Keeping a detailed "paper trail" can save you money
ContentsThe Registrar of Contractors (ROC) annually receives between 11,000 and 13,000 complaints against licensed contractors, approximately 7,000 complaints against people engaged in unlawful contracting practices which includes unlicensed contracting and more than 700 claims filed with the ROC Residential Contractors' Recovery Fund. Most of these complaints are favorably resolved by our office with little or no cost to either party; however, a percentage of these complaints must be resolved formally by an administrative hearing. The administrative hearing process can be lengthy, expensive and emotionally challenging for everyone involved.
Many of the cases resolved through an administrative hearing could have been resolved more quickly if the customer or the contractor had maintained proper construction documents. Customers should expect and require that standard business practices be followed when having any construction work performed. Making a construction contract, keeping receipts, lien releases and other documents will, many times, avoid the need for an administrative hearing. Reputable contractors expect that these documents will be used. Customers should contact the ROC if the contractor is unable or unwilling to correct any construction problem or to comply with the terms of the construction documents.
One primary purpose of a contract and the associated contract documents is to avoid confusion. Contracts that are clearly understood by all parties have a higher probability for avoiding an administrative hearing and, if an administrative hearing is required, the hearing process is more easily resolved.
The following items, while not all-inclusive, are very common requirements in the construction industry and should be used as a guide when planning a construction project. The following items will greatly assist you in resolving any construction dispute that may occur.
Before You Sign
- Check the contractor's license status and complaint record with the ROC by telephone or on our Web site.
- Never enter into a verbal agreement. Always get agreements in writing.
- Ask prospective contractors for references and be sure to check them.
- Have a legible written contract prepared with at least the following items included:
- The contractor's company name, address, telephone number and current contractor's license number
- The homeowner's name(s), address and the jobsite address
- List the payment schedule you have agreed to in the contract.
- A detailed description of the job specifications, the exact work to be performed, the brand and model of all material and equipment to be provided and any required drawings or plans should be approved and signed by all parties
- All subtotal amounts should be listed for each trade and a grand total of the contract price listed.
- The signature of all parties to the contract and the date signed.
- The completion date of the work to be performed. (If the completion date is critical, the parties should negotiate a liquidated damages clause, if necessary, to insure that completion is timely.)
- Get all addenda, change orders and credits in writing with a date and signature. (Think of these as mini-contracts.)
- Consider asking about the contractor's insurance coverage over the project and ask for proof of insurance.
- Keep a copy of all contract documents, notes, drawings, letters and memos for your records.
Proof of Payment
- NEVER pay with cash.
- Request a properly executed and notarized lien waiver/release in exchange for each payment made.
- Have the bank return a front and back copy of each cancelled check issued as payment.
- Keep a copy of the front side of personal checks issued as payment.
- Keep copies of bank statements that reflect checks issued as the payments clear your account.
- Request a formal account statement from the contractor that reflects services rendered, invoice numbers and payments made.
- Request a formal account statement from the contractor that reflects balance of an account paid in full.
- Make personal checks payable to the licensed contractor's company name only.
- If you pay with a cashier's check, keep a copy of the front side of the cashier check.
- Never make a personal check payable to a company partner or employee.
- Never pay a contractor's employees directly.
- Obtain properly executed and authorized bank records (outgoing electronic wire transfer document) to document draws made to a contractor by your bank on a construction loan.
- If you make a payment to your contractor's subcontractor, issue the check as a two-party joint check to both the general contractor and the subcontractor.
- Keep a copy of all credit card statements that reflect purchases for the project or payments made to a contractor.