Tips for Hiring a Construction Contractor
Season 3, Episode 11 – Get it in writing. That’s the common tip people give when someone is hiring a contractor.“You’ll thank me”, is usually the last piece of the conversation. But is there more to hiring a contractor than just a written quote? You bet your hammer and nails there is! Firstly, what is the legal definition of a contractor? How much homework do you really need to do? What licenses should your contractor have? Insurance? References? Worker’s Compensation? Who resolves a problem or dispute? There’s definitely more to hiring a contractor than just a written quote. JDSA Attorney Matthew Hitchcock gives us important ideas to build on in this podcast titled Tips for Hiring a Construction Contractor.
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Host: Construction contractors, we've all heard that horror story or some variation of it. Homeowner pays thousands of dollars to a contractor, only to be left with an unfinished project or bad workmanship. So, how do you protect yourself? How do you find that reliable contractor? What do you do if there is, indeed, a dispute? In this episode of JDSA's Law Talk attorney Matthew Hitchcock is here to discuss tips for hiring a construction contractor. Matt, always good to talk to you.
Matt: Great to be here Clint.
Host: Okay, so Matt, we're talking about contractors. I guarantee you there's that one person listening right now that's rolling their eyes and saying, oh, my gosh, common sense 101, almost victim blaming here. But if that were really the case, we wouldn't need to have this conversation.
Matt: That's right. In fact, I have this conversation frequently with people of all walks of life. In fact, I had a conversation with a gentleman who worked in the medical field who thought he had hired a standup contractor and had based his decision on a referral from someone he trusted and this contractor turned out to be shady, turned out to essentially rob the gentleman blind and disappear off to Tahiti or some Caribbean island with his $50,000.
Host: So, it's not just an urban legend, it actually happens?
Matt: Unfortunately, it happens too frequently.
Host: We'll break it down, we'll tell you how you can protect yourself and more. It's coming your way right here next on JDSA Law Talk
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Host: Welcome back to JDSA's Law Talk. Now remember, you can always connect with us on Facebook. You can follow us on Twitter too. Just search for us, @jdsalaw. I'm your host, Clint Strand, talking with Matt Hitchcock about contractors and how to not get taken for a ride when you're remodeling that kitchen or whatever. Matt, let's start it out here with the basics. In legal terms, what is a contractor?
Matt: Well, a contractor is someone, could be a person, often times it's a business. A contractor is someone that performs services for another person or another business and that performance is pursuant to the terms of a contract. Sometimes that's a written contract, sometimes it's an oral contract, but typically the contract will spell out cost, scope of work, materials to be used and any number of other provisions.
Host: In essence, this is what I'm going to do, these are the materials I'm going to do it with, and this is how much it's going to cost you.
Matt: That's right. And they may be called a builder, they may be called a building contractor, a remodeler, handyman, or contractor. Often times, general contractor or the shortened term GC are used and it's someone who is compensated for a service performed for another person, typically not an employee.
Host: So, obvious statement alert here, when you enter into an agreement with a contractor, no one wants to get taken for a ride. You want to set yourself up for success. So, let's talk about keys to success. In broad scope, what should I consider?
Matt: Broad scope, ask questions. Don't be shy about asking about experience. Don't be shy to ask about past work completed to see examples or pictures from a prior job. Don't be shy to ask questions that are important to you. Second, do your homework. Investigate the contractor. If you have friends who use the contractor, check with them and see what their experiences were. You may want to also go onto the internet and do some research on a Facebook page or a Better Business Bureau website or in Washington State the LNI website has information about contractors that can be valuable to know before hiring.
Then finally, whatever you decide, if your agreement is for more than $1,000 probably, get it in writing, define the rights, obligations, duties, the scope of work. Define the important things in writing so that in the event it doesn't go the way you expected, you have recourse.
Host: It's 2018. Handshakes are good for greetings. They're not for agreement, pretty much is what you're saying.
Matt: And handshake deals are great. I would recommend that people enter into handshake deals and memorialize them in writing.
Host: I like the way you put that. I'm a firm believer that to get the best answers you need to ask the best questions. So, let's arm our listeners with the best questions. What questions should I ask before hiring the contractor?
Matt: Well, first you want to know, is your contractor licensed to perform the work that they're going to perform for you. If it's an electrician, there are specific licenses. Or plumbing or any number of different types of services that a contractor may perform, require a specific license. So, that's a number one question, are you licensed? Second, you should ask the contractor, are there any complaints against your company? You can also find that information out often times on a website, but whether there's any complaints is important.
Third, if there were complaints, you'll want to find out how they resolved it. Were they involved in drawn out litigation? Did they pay as soon as they realized they were at fault? How did they handle the problem when it came up? Another one would be references. We already talked about asking friends and neighbors for information on contractors. What about asking the contractor, do they have references that they can give you, people to discuss how they performed.
Another key item to inquire about with your contractor is do they have Worker's Compensation insurance. In Washington a contractor is required to have Worker's Compensation insurance and so you would know right off the bat if they didn't. You're not dealing with somebody who plays by the rules and the chances of the deal going sideways increases substantially.
Host: That is a great question to ask. I didn't realize that about Worker's Comp insurance, that they're required to have that. What about other types of insurance?
Matt: Other types of insurance, the most common type of insurance and it's required again in the state of Washington, is a general liability insurance policy. Occasionally, a contractor may carry an errors & omissions policy, which is a broader scope, a little bit more expensive, but also covers a broader range. I wouldn't require my home contractor to have errors & omissions insurance because that's fairly rare for a home contractor to carry. But I would require they had a general liability policy.
Host: I can imagine that some people would hear us say, recommend asking a contractor, "Do you have any complaints against your company?", and think gosh, that feels a little uncomfortable to ask that. But I guess I would go back and say it's only uncomfortable if they're uncomfortable answering it.
Matt: Right. That can be a tip off. If you're dealing with somebody who seems devious to you or seems like they're not giving you the whole story when you ask about complaints, that might be a tip off that you're not dealing with a reputable contractor.
Host: All right. We talked very briefly about doing your homework, about getting it in writing, about what a breach of contract is if you get to that point. We're going to do a deep dive on all of these coming your way next because there are certain details that you need to know, and we'll tell you about them, next, right here on JDSA's Law Talk.
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Host: Welcome back to JDSA's Law Talk. If you'd like to read more in-depth articles on important legal topics, read through our news articles and blogs at jdsalaw.com. I'm Clint Strand talking with our featured attorney Matt Hitchcock about tips for hiring a construction contractor. All good stuff in this conversation, Matt, because we're giving people information to protect themselves when they want to improve their home, their business, whatever.
Let's do a deep dive here. We talked in generalities, let's talk specifically about doing your homework when it comes to hiring a contractor. When we say that, what do we mean?
Matt: Well, we really mean investigating the contractor, finding out about past jobs, finding out about past employees, and not just taking the contractor's word for it either. One thing that you'll want to do is you'll want to get a copy of the contractor's license to perform the work that they're going to perform for you. You'll want to get their registration number. You'll want to check with consumer agencies like the Better Business Bureau, the state Attorney General will frequently have information that is helpful. In Washington, the Department of Labor and Industries provides information that is helpful.
And then cross-check references. If they give you references, cross-check them. If you got them from a reference from a friend, cross-check with someone else. Don't just take one person's word for it. You'll want to ask several different people and explore the contractor's background in several different ways.
Host: I'd imagine that a tip-off for you to be wary would be if a contractor seems to be pressuring you to get a deal done fast, to come to an agreement quick, to not allow you to do your due diligence. "Let's just do this, I have a hole in my schedule next week. Let's get this done."
Matt: Yeah, that may be a tip. It may also be that the contractor has a hole in their schedule. So, I don't think there's one thing that we could point to that would be the obvious red flag. In a lot of situations, it's going to be little warning signs that just slightly pop up over the course of several different types of investigations or different checks.
Host: And regardless, this contractor, whatever contractor we're dealing with, should be very comfortable answering and handling these questions. If they're not that should be a red flag.
Matt: That would be a red flag. In fact, you may even want to ask the contractor if you can go out to a job site that they're on. Depending on the size of the project, you may want to visit a job site and if the contractor refuses, that could be a red flag. Some other things that you'll want to do, it's important to get proof of insurance, not just to know that they carry insurance, but also to know who that insurer is and what that policy covers. So, insurance is important, and you'll want to retain a copy of that for yourself.
Also, check on employee work history. Are there any complaints or lawsuits filed against the company by former employees? That could be a huge red flag as well.
Host: Let's talk about another generality you said earlier, get it in writing. It's almost a cliché at this point but get it in writing. Get what, and for what?
Matt: Well, you want bids, so you'll want to know before you enter into the formal agreement with your contractor, you'll want to know how their pricing, how their materials, how their warranties if there are any, how they compare to others. So, get it in writing means get written bids from preferably three contractors. You may want more, it depends on the scope and the nature of your project. But the bids should be a specific breakdown of costs by the type of work that will be done, the materials that will be used, and if your contractor is not willing to specify that, that would be an area for concern because you want to know what they're going to do, you want to know what they're going to use.
In some cases, it may not just be appropriate to look at the lowest bidder because you may have a contractor who is going to charge a little bit more because they use higher quality materials. Or you may have a contractor who's got tremendous skill in that particular area and can do the work for a slightly higher price but will be a higher quality product.
Host: Now, there are always exceptions to the rule, but it sounds like what you're telling me is if you get three or four bids and one of these bids is not like the others, meaning it's way low, you should be way skeptical.
Matt: You should be skeptical of a bid that is far outside of the range of others. There are going to be costs associated with your project and most contractors are going to pay the same basic rates for labor. They're going to pay the same rates for materials, they'll make the same basic or close to the same size payments for insurance and overhead. So, if you've got a contractor who's 50% of the other bids, chances are the materials aren't going to be good, the workmanship may not be good, or they are not a reputable contractor.
Host: Okay, Matt, so we talked about doing our due diligence, doing our homework, but best of intentions still sometimes does not equate the best of experiences. You've done what you thought you needed to do and the deal went sideways. So, let's talk breach of contract. Deep dive, what legal remedies are available if you thought you got taken for a ride?
Matt: The first thing you'd want to do if you got taken for a ride is contact your contractor. It may be as simple as the contractor is not aware of the deficiencies on the job and they'll come out and fix it. It could be that the materials were under warranty and it's an easy solution. So, contacting your contractor just to see what your options are at the lowest and easiest resolution level possible is the best place to start.
Host: So, contacting them, trying to negotiate the issue, I'm sure, but what if that goes sideways?
Matt: If you try to negotiate the issue, if you don't get any traction on resolving it and you enter into a situation where you're in a dispute and you're not seeing eye-to-eye, litigation is a possibility. Often times, litigation may mean arbitration which is an extra judicial proceeding that is outside of the court system as we typically think of it. But that's fairly common in construction contracts because construction contracts and construction disputes are nuanced and they are not the area for generalities and general practice. Most individuals who oversee construction disputes are specialized and focused in that area because it is complex and unique and requires some different statutorily mandated procedures.
Host: So, is that a question you should ask a contractor then before you enter into it? Is there an arbitration clause in here?
Matt: Yeah, and just because there is an arbitration clause doesn't mean that it's always a bad thing.
Host: Not necessarily a red flag?
Matt: It's not necessarily a red flag because if there is a dispute arbitration it may help you solve the dispute, resolve it faster, resolve it with less cost out of your pocket and it's legally enforceable to a large extent the same as a judgment from a court would be. So, the arbitration clause may or may not be a red flag, but it's something you should be aware of because it will impact your rights and how you go about pursuing your damages against a contractor.
Host: Great information. We're going to wrap it all up with Matthew Hitchcock about contractors, protecting yourself and what to do when things go sideways. That's coming your way next right here on JDSA's Law Talk.
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Host: Welcome back to JDSA's Law Talk. If you'd like to read more in-depth articles on important legal topics, read through our news articles and blogs at jdsalaw.com. We're talking with our featured attorney Matt Hitchcock about tips for hiring a construction contractor. We talked about a lot, Matt, how to protect yourself, things to think about before you entered the agreement, and if things go sideways, your remedies to fix the situation. Let's bring it all together. What would you like people to come away with from this conversation?
Matt: I think everybody probably will recognize that the key to success on your project is getting the right contractor. The way that you go about getting the right contractor is investigating, researching, and asking questions. Now, this might be time-consuming, but the amount of time that you spend, if it takes you a couple of extra days at the front end, it will be worth it on the back end if you did your research and your due diligence and you hired someone who will complete the job on budget and on time and to the standard that you expected.
You'll want to also memorialize those agreements, the cost, types of materials, scope of work. You'll want to memorialize all of that in writing and I think you should reach a handshake deal with your contractor, but you should get that in writing as well. Then in the event you run into trouble and you feel like you may have been wronged by a contractor, contact an experienced construction attorney because the field is nuanced and it's unique and while virtually any attorney could probably give you a general overview of your rights and remedies in the situation, an experienced construction attorney is going to be able to point you in a more specific direction right off the bat.
Host: Not only for remedies, but especially considering the scope of a project, before you enter into the agreement would be a good idea to run that past a construction attorney, just so they can point out any potential red flags that may exist.
Matt: Depending on the size of your project, that could be a very good idea. If it's $1,000 contract to repaint a couple of bedrooms, maybe not necessary. But if you're redoing your kitchen and you're going to put $80,000 or $90,000 into a project, it's probably worth spending a little bit upfront to ensure that the terms of your contract are consistent with your handshake deal.
Host: An investment in peace of mind, I would think, right?
Matt: And you can never have enough peace of mind.
Host: Sage words. Matt, thanks so much. We appreciate the time.
Matt: My pleasure, Clint, glad to be here.
Host: Thanks for joining us for this episode of JDSA's Law Talk. Remember, if you have a legal matter and require solid legal advice, connect with a member of the JDSA Law team at jdsalaw.com. You can also hear Law Talk episodes on other topics and submit your questions or suggestions for a future show. I'm your host, Clint Strand. Thanks, again, for joining us on JDSA's Law Talk.
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