that he included material invoices for other peoples’ projects. Nor would they have caught that he made mistakes in the construction and charged the homeowner for the replacement materials and the labor to fix those mistakes. There were more things, but my heart rate goes up just trying to write this. In the end the homeowner negotiated merely a $50k overage to his “Not to Exceed” promise, down from the over $150k (not including legitimate change orders) he wanted to charge them. But, hey, no problem. He can come in waaaay under budget...
This story illustrates one of the reasons that I don’t recommend T&M contracts, but even more than that is that generally a contractor who has taken the time to REALLY bid your job has a much better idea of what he is getting into. The thorough bid is more likely to net a project with fewer hassles. And if the project can’t be done for your budget….you’ll know that before you ever start!
Friday, July 2, 2010
Check this out!
Hey! Check this guy out.
The information on this site is current, relevant to California and incredibly thorough! Be sure to look at the “Owners Manual” tab for things to watch out for and general information about your part in the construction process. The section on “Selecting a Contractor” has some of the best, down to earth advice I’ve seen from a contractor. Good building skills are necessary, but if a contractor can’t run a business, he’ll be thanking YOU for those checks to cover back taxes if you aren’t careful….
Have a Happy 4th of July!!
The information on this site is current, relevant to California and incredibly thorough! Be sure to look at the “Owners Manual” tab for things to watch out for and general information about your part in the construction process. The section on “Selecting a Contractor” has some of the best, down to earth advice I’ve seen from a contractor. Good building skills are necessary, but if a contractor can’t run a business, he’ll be thanking YOU for those checks to cover back taxes if you aren’t careful….
Have a Happy 4th of July!!
Tuesday, June 22, 2010
TOP 5 MISTAKES Homeowners make during the course of construction
1. Paying for work not yet complete or done incorrectly.
Too many times contractors will bill for work not yet completed because they need the money to meet their payroll or child support or whatever. This generally won’t catch up to you until the end of the project when there is no more money left and the job is not yet complete. Chances are you won’t have the expertise to catch this. Make sure that someone walks your job with invoice in hand to verify that all the work is complete that you are paying for. If it isn’t you, find someone with construction knowledge that can tell the difference between plumbing being 50% complete and 20%.
2. Paying the contractor more money when subs/suppliers haven’t been paid from the last payment.
Did you know that a subcontractor or material supplier providing services or materials to your project has the right to lien your home if he is not paid WHETHER YOU HAVE PAID THE GENERAL CONTRACTOR OR NOT! It is YOUR responsibility to ensure that they get paid. There is a simple way to do this – it just takes a little organizational skill and the willingness to track everything. (I’m good at this.) Go to CSLB.ca.gov for information on how to do this yourself and what your rights are. Which leads to my next pet peeve:
3. NOT holding a 10% retention throughout the project
You have a legal right to protect yourself. Holding 10% back from EACH contractor billing ensures that there will be money left in the contract at the end. This is your legal motivation to get a COMPLETE project. All those little, pain in the rear things that are left hanging at the end of the job? 10% of the contract is usually motivation enough to actually see them done!
4. Time and Material contract on a large project
Time and Material contracts in general benefit the contractor. Not the homeowner! Your contractor will tell you otherwise, but I have yet to see one of these contracts come in under budget – or even ON budget. If you MUST have a Time and Material contract, at least put a “Not to Exceed” price in it. Otherwise, you are opening your check book to what the contractor wants to do. If a contractor is put to a budget, they are more likely to use materials wisely instead of wastefully. Inside of a budget, subcontractor mistakes are paid by the subcontractor – not you! Change orders become documented alleviating the “he said – she said” arguments. And you know from the outset what this project is going to cost you.
Ever driven around town and have seen a project sit undone for months and months? I would bet you these are owners that ran out of money because they didn’t have any idea what it was going to cost. Now the money that they DID put in is useless. They can’t live in the house and they can’t get that money back because the work IS done!
5. Hiring a contractor that does not carry both workers’ compensation and liability insurance
Directly from the CSLB website!
a. Ask to see a copy of the certificate of insurance, or ask for the name of the contractor's insurance carrier and agency to verify that the contractor has the insurance.
b. In California, if a contractor has employees, they're required to carry workers' compensation insurance. The importance of this cannot be overstated. If a worker is injured working on your property and the contractor doesn't have insurance, you could be liable to pay for injuries and rehabilitation. Your homeowner's insurance may or may not cover those costs. You should check with your insurance carrier to make sure the workers' compensation insurance coverage being provided by the contractor is adequate. Learn more from the California Department of Insurance.
c. Commercial general liability insurance is not required, however, it covers damage to your property. If the contractor does not carry general liability insurance, they should be able to explain how they would cover losses that would ordinarily be covered by insurance. If your contractor damages your property and doesn't carry commercial general liability insurance, you or your insurance policy could end up paying for damages.
d. A licensed contractor must provide you with information regarding both types of insurance in your written contract.
Too many times contractors will bill for work not yet completed because they need the money to meet their payroll or child support or whatever. This generally won’t catch up to you until the end of the project when there is no more money left and the job is not yet complete. Chances are you won’t have the expertise to catch this. Make sure that someone walks your job with invoice in hand to verify that all the work is complete that you are paying for. If it isn’t you, find someone with construction knowledge that can tell the difference between plumbing being 50% complete and 20%.
2. Paying the contractor more money when subs/suppliers haven’t been paid from the last payment.
Did you know that a subcontractor or material supplier providing services or materials to your project has the right to lien your home if he is not paid WHETHER YOU HAVE PAID THE GENERAL CONTRACTOR OR NOT! It is YOUR responsibility to ensure that they get paid. There is a simple way to do this – it just takes a little organizational skill and the willingness to track everything. (I’m good at this.) Go to CSLB.ca.gov for information on how to do this yourself and what your rights are. Which leads to my next pet peeve:
3. NOT holding a 10% retention throughout the project
You have a legal right to protect yourself. Holding 10% back from EACH contractor billing ensures that there will be money left in the contract at the end. This is your legal motivation to get a COMPLETE project. All those little, pain in the rear things that are left hanging at the end of the job? 10% of the contract is usually motivation enough to actually see them done!
4. Time and Material contract on a large project
Time and Material contracts in general benefit the contractor. Not the homeowner! Your contractor will tell you otherwise, but I have yet to see one of these contracts come in under budget – or even ON budget. If you MUST have a Time and Material contract, at least put a “Not to Exceed” price in it. Otherwise, you are opening your check book to what the contractor wants to do. If a contractor is put to a budget, they are more likely to use materials wisely instead of wastefully. Inside of a budget, subcontractor mistakes are paid by the subcontractor – not you! Change orders become documented alleviating the “he said – she said” arguments. And you know from the outset what this project is going to cost you.
Ever driven around town and have seen a project sit undone for months and months? I would bet you these are owners that ran out of money because they didn’t have any idea what it was going to cost. Now the money that they DID put in is useless. They can’t live in the house and they can’t get that money back because the work IS done!
5. Hiring a contractor that does not carry both workers’ compensation and liability insurance
Directly from the CSLB website!
a. Ask to see a copy of the certificate of insurance, or ask for the name of the contractor's insurance carrier and agency to verify that the contractor has the insurance.
b. In California, if a contractor has employees, they're required to carry workers' compensation insurance. The importance of this cannot be overstated. If a worker is injured working on your property and the contractor doesn't have insurance, you could be liable to pay for injuries and rehabilitation. Your homeowner's insurance may or may not cover those costs. You should check with your insurance carrier to make sure the workers' compensation insurance coverage being provided by the contractor is adequate. Learn more from the California Department of Insurance.
c. Commercial general liability insurance is not required, however, it covers damage to your property. If the contractor does not carry general liability insurance, they should be able to explain how they would cover losses that would ordinarily be covered by insurance. If your contractor damages your property and doesn't carry commercial general liability insurance, you or your insurance policy could end up paying for damages.
d. A licensed contractor must provide you with information regarding both types of insurance in your written contract.
Sunday, June 13, 2010
Welcome, Home Renovators!
Either you are getting ready to embark on a substantial construction project or you were just bored today. In either case, you found me! I am Vicki Hoppin, owner of Hoppin Construction Administrative Services (HCAS for short..). I have over 15 years of experience in the construction industry and have seen all kinds of things. This is one of those times when you would be much better off learning from others’ mistakes and not insisting you gain knowledge from your own experiences.
I started HCAS for the same reasons I believe Mike Holmes from "Holmes on Homes" (HGTV) does what he does….we are heartbroken watching homeowner after homeowner devastated - and unnecessarily so, when there are so many legal protections in place. You don’t have to be one of those nightmares! Protect yourself from the beginning. A large construction project is an emotional adventure that need not also be financially devastating. But beware….managing your project properly can be a full time job!
What I hope to do through this blog is give you input and resources that will enable you to end up with your dream come true with only minimal hair pulling. Most homeowners only do a home renovation project once – you don’t have time to gain the experience that will help you on ‘the next one’. I will provide you with website links that I hope you take the time to check out. I will share my own experiences and insights into how you can avoid some of the most common pitfalls.
Although my services are available to those in the SF Bay Area (California), I am more about helping you avoid financial ruin. Whether you decide to manage your project yourself or hire a professional – don’t let your contractor be your only project watch dog. They have other things that will take precedence over you. I’m not judging – I’m just saying: I have seen contractors with the highest integrity get into trouble – and it is those projects with the least amount of checks and balances in place that will dig them out.
If you do nothing else, check out the information available to you from the California Contractors State Licensing Board. It is easy to understand and extensive. www.cslb.ca.gov
Come back here often. I will continue to provide resources I think will benefit you as well as share experiences of my own. Feel free to leave questions or your own experiences.
I started HCAS for the same reasons I believe Mike Holmes from "Holmes on Homes" (HGTV) does what he does….we are heartbroken watching homeowner after homeowner devastated - and unnecessarily so, when there are so many legal protections in place. You don’t have to be one of those nightmares! Protect yourself from the beginning. A large construction project is an emotional adventure that need not also be financially devastating. But beware….managing your project properly can be a full time job!
What I hope to do through this blog is give you input and resources that will enable you to end up with your dream come true with only minimal hair pulling. Most homeowners only do a home renovation project once – you don’t have time to gain the experience that will help you on ‘the next one’. I will provide you with website links that I hope you take the time to check out. I will share my own experiences and insights into how you can avoid some of the most common pitfalls.
Although my services are available to those in the SF Bay Area (California), I am more about helping you avoid financial ruin. Whether you decide to manage your project yourself or hire a professional – don’t let your contractor be your only project watch dog. They have other things that will take precedence over you. I’m not judging – I’m just saying: I have seen contractors with the highest integrity get into trouble – and it is those projects with the least amount of checks and balances in place that will dig them out.
If you do nothing else, check out the information available to you from the California Contractors State Licensing Board. It is easy to understand and extensive. www.cslb.ca.gov
Come back here often. I will continue to provide resources I think will benefit you as well as share experiences of my own. Feel free to leave questions or your own experiences.
Subscribe to:
Posts (Atom)