Protecting Your Interests When Working with Contractors

The best way to avoid problems with construction contractors is to be as clear as possible in your written agreements, be observant without interfering, and keep communication open throughout the project.

Hiring the Right Contractor

To protect yourself from problems in a construction project, hire a competent and reputable contractor with whom you feel comfortable working. Here are some tips to follow:

  • Ask your friends, families, and colleagues to recommend contractors they know or have worked with successfully.
  • Try to get bids from at least 3 contractors, but be careful how you evaluate them. Make sure you know what a bid covers and what it doesn't cover, and make sure all bids cover the same things. Low prices may indicate low quality work or materials, so be careful.
  • Check that your contractor is licensed and insured. See Licensed Contractors: Why Is a License Important? for more information on licenses.

Contractor Agreements

Once you select the right contractor, draft a detailed and thorough contractor agreement to help avoid later misunderstandings and problems. See Contractor Agreements for more information.

Oversee the Project

You can avoid many problems by watching the project as it progresses. But you want to do this in a way that doesn't interfere with the work. For instance, you might check the site after the work is finished for the day. When possible, check the materials before they're used to be sure they are the same quality, models, or colors as you've specified in the construction agreement. It's easier to return the wrong kitchen cabinets before they've been installed.

You also want to monitor safety on the work site. You can make sure children and pets are out of the way. Be sure the workers are also keeping a safe work area by keeping it relatively clean and using safety precautions.

Keep lines of communication open with your general contractor by scheduling regular meetings, such as once a week. Keep abreast of how the project is progressing and any problems that have arisen. Express any concerns you have in a reasonable (and timely) way.

Finally, get the relevant papers, like warranty cards, from the contractor for all the appliances and equipment installed in your house.

Pay with Caution

One good way to avoid problems in construction projects is to be very cautious in the way you pay for the work. Don't pay more than 10-15% of the project costs up front. If your contractor pushes for more, you'd do well to hire a different contractor. Make payments as the project progresses and tie payments to completion of phases of the work. Check to make sure the work in question has actually been done. Make all payments by check to prove the payment was made.

If you obtained a loan to pay for the construction, make sure the lender doesn't pay money directly to the contractor. Have the money paid to you or to you and the contractor together. You don't want the contractor to be paid until you have verified that the work has been completed in a satisfactory way.

Avoid Liens

People who work on your construction project who don't have contracts directly with you, such as subcontractors and suppliers of materials, can put mechanic's liens on your property if they aren't paid for the work. Because of this, you want to ensure that your general contractor pays everyone who has the ability to place a lien.

Make sure you keep track of all the people who can place a lien and monitor when the contractor pays them. You can request documents called conditional releases from those entitled to liens. These documents tell you how much is due in payment and that all claims to a lien will be released if the amount is paid. You can ensure the amount is paid by writing checks jointly to the contractor and the subcontractor or supplier. After you have paid, you should receive and keep for your records a release from each of the potential lien holders. Make sure all these amounts have been paid before you make the final payment to the general contractor.

It doesn't hurt to consult with a construction attorney if you run into a difficult situation or have unanswered questions about your contractor agreement. An experienced construction attorney may end up saving you time and trouble.