Monday, July 23, 2007

Why is it important whether the builder/contractor is incorporated?

I was so pleased to read the question listed above as comment on a recent blog post. Please continue with questions, and I will be happy to answer them. There are a number of reasons to want to know whether a builder/contractor is incorporated.

In general, the reason to incorporate a business is to protect one's individual assets from creditors. For that reason, and others, many businesses incorporate. A corporation is like a separate individual. So, if you obtain a judgment against a corporation, you can only collect against corporate assets. Sometimes contracting companies own trucks or equipment, but in general, they do not own valuable assets. So, before investing money in a claim or lawsuit, it is important to figure out if there is anything to collect against at the end of the day.

Of course there are other reasons to incorporate as well. There are tax implications, branding and marketing reasons (to protect a particularly catchy name), and other financial and business reasons.

In Massachusetts, a designee of the corporation is jointly and severally liable for a violation of the Home Improvement Contractor Statute. That means that the designated individual can be held individually liable for a violation. It is important for contractors to know this and make sure to follow the law before they start going after homeowners for money, etc. Contractors do not want to be held invidually liable under the law and subject their assets to seizure!

Wednesday, July 11, 2007

How to Approach Your Home Contractor Problem

Today I was thinking about that fact that I approach most of my home contractor cases the same way, but the path that is followed after the initial steps will vary depending on a number of factors. It also occurred to me that I frequently send homeowners off with a homework assignment before I even meet with them, because they call me before being fully cognizant of their potential damages or without knowing what they want to do next.

More specifically, I get a call like the one I received today where the contractor delayed and delayed, violated the building code by not pulling permits, and then abandoned the job. The homeowner in this case did do some of his homework before calling me, so it was easier to figure out a course of action.

Here are some of the steps to take:

1. Find out if your contractor is registered with the state if you have not done that already.

2. Find out if your contractor is incorporated.

3. Get quotes for completing the work.

4. Have the work evaluated for defects.

5. Speak to your local building inspector and find out whether proper permits were pulled and whether inspections should have taken place.

6. Ask the building inspector to inspect the work and write a report.

7. In some cases, you will want to hire an independent expert to evaluate the work.

8. Document everything! Write a chronology of the events leading up to the breakdown of the relationship.

9. Take good pictures!

10. If you have to do emergency repairs, try to get even more documentation of the problems before they are repaired.

11. Try to determine where your contractor lives and whether he/she is married. (You may ask why? If you try to attach real estate to secure a possible judgment against the contractor, it is harder to enforce a judgment against property owned as tenants by the entirety, which is a form of ownership available to married couples).

12. Do not rashly call and cancel the contract with your contractor, because you could be sued for breach of contract.

13. Know whether your contract has an arbitration and/or mediation clause.

Quite frankly, the more legwork the client does, the less expensive the legal bills. I ask clients to e-mail me their chronologies so I do not have to start from scratch. So, do your homework before calling an attorney, and you will find that your lawyer will be able to offer you more helpful, clear cut advice from the beginning.