How To Hire A Contractor And Not Get Cheated

How To Hire A Contractor And Not Get Cheated

I recently wrote a post titled How To Hire A Roofing Contractor. I received an email asking me to go into a bit more detail, so this post tries to deliver that additional content. So with apologies for the long post, here it is...

One of my favorite TV shows is Holmes on Homes. Mike Holmes, the host, fixes the houses of unfortunate homeowners who have been swindled by different contractors. This of course leads us to ask the question: how do I avoid hiring the wrong contractor and avoid being one of those financial horror stories and housing nightmares? How do I avoid, pardon the language, from getting screwed by the contractor?

And it is a good question to answer before we have any work performed on our homes or properties we own. Because we've all seen or heard about those nightmares... or already had our own nightmare experience(s).

Know Your State Law

What I write will be specific to the State of Michigan, although your state may have similar processes and laws.

Is Your Contractor Licensed?

The first thing you want to do is make sure your contractor is licensed by the State. Licensing doesn't mean s/he is an effective contractor, it simply means s/he has met a minimum standard.

People and companies can be licensed. Let's say I own Jason's Excellent Construction Company, LLC. In order to do business in the construction or remodeling fields, my company would have to be licensed by the State, and one person in the company (called a qualifying officer) would have to be licensed as an individual by the State.

People or companies in the following trades must be licensed:

• Carpentry
• Concrete
• Excavation
• Insulation work
• Painting and decorating
• Masonry
• Siding
• Roofing
• Screen and storm sash
• Gutters
• Tile & Marble
• House wrecking
• Swimming pools
• Basement waterproofing

Companies or individuals licensed in any individual trade listed (called an Maintenance & Alteration or "M&A" license) may only work in the trade licensed. Companies or individuals with a Residential Builder's license can practice all of these trades. The Department of Energy, Labor & Economic Growth (DELEG) issues the M&A and Builders licenses.

You can check on the license status of anyone in the construction field at the State of Michigan website: www.michigan.gov/builders. I'll use my license as an example. Say I am bidding on your roof. Since Jason's Excellent Construction Company, LLC is a fictitious example (although I think it would make a fantastic business), let's search by my name, Jason Channell, instead.

Go to the website and click the "Check A License" option in the right column.

Next, choose your search option.

Next, enter the name of the business or individual. Let's say you can't remember my first name... you can enter a partial name and a list of possible licensees will pop up.

Be sure to include what kind of license you are looking for... in this example, you'd want to know if I had a Builders license or a Roofing M&A license.

The list of people holding a builders license surnamed "Channell" pops up.

There it is: Channell, Jason Andrew. You can see my license number, you can see it is active (i.e. current), and you can see there is no enforcement action against me.

Note that you can check the licenses of individuals or businesses in the Boiler, Electrical, Elevator, Manufactured Housing, Mechanical (i.e. HVAC, Heating & Cooling), and Plumbing trades at http://www7.dleg.state.mi.us/bcclicense/

These tips focus on M&A's and Builders, but should also work with contractors in plumbing, electrical and mechanical fields.

When Is A Residential Builder or M&A License Not Required?

Here are the common exceptions:

• When the property owner works on his or her own property
• When the owner of a rental property works on his or her rental property
• A salesperson for a builder or remodeler (more on that later)
• A person (i.e. handyman) working on a minor repair projects under $600 for labor and materials

These trades are also unlicensed:

• Drywalling
• Fences
• Awnings
• Sewer and septic, water lines, sprinklers
• Pavers without mortar
• Asphalt paving
• House moving
• Carpeting and vinyl floors (not wood)
• Plaster and lath

Licensed Companies

According to Michigan law, companies working on your home must be licensed, and the person on the site supervising must have an individual M&A or Builders license. No one else on the project needs to be licensed, so if you have a group of seven or eight people tearing off your roof and re-shingling, chances are that only one or two people in that group will be licensed.

Salespeople

According to Michigan law, salespeople for remodelers and construction companies must be licensed. This is a separate license from the M&A or Builders license, and it can be checked at the same website, using the "salesperson" option in the "License Type" category. They should also carry a wallet card issued by the State.

Contracts and Confusion

From what I've observed, there are more problems between contractors and clients from misunderstandings and unfulfilled expectations than from shoddy construction. Good contracts should help clear up confusion. I'm no attorney, but here are my suggestions regarding the contract based on my observations and experiences over the last couple of decades:

• The contract should have definite terms, clearly express the type and amount of work to be done, and the type and quality of material to be used.
• The contract should have an approximate completion date.
• All terms of the contract should be clear.
• Copies of the contract should be passed out to all parties at the time of the signing.
• Changes to the contract should be made in writing and signed or initialed by all parties.

Make sure you keep copies of all documents relating to any transaction. Note the company representative who provided each document to you, and the date you received them.

Also make sure to keep fairly detailed notes of conversations you have with the business or person providing your construction/remodeling services, or with any subcontractors. Note who you spoke with, what you were told, and the date.

Depending on the type of project you have, it may be a good idea to write these down and send them to the contractor in an email as a permanent record of the phone call... you never know when you may need this.

Always Use A Licensed Contractor

Unlicensed Pickup Truck Pete is probably going to be cheaper than a licensed contractor. So why should you use a company or individual who is licensed?

Several reasons. But to start off, I'm not an attorney, so don't consider this as legal advice. With that caveat...

First, let's say something goes terribly wrong during the construction or remodel. Most homeowner insurance policies wlll not cover damages caused when homeowners use unlicensed labor! The neighborhood kids may be cheaper than a roofer, but you'll be stuck with no insurance coverage when that roof fails. The handy brother-in-law may need the side job money and be cheaper than an electrician, but when the house catches on fire from a poor wiring job, the homeowner's policy won't cover it.

So the couple hundred dollars saved can cost a homeowner tens of thousands of dollars... even hundreds of thousands in extreme cases.

Second, it is a misdemeanor to practice construction or remodeling for pay without a license (i.e. feel free to work on your own house or a buddy's house, but don't work on the buddy's house for pay), if the project is for greater than $600. The $600 figure allows the handyman to take simple projects around houses without being licensed.

It is also against the law to break a large project into a bunch of $599 projects to avoid exceeding the $600 figure.

Third, if something is not satisfactory with your project, you can contact the the Bureau of Commecial Services at the DELEG to complain. After an investigation, if you are in the right, the DELEG will take an enforcement action against the contractor... not something any contractor wants to deal with. You can also raise a stink with your local building inspector -- as long as the contractor was licensed.

Fourth, unlicensed contractors won't be bonded or insured.

Fifth, if a licensed contractor goes belly up, you are still on the hook for paying any subcontractors and all suppliers. But you have legal recourse in such a case against a licensed contractor, and very few legal options by breaking the law and using an unlicensed person.

A Few Words Of Advice

• Have your contractor show his/her license, not just a license number on a contract form. Do your homework. Make sure s/he is licensed AND current. It takes longer to boot up my computer than it does to check a license on the State of Michigan website.
  
• Make sure the contractor carries Worker's Compensation and liability insurance. Don't get caught in any legal battles if someone gets hurt on your job or screws up your neighbor's property.
  
• Always always always make sure the contractor gets a permit from your municipality. You want to have an extra set of eyes making sure the project is completed according to the Code. Problems are expensive to fix, and if you don't have a permit, you lose options if legal recourse is ever required.
  
• Ignoring building permits can get you, the homeowner, in trouble with the local government.
• Only homeowners and licensed contractors can obtain building permits. DO NOT, as a homeowner, get a permit for your contractor. Legit and reputable contractors get their own permits. Scoundrels are known for using the homeowner-obtained permit to avoid dealing with the local inspector.
• NEVER NEVER NEVER sign a check or pay someone different than the name on the contract. Many contractors will issue a bid in the name of their company (Jason's Excellent Construction Company, LLC), then ask to have the check made out to them personally (Jason Channell, in this case). Don't do this. You have a contract with a company, not with that person. Paying the wrong entity takes away most of your legal options to fix any possible problems -- and you will lose that money if there is a problem. Asking for payment this way is a shady practice at best, so drop any contractor that wants paid in such a way.

The DELEG Offers Advice To Avoid Complaints

1. Ask to see the person's "pocket card" license.
2. Check by phone or online to verifiy the license.
3. Ask for and check references.
4. Check with local authorities and Better Business Bureaus for complaints against the contractor.

I've tried to be thorough, but I am sure I will think of ten other things to add as soon as I hit the "post blog entry" button. Maybe I'll include any additional thoughts in a post.