Home Contractor vs. Homeowner

The construction industry is in a terrible state right now, and I know many contractors who are suffering the worst downturn in work in their careers. Now, more than ever, contractors need to protect themselves when they undertake projects and make sure they are operating their businesses correctly. In my practice I see many distraught homeowners who want to file claims against contractors. They are now willing to fight over less and less money and their general level of anxiety has risen. The best contractors recognize that maintaining good client relations is the best way to stay out of trouble, ensure future referrals, and stay in business. Particularly in this economy, this is not the time to ignore phone calls, disappear from the job, hit consumers with unexpected change orders and extra bills and cut corners. Many builders do not realize that their best source of future business is their current clients. So, keep the following in mind: 1. Keep the lines of communication open...

About a month ago, a woman walked into my office, and she said that her contractor told her that he would not honor his warranty unless she gave him a good reference. It seems like, of late, that homeowners are extremely concerned about the warranties provided by their contractors. What if something fails over time? Who is going to address problems that arise? Let's face it. Good contractors honor their warranties. In fact, for you contractors out there, here's a tip: warranty your workmanship for life. A contractor I know says, why not? I have complete faith in my workmanship. There is no reason not to give a lifetime warranty When a contractor abandons the job, it is unrealistic to expect that he or she will honor his warranty. It is not unusual for problems to develop as months pass. That is why it is important not to bring a claim before all of the damages are discovered. When claims are filed initially, it is important to factor in the value of the warranty and the likelih...

As the economy has gotten worse, I receive phone calls from homeowners asking: what do I do if my contractor files for bankruptcy? First, the disclaimer. I am not a bankruptcy lawyer. The bankruptcy law changed within the last few years, and lawyers are required to issue a number of disclaimers before offering bankruptcy advice. So, I am not going to tell you how to file for bankruptcy, or which debts are dischargeable in bankruptcy and which are not. If your contractor states that he is on the verge of bankruptcy, understand that you may never recover even if you can bring a claim against him. That is why it is important to take one's ability to collect into account prior to filing a lawsuit. In Massachusetts, tshere is a fund called the Guaranty Fund that will pay up to $10,000.00 of your damages if you obtain a judgment and your contractor files for bankruptcy. I do not know if other states have similar funds. In any event, I always say that the easiest thing for a contract...

I stated when I started this blog that I would have been able to help prevent many of the problems that contractors and homeowners experience when going through a construction project. I am now making my services available to support the goal of having a stress-free process. I am pleased to announce the launch of my new business, Building Confidence, LLC www.buildingconfidence-llc.com . I am offering consulting services to homeowners and contractors who are about to embark on new construction or renovation projects. For a flat fee, I will write your contract and work with local lawyers to make sure it protects your interests and is in compliance with state law. I will then be available by telephone and e-mail to consult with you throughout your project and advise you regarding any issues that arise. I can be reached at 617-467-3073 or ajg@buildingconfidence-llc.com . Please look at my website to learn more about my new construction consulting business.

One of the interesting aspects of writing this blog is I get to see the keywords that people use to find me. My audience frequently searches the title above to land at my blog. I have posted previously ("Think Before You Sue"), but I think it is tremendously important in the current economy to re-visit this issue. Lawsuits do not usually end well. I think the media has given us an unrealistic picture of the rare windfalls that can occur after going through a court proceeding. So many clients have told me they want "justice." I try to point out that a group of twelve strangers or a judge are not necessarily going to provide a just result. So many factors influence the behavior of the decision-makers that it is not realistic to think that one is going to achieve a storybook verdict. At the end of a lawsuit, if the parties do not settle, one side receives a judgment. Frequently that is only the beginning. Enforcing the judgment and collecting on it is a whole o...

Although the concept of Green Construction has been around for quite some time, there seems to have been more discussion recently about using the technology to reduce heating costs, benefit the environment and as a marketing angle. I belong to a builder's association, and there have been more courses offered in green construction and LEEDS certification. I am not going to pretend to be an expert in this area, but I am trying to learn more about the "green" movement and how I can offer advice to my clients in this arena. For example, I recently learned about LEEDS-AP certification which a limited number of lawyers in Massachusetts have obtained. I am pursuing the possiblity of taking this class through the Green Builders Council http://www.usgbc.org/ . So, what does this mean for you? For the contractor, it is important to stay state of the art. Educate yourself about options and take continuing education classes. Learn about the pros and cons of green products and de...

Before I say anything, I want to remind homeowners that mechanic's lien law is state specific. I only know how they work in Massachusetts. That said, there are usually similarities between states, and this will give you some idea of how the process works. It is not easy to follow the mechanic's lien process properly. For contractors, it can be complicated, and it is very easy to make a mistake. Many attorneys do not get it right. So, there are opportunities along the way for a lien to be subject to being dissolved. The problem is, they do not self-extinguish. A document has to be filed with the registry of deeds to put the public on notice that the lien is no longer valid. The simplest way to dissolve a lien is by agreement. The parties come up with a way to resolve their dispute, and a Notice of Dissolution is filed by the contractor. The next "easiest" is for the homeowner to post a bond. The reason I put "easiest" in quotes is because this can be...

Before I start this post, I want to remind my readers that I represent both contractors and homeowners and have seen good and bad on both sides. I can certainly write the next post about nightmare homeowners, but this one focuses on a phenomenon that I have seen recently. I have had more than one client come to me within the last few months who has been bullied by his contractor with threats of walking off the job, failing to honor warranties, and pushing homeowners into changing the scope of their projects. The homeowners feel powerless and do not know how to handle the situation. So, here is some advice for dealing with the difficult contractor: 1. Ask yourself what if? A home renovation project can be unpleasant, invasive and overwhelming, but it should not be threatening. If your contractor is not honoring your wishes, something is going wrong. So, the first thing to do is ask yourself, what if the contractor walks off the job? Files a lien on my property? Refuses to honor the warr...

At one point in time, I would guess that if a contract contained an arbitration clause, it most likely would have included an agreement to use the American Arbitration Association (AAA) for the arbitration itself. Nowadays, AAA has many competitors, but it is still a very popular option for construction contracts. There are pros and cons to choosing arbitration to resolve disputes, but the purpose of this post is to compare two arbitration organizations: AAA and the Massachusetts Home Improvement Contractor Arbitration Program (HIC). Price: AAA is more expensive. The fees for arbitration are based on the amount in controversy, and the arbitrator is paid by the hour. There is no limit on the amount of time to be spent in arbitration. The HIC program has a fixed price ranging from $450-850.00 depending on the amount in dispute. This fee provides for a half-day arbitration that also includes a site visit if the homeowner so chooses. Arbitrator: AAA sends out a list of arbitrators to choos...

I cringe when I hear that a homeowner has pulled a building permit. Homeowners do not consider the responsiblity that goes along with pulling the permit and do not really think things through before doing so. Here's the good news-the average homeowner who pulls his own permit does not have to have a Home Improvement Contractor or Construction Supervisor license if he satisfies the following requirements: "Exception: Any Home Owner performing work for which a building permit is required shall be exempt from the licensing provisions of 780 CMR 108.3.5; provided that if a Home Owner engages a person(s) for hire to do such work, that such Home Owner shall act as supervisor. This exception shall not apply to the field erection of a manufactured buildings constructed pursuant to 780 CMR 35 and 780 CMR R3. For the purposes of 780 CMR 108.3.5, a "Homeowner" is defined as follows: Person(s) who owns a parcel of land on which he/she resides or intends to reside, on which there...

One of my readers asked a very good question in response to a recent blog post. Is the mechanic's lien a stronger item in Massachusetts? The answer to that question is yes, a mechanic's lien is a very effective means for a contractor to put someone on notice of his claim. It will also put a "cloud" on the title of the property, meaning that most real estate conveyances cannot take place once a lien has been filed. Over the past few years, mechanic's liens I have filed have prevented progress payments for new constructions projects, prevented the sale of houses, and forced others to come to the table and try to settle the dispute. The only way for a property owner to dissolve a lien without going to court is to post a bond, and as some of my clients have found out, posting a bond can be quite expensive (usually 10% more than the amount of the lien). Even if the lien is not done properly, one still has to file an action in court to dissolve it, which requires paying...

There is a great deal of confusion about what to do when a contractor does not pay the subcontractor. The homeowner wonders if he is liable when subcontractors start knocking on his door, saying they are still owed money. Subcontractors are not sure about their rights either. They are upset that the general has not paid them, and do not know what to do next. Please keep in mind that the following information applies to Massachusetts law. I suspect that other states are similar, but you need to consult with your own legal advisor about these issues. The general rule is that when the contract is between the contractor and the subcontractor, the homeowner is not liable to the sub for payment. There is an exception carved out in the law that helps to protect subcontractors, and that is the mechanic's lien law. Mechanic's liens are generally a creature of statute, which means they are governed by a specific law. In Massachusetts, that law states that subcontractors can place liens o...

Perhaps the hardest part of dealing with a home renovation project for a homeowner is giving up control of his home. The homeowner has to really have faith in the contractor because she is turning her life upside down and allowing someone else to control her environment. The contractor is automatically in conflict with the homeowner, because he is trying to maintain control of the project while the homeowner is "interfering" in the process. The interference isn't necessarily a bad thing, because it allows for a system of checks and balances. At the same time, some homeowners overstep and try to micro-manage and drive the contractor crazy. So, how does one maintain a balance and deal with the lack of control? Rule #1-Start with a good contract. A contract that contains clauses that deal with possible unforseen events helps to protect both parties. Those who are in the business of construction develop these contracts over time as incidents occur during home improvemen...

I have noticed a trend recently in contractor-homeowner disputes. It is a problem that usually occurs when contractors do not follow my cardinal rule: ALL CHANGE ORDERS MUST BE IN WRITING AND SIGNED OFF ON BY BOTH THE HOMEOWNER AND THE CONTRACTOR. THE CHANGE ORDER SHOULD SPELL OUT THE INCREASE OR DECREASE IN PRICE AND ALSO STATE WHETHER THE DATE OF SUBSTANTIAL COMPLETION WILL CHANGE AS A RESULT OF THE CHANGE ORDER. The trend is that as the project progresses, the contractor realizes that he has underbid the job, and starts to ask for or negotiate for more money.; or, at the end of the project, the contractor finally works on his accounting, and discovers that he has to bill for a great deal of additional work. When this occurs, what do you think happens? The homeowner ends up furious, shocked and blindsided by the additional bill, or it does not dawn on him/her right away that he is shelling out much more money than anticipated. The reason this occurs is obvious: no one likes to talk a...

I recently made my YouTube debut when I was interviewed by The Contractor Show in Florida. I gave advice to contractors about how to prevent disputes during renovation projects. Here's the link: http://www.youtube.com/watch?v=KsHpXmFkS1U

One day I was having lunch with a colleague who is an in-house counsel and he told me that someone asked him, "Do you really read everything that's written in those contracts?" At that point, we both started to laugh because the answer is yes, we really do read every word. It astounds me at times what people will sign without reading the contract. For example, I recently reviewed a Massachusetts contract that said that all disputes would be resolved by going to an arbitration hearing that would take place in Washington, D.C. How could these people agree to go to Washington, D.C.? Another contract stated that the arbitrator had to be chosen by the Superior Court. How practical is that? It is better to say that an arbitrator will be mutually chosen by the parties. If the parties cannot agree, then there should be a secondary mechanism for choosing the arbitrator. One of my favorite clauses is when people put in that the prevailing party will be reimbursed for his/her legal ...

Most construction contracts include a schedule for payments that looks something like this: 33% on signing 33% at completion of the rough inspection 33% upon substantial completion. Although this would appear straightforward, in many cases it is not, and both parties need to put more thought into the payment schedule. From the contractor's point of view, he wants to make sure that he gets paid regularly, so he can pay for his subcontractors and materials. From the homeowner's point of view, she does not want to get so far ahead on payments that the contractor has an incentive not to finish the job. In addition, payment becomes a way of monitoring performance and ensuring that each side lives up to his end of the bargain. The contractor has to perform before payment, and the homeowner has to show good faith and pay so the contractor will perform. Most importantly, the payment schedule must allow for verifiable stages when payment will be made so both sides know what to expect. S...

Another post from Jerry Solomon: The new 2008 construction season is just weeks away. As you plan and prepare for your new jobs think about the safety of your workers and subcontractors. Make sure everyone knows how to do their work safely and is aware of the safety rules that apply to residential construction. OSHA continues to focus on residential construction as a high hazard industry. They are out there looking for you. Last year they issued over 4900 citations against home builders and renovators with penalties of over $3.7 million. You need a lot of profit to cover those penalties which come off your bottom line. The most frequently cited violations are for fall protection for workers on floor edges, roofs, etc. Workers must be protected against any falls of 6 feet or more. Guardrails may be impractical except for fall hazards that might exist for a few days or more. For trained workers, safety harnesses with lanyards which are properly worn and secured are often the best ...

A couple of weeks ago, I gave a presentation along with a home contractor to a group of professionals. The contractor, Paul Monaco, brought up a number of terrific points about the effect that a home renovation project has on one's household. So, in no specific order: 1. Be ready to have your life turned upside down. Doing renovation work in your home is very disruptive. 2. Do not put in a new lawn or beautiful new shrubs just prior to putting in an addition. Assume that your landscaping is going to get ripped up. 3. Prepare to eat off paper plates and wash your dishes in the bathtub or a temporary slop sink. 4. Understand that different workers will come and leave at different hours. 5. Do not count on workers to arrive on a daily basis. For example, a plumber may need to attend to an emergency and put off work at your home for a day. 6. Unforseen events may occur. Weather may interfere with the progress of your project. In addition, there may be hidden defects that mu...

The New York Times featured an article recently about consultants who help homeowners work through renovation projects. Here's the link: http://www.nytimes.com/2008/03/13/garden/13coach.html?_r=1&scp=1&sq=renovation+consultant&st=nyt&oref=slogin