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If you are facing the prospect of major repairs or remodeling in the next few months you will want to review procedures for choosing a contractor so that you and your biggest investment, which is your house, are protected. This article applies to any major project that will have people working on your property, especially if they are going to be on the roof, on ladders, under the house or working with heavy equipment. It also applies to choosing a licenses general or specialty contractor (such as an electrician or a plumber.
Selecting a Contractor
After you have decided what your remodel will be you will need to choose a contractor. Plan to seek at least three bids. Four or five are even better. The first place to look for contractors is among friends and neighbors who have had work done which is similar to that which you are planning. Your local real estate advisor, Lynne Mercer, will also give you excellent referrals, as she has over twenty years experience with contractors of all sorts. If you must choose from the yellow pages look for someone who has been in business for some time and who can afford an ad as well as a listing.
Before contacting any of the contractors it is wise to familiarize yourself with your city’s individual building codes, and permit requirements. Always ask the contractor to obtain the necessary permits. This is part of the contractor's job! Insist upon it! If your city charges a permit fee, this should be included in the bid and invoice that you receive. The contractor should also contact the city after the work is completed so that an inspector will come out and look at the work and finalize the permit, by initialing it and dating it. Make sure that this is done. A permit that is not "finaled" is virtually useless
If your project is big enough to involve subcontractors or many suppliers, require a waiver of mechanic’s lien from the contractor. Make sure at the outset that this will be provided at the end of the project. Your general contractor should provide waiver from each of the sub-people. Make sure that you receive these before you make your final payment. A waiver of mechanics lien states that you have paid the contractor in full, and that the right of subcontractors and suppliers to file a “mechanic’s lien” against your property is waived. A sample form is available at the forms guru website listed at at the bottom of the article.
The purpose of all of this paperwork is simple: It also protects you from having a lien filed against your property by a subcontractor who has not been paid. (There have been instances when the contractor has been paid but fails to pay the subcontractors.) For a good discussion of this in greater detail see the Nolo Press web article cited at the bottom of the article.
Check out the Contractor
Contact the Santa Clara County Better Business Bureau at 408-278-7400 and the California Contractors State License Board at 1-800-321-CSLB (see link at bottom of article) to see if the contractor is licensed and in good standing. The License Board website has a quick check feature for the license number which may save considerable time. Make sure the license is current, and that the person is in good standing with the state and has no complaints outstanding with the Better Business Bureau. Make sure the contractor carries general liability insurance against any damage which might occur to your property as a result of the work that is to be done. Verify with the contractor that he/she carries workmen’s compensation for himself/herself and any crew who will be brought onto your sight. Check your own insurance to make certain that you have adequate coverage, should anything go wrong with the contractor’s insurance.
A licensed contractor will have higher overhead than an unlicensed contractor. Hiring the licensed person will cost more. This is what the homeowner gets for the higher price: the licensed contractor has passed tests given by the state of California; has a minimum of four years of experience; has a surety bond of $7,500 on deposit with the state; and carries workmen's compensation insurance for the contractor and crew. The licensed person is more likely to be paying "self-employment" taxes—that is Social Security and Medicare taxes and is also more likely to be paying these taxes for employees who come unto your property.
Ask for Bids
Ask for a written bid with labor and materials broken out. Materials should be specified. Let the contractor know that you expect a written invoice that you can check against the bid when the job is completed. If at the end of the job other materials, particularly if they were of lesser value were used, this should be reflected in an adjustment on the invoice. Ideally, you should also receive at least a one-year guarantee of the work, and as part of the contract, which you write with the contractor, a statement of who will be on site overseeing the day-to-day work on your job. Determine how cleanup and trash removal will be done.
How Much to Pay as a Down Payment
Never pay more than 10% or $1,000, whichever is less, as a down payment. That is the law. If your contractor requests more consider that as one reason to hire someone else. Make the down payment part of the written bid (see below) and make sure that you get a receipt when you pay it. Don't wait until the end of the job when it could be in dispute.
Ask for References
Finally, ask each contractor for references. Contact these customers. Ask them the following questions: Do you like the work that was done? (How long have you lived with it?) How was the trash removal and day to day cleanup handled? How easy was it to communicate with the contractor on the bid, on the job and about any changes or differences that occurred along the way from what was specified in the bid? How did this contractor handle the waiver of mechanics lien? As far as you know, were the subcontractors and suppliers paid on time? Was work done on time and on bid? If substitutions of materials were made, and particularly if a lesser grade of supplies was used, was this reflected in the final invoice? Did you receive a written invoice at the end, along with the waiver of mechanics lien?
Links to Websites
“Waiver of Mechanics Lien”, from FormsGuru.com:
“Home Improvement: How to Avoid Paying Twice”, from Nolo, Law for all:
State License Board for Contractors