Educational Consumer Tips
Author: Better Business Bureau
Most of the information provided in this general report was obtained from the Contractors State Licensing Board.
Are you planning to build, remodel, or decorate your home or office? If there is ANY installation involved in your project, whether it is cabinets, shelves, built-in entertainment center, retaining walls, draperies, carpeting, in-ground spas or pools, landscaping or similar- the company may be required to hold a Contractors license.
If you have any question about whether the TYPE of company you are considering requires a license-call the local Contractors State License Board at 800-321-2752 in San Diego or visit their
web site at www.cslb.ca.gov. In general terms, if the cost of the
job exceeds $500 (materials & labor) the contractor is required
to hold a license for that type of work.
If you determine that they do, ask the company for their License
number and call toll-free 800-321-2752 to determine the current
licensing status. You can also obtain a free information kit by
calling that 800 number. Be sure that the name of record matches
the name of the company you are considering and that the
contractor is licensed to do the type of work you plan to contract for. Our records indicate that some unscrupulous companies will give out a license number which does not belong to their company, or one which is not registered under the appropriate category to legally perform the work you wish done. For example, a painter is not licensed to do plumbing work.
The BBB warns that while checking the status of a company's
Contractor's license is important, the information provided by the contractor to the CSLB is not verified for truthfulness; however, the applicant is required to sign a statement of perjury.
Ask the contractor for local references, and call them to see if they were satisfied with the contractor's work. If possible, go out and look at finished projects. Some consumer may also wish to find jobs in progress to see how the contractor works and to speak with the property owner about work habits, inconveniences, and the sensitivity of the contractor to the living needs of the property owner. In addition to talking with customer references, obtain references from material suppliers, subcontractors, and financial institutions, if possible, to determine whether the contractor is financially responsible.
CONTRACT AND INSURANCE INFORMATION
It is a good practice to get at least 3 bids for any work you are
considering to compare pricing and contractors. Be sure that all bids are based on the same set of specifications. You should also require documentation that the company has adequate liability insurance, worker's compensation insurance and a current bond. Be sure that you also receive a list of all of the subcontractors that will be working on your project and that they, too, hold the proper licensing and insurance required.
Don't be rushed into making a hasty decision, especially if your
decision is based on the lowest bid, or the offer of rebates, discounts or other compensation. Make sure that you read and
understand everything on any contract or agreement before you sign it, and that any verbal promises are included in your written agreement.
The law requires a contractor to give you written notice of your
right to cancel a contract within 3 business days of signing it,
provided that it was solicited at some place other than the
contractor's place of business. Use those three days to review
the contract. If something bothers you, don't be afraid to cancel the contract. If you do cancel, by all means call the contractor; then make sure your cancellation is in writing.
Be sure to get any warranty offered by the contractor for labor and materials in writing. It should specify which parts of the work are covered and the duration of the warranty.
Your contract should specify an approximate starting date and
completion date for your project. The BBB warns that it is a violation of Contractors License Law for the contractor, without lawful excuse, to NOT begin work within 20 days from the approximate date specified in the contract.
Make sure that the payment schedule for your project is based on
the contractor's performance. The BBB warns consumers to NEVER let your payments get ahead of the contractor's work, not even if the contractor states that they must have upfront money for
materials or they threaten to walk off the job. This may mean that the contractor is having financial difficulties. Make sure the contract provides for a "retention." A "retention" is a percentage of each payment or of the total job, ordinarily 10 percent, which YOU retain until the job is completed. The BBB also warns consumers to NEVER sign a completion certificate until all the work called for in the contract has been properly completed. Lenders usually require a signed completion certificate before they will release the last payment.
If the payment schedule contained in the contract provides for a
down payment, it shall not exceed $ 1,000 or 10% of the contract
price, excluding finance charges, whichever is less. If the contract provides for the contractor to furnish performance and payment bonds, lien and completion bonds, a bond equivalent, or funding control, this limitation of down payment does not apply.
For a large remodeling job that involves many subcontractors and
a substantial financial commitment, you should protect yourself
from liens against your property in the event the contractor does
not pay subcontractors or suppliers. You may be able to add a
release-of-lien clause to your contract, requiring the contractor or subcontractors and suppliers to furnish a certificate of a waiver of lien. Another solution is to place your payments in an escrow account until the work has been completed and subcontractors and suppliers verify that they have been paid.
PRELIMINARY LIEN NOTICES
Shortly after your job commences, you will probably receive preliminary lien notices from subcontractors and material suppliers. Don't panic! This does not mean that a lien has been filed against your property. The law requires you to be furnished with these notices to alert you that those persons have worked on or have supplied material for your job and may have lien rights.
The law provides that anyone who furnishes labor or materials
to your property can record a "Claim of Lien" or "Mechanics'
Lien" against your property if they are not paid. Even if you have paid your general contractor in accordance with the contract, if the contractor fails to pay any subcontractor or materials supplier who performed work or supplied materials in connection with your project, you still run the risk of having a lien filed against your property. You could be required to pay a bill twice to keep from losing your property in a foreclosure proceeding.
This risk is greatly reduced by protecting yourself with a contract bond and/ or use of a joint control company, but is never entirely eliminated. Therefore, it is a good practice to specify in the contract that the contractor is responsible for obtaining lien releases from each of the subcontractors and material suppliers.
The time you spend on investigating before you sign the contract,
will save you both time and money in the long run. The BBB offers a FREE Tips Booklet on Home Improvement, and a variety of related subjects. Write to us or call to request a copy.