Avoiding Contractor Nightmares

We’ve all heard of someone who paid a contractor for materials to start a construction job, then had the contractor flake out and keep the money without completing the job.

When Good People Make Bad Choices

Usually it seems like the contractor isn’t intentionally setting out to commit fraud, but it is common for contractors to become overextended or have a setback where they spend the money on something else and are unable to complete the job they were paid to start. Unfortunately, there isn’t much recourse for homeowners in these situations. If the contractor can be located to file a lawsuit, there usually aren’t any assets to recover.

Likewise, I understand contractors’ reasons for asking for money up front. Often, they don’t know the person hiring them, and the job materials are likely to be expensive. The contractor doesn’t want to pay out of pocket for materials and employee labor on the speculation that they’ll be paid later. Unpaid contractors do have the recourse of filing a mechanic’s lien against the property, but the lien can be on the property for years before it is paid.

Know How to Protect Yourself

As a homeowner, there are a few steps you can take to avoid this situation:

1. When possible, use a contractor that has references and an ongoing working relationship with someone you know. If a contractor has been working on houses in your neighborhood, they’ll know what to expect with the job and be conscious that your neighbors are their best market for the next job.

2. Always get a written quote with as much detail as possible that clearly defines exactly what the scope of work is, what quality of materials will be used, how mid-project changes will be dealt with and when payments will be made.

3. Make any payments with a check or credit card and have a receipt.

4. If the contractor can’t or doesn’t want to obtain the materials up front, buy them yourself. This ensures you have control over the materials. You know lesser quality materials won’t be used for your job, and the materials for your job are on your job site. If something prevents the original contractor from completing the job, you have the materials to have someone else step in.

5. If the contractor insists on having money to start a job, the only way I’ll pay anything up front is when there is a crew working on the job site on the first day. This initial draw should be small.

6. Make sure all work is done for the stage of the project that is being paid for. Insist on at least ten percent of the total job amount be paid only after the entire job is complete, including all cleanup.

I’ve got lots of contractor stories, both good and bad, but I’ll save those for another post. In the meantime, good luck on your projects.