Home Contractor vs. Homeowner

One of the advantages of having handled numerous home contractor/homeowner disputes is that I have a global view of the problems that arise. Homeowners and contractors are frequently shocked when something goes wrong during a renovation project, but if they are made aware of the "signs," the problems may be preventable. 1. The contractor who tells you that you do not need a contract. Sure, things are great at the beginning, but working without a contract can be a recipe for disaster. The purpose of a contract is to memorialize a "meeting of the minds." As one arbitrator said to me, "the best kind of contract is put on the shelf once it is drafted and left to collect dust." 2. The homeowner who is overly preoccupied with details and processes. Homeowners should be actively involved in the renovation process. However, if they have difficulty making up their minds over the smallest issues, or insist on controlling minute aspects of the work, the proje...

Last night I attended the Builders Association of Greater Boston economic forecast dinner. The speakers were excellent, and they provided some encouraging news for Massachusetts and the nation. To summarize, their view is that the first quarter of 2009 is going to be the worst, and then things are going to gradually get better. In their opinion, we all need to try to funnel money into the economy. Those who want to buy homes should start doing it now. Mortgage rates are low, and housing prices have dropped. Those waiting for prices to drop even lower are part of the reason that we are in such a bad situation right now. There are efforts being made to help protect buyers by reimbursing them if prices were to drop even lower. So, that supports my contention that it is a good time to renovate. You will be helping the economy and availing yourself of the good deals out there. To my last comment: There will still be bad contractors out there, but I do believe that those who are ri...

I imagine that some of you will say it's crazy to start a home renovation project in this economy. However, there are many reasons to consider doing one now, and here are a few: 1. Contractors are no longer busy. The days are gone when contractors could afford to disappear from your project because they were working on others. It is in their best interest to do a good job and keep the homeowner happy. Now, more than ever. 2. The bad contractors are closing shop. I know so many contractors who are going out of business. This is very sad, but it is also serving to retain the good ones who have treated their clients well and maintained a good reputation. It is more likely that someone who has stayed in business is a "good" contractor. In my mind, that means there is a greater likelihood of a successful renovation project. 3. You will get a fair price. See #1 above. 4. The homeowner might have more time to devote to the project. My work is not as busy, and most ...

Like most construction lawyers, I am spending a lot of time thinking about the economy and how to safeguard my practice in these tough times. It occurred to me that now, more than ever, homeowners need to be realistic when planning a home improvement project. I have been absolutely astounded by the projects undertaken by homeowners that are well beyond their means, or cause them to live so close to the bone that there is no room for extra expense. By the time they come to see me, their situation is truly disastrous. Even in home renovations that run smoothly, it is not unreasonable to allow a cushion of ten percent for unexpected change orders. This is not the contractor's fault. One never knows what one will find once excavation begins or walls are demolished. Any sensible contractor will include a clause in his contract that allows for a change order when unexpected conditions are encountered. I jokingly tell people that I will not even change a lightbulb in my house for fear tha...

I have been wanting to post about insurance policies and construction projects for quite some time, as there is a great deal of confusion about what kinds of policies are necessary and which items are covered. Mark Tarpey of Tarpey Insurance Group provided me with this guest posting: For New Construction, the Purchase and Sales Agreement must be reviewed to determine who is providing the insurance during the course of construction. I have seen contracts that require the builder to carry it and some other contracts require the homeowner to provide the coverage. The builder will provide the coverage under a Builder’s Risk Policy. The homeowner can purchase a standard homeowner’s policy with an endorsement to cover the theft of materials( this is excluded under a regular homeowner’s policy). If the homeowner owns the lot during the construction phase, they should require the builder to list them as an additional insured under the Builder’s general liability policy. During a remodeling pro...

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