What You Need to Know Before Hiring a Contractor

By | May 18, 2011

Presented by Béat Koszinowski, Certified Insurance Counselor & Community Risk Management Specialist with The Buckner Company

1.  Is the company licensed? What is the license number?

If your “contractor” is not licensed and something goes wrong, you may have very little recourse. Professional contractors are licensed by the Utah Division of Occupational and Professional Licensing (DOPL). Go to http://www.dopl.utah.gov/licensing/contracting.html to inquire if a contractor is licensed.

If something goes wrong on your job, you can file a complaint with the DOPL. Complaints are verified and inspected. Complaints found to be valid can result in fines, suspensions or loss of license to the offending contractor. If your “guy” doesn’t have a license, he or she has nothing to lose.

2.  Is the company insured> general liability and workers compensation insurance?

Utah law requires contractors to maintain workers compensation and general liability insurance. If a company does not have workers compensation insurance or cannot prove they do – cross them off your list. Some businesses may be exempt from having a workers compensation policy. You should ask to see a waiver form. Check workers compensation insurance at https://www.ewccv.com/cvs/

What is at stake for you> They are violating the law, which brings their honesty and integrity into question. Additionally, if a worker gets hurt on your job and there is no workers compensation in place, you may be held liable.

All major contractors should have a minimum $1,000,000 general liability policy in place. They also should list your HOA as an additional insured and you should have a contract in place.  If they don’t and something happens on the job – guess what, you may be held liable.

Often people will say “I don’t have to worry about my contractor because they have insurance”. Keep in mind that commercial general liability insurance does not pay for the replacement or damage that needs to be repaired due to poor work by the contractor’s employees. All insurance companies exclude damage to your work. They don’t want to give anybody incentive to perform poor work. They will pay for subsequent damages and make sure this exclusion does not apply to the work done by subs.

If a performance and work guarantee is important to you, you may want to ask the contractor to furbish a performance and payment bond.

Anyone can say they are insured. Make the contractor prove it by having their insurance company FAX or mail to you a certified copy of his insurance with you named as the certificate holder or additional insured.

3.  How long has the company been in business?

You want to know that if the workmanship doesn’t hold up, the contractor will still be around to make it right. It doesn’t take much to start a repair or contracting company. Companies that have been in business for 5 years or longer are more likely to be around next year. Also if the contractor is no longer in business they will more than likely not have renewed their insurance and could leave you with no products and completion liability insurance. > This is recourse you could have for their work causing bodily injury or property damage.

4.  Specifically, what kind of experience does the company have? Everybody says they have experience in “all phases of construction.” Have they done your kind of job before?

“All phases of construction” is just a phrase. If your repair or remodel has several phases, i.e., construction, plumbing, electrical, painting, dry wall, etc. you not only want to know that the contractor has done all of this work before, but how often. If the company you are interviewing says they’ve done 1 or 2 or none, you might want to keep looking at other companies.

5.  Will I get an “itemized” quote?

Without an itemized quote, you don’t really know what the contractor plans to do. Without an itemized quote, it is easier to “underestimate” the job, resulting in unexpected expenses in order to get your work done. Additionally, itemized quotes make it much more difficult for unscrupulous companies to “pad” the quote.

6. Will you provide me with written references?

A good contractor will be happy to provide you with references. You should look for a well-established contractor who can give you several client references from the last 6 months to one year. Ask for the name of the contractor’s accountant or banker. You want to ensure the contractor is financially sound and won’t be declaring bankruptcy in the middle of your project.

7.  Will you provide me with a written lien waiver?

Your contractor should provide you with a written lien waiver at the end of the job. This is a legal document, which says you the homeowner or HOA have paid the contractor in full for the services rendered and the contractor waives his right to place a mechanic’s lien on your property. If during the course of construction you receive any Notice to Owner documents from material suppliers or sub-contractors, it would be prudent to ask the contractor for a Final Release of Lien from each one prior to paying the contractor his final draw. This protects you in case the contractor doesn’t pay his material suppliers or subcontractors after you have paid him in full.

8. Are you a member of NARI or NAHB?

NARI stands for the National Association of the Remodeling Industry and NAHB stands for the National Association of Home Builders. It’s always a good idea to consider hiring a NARI or NAHB contractor. In most cases, both organizations only attract conscientious contractors interested in bettering the industry and in weeding out unprofessional contractors. In order to become a member, the contractor’s background and references are thoroughly investigated. Some contractors could be members with other trade associations.

9.  Will you pull all the required building permits?

Make sure your contractor pulls all required permits. This is very important. When a contractor pulls the required building permits, you know things will be done to “code’. Not all contractors will do this. Many prefer not to pull permits because of the time involved and the “hassle” with the inspectors. Some contractors may ask you to get the permits. This could be a warning sign that they are not able to pull the permit because they are unlicensed, or the work is outside of their license. A reputable contractor will permit every job where a permit is required.

10.  Do you guarantee your work?

Your contractor should guarantee his work for at least one year from date of completion. But if the company is not licensed, or if the company goes out of business, your guarantee is not worth anything.

Feel free to contact me if you have any questions> beatk@buckner.com or cell phone 801-577-9455

5/5/2011, UCCIA May Roundtable



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