THE FINE PRINT — Don’t get taken for ride by unscrupulous contractors

January 2, 2014

By Jan Pierce

janpierceThe world is filled with honorable, hardworking, and talented contractors.

But that doesn’t matter if you aren’t lucky enough to find one.

And the bad ones are really bad, and they operate in a manner that ranges from incompetent to criminal.

If you aren’t careful, you can lose tens of thousands of dollars before you know it. To make matters worse, you will likely not be able to recover your losses. The kind of contractor I’m talking about is usually “judgment-proof,” meaning that even if you win a lawsuit against them, they have no assets to collect.

Your only real protection is to keep all contractors on a very short leash. The following recommendations are ways to help protect yourself.

Get Referrals

While past experience is no guarantee of future performance, using a contractor who comes highly recommended is a great way to avoid bad ones.

Require Certificates of Insurance 

You don’t want to get stuck with the liability for workplace injuries or damage. The only way to make sure you don’t is to request certificates of insurance from the contractor. If a contractor can’t produce these, get another contractor.  Often licenses are dependent on having insurance so this probably means your contractor isn’t licensed either.

Get It In Writing 

Contracts do not have to be in writing, but make certain the one for your project is, and make sure it’s signed. Wisconsin law requires that a contract must be in writing, if it stipulates prepayments. Memory tends to be selective, so a written contract provides all parties with a roadmap for settling their disputes before things get really nasty, and it can be used as evidence if they do.

Understand Construction Liens 

Contractors understand construction liens. If you don’t understand how they work, you’re likely to have them used against you. I covered them in my August column: bayviewcompass.com/archives/14600.

Use Draw Requests

Use a system of draw requests (staged payments), especially if your project is large and/or your bank is involved. This requires the contractor to complete benchmarks before they are paid. A percentage will be held back to make sure there is an incentive for the contractor to finish every last detail. Also, lien waivers are provided by the contractor with every payment.

Purchase Materials Yourself

If you are concerned that the money you are paying the contractor for materials will not be used for that purpose, arrange to purchase those materials yourself.

Exercise Your Right of Rescission

If the contractor came to you, as in knocked on your door, Wisconsin law provides you with the right to cancel the contract within three days of signing. This law protects consumers from high-pressure sales tactics. If you have any misgivings, listen to your intuition and cancel the contract by sending the contractor written notice.

Finally, be firm and confident. A professional contractor will be very familiar with the rules and conventions I have outlined above and will not object to following them. If they do, find another contractor.

Send your question to jan@janpiercelaw.com. To protect your privacy, your name will not be published.

Jan Pierce, S.C. is a law firm In Milwaukee that was founded with the belief that people can make a positive difference in the world and make a profit. The firm’s emphasis is on assisting small businesses and social entrepreneurs in all aspects of launching and managing their ventures. Disclaimer: Advice in this column is general legal information and does not constitute, nor is it intended to be, legal advice.

 

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  1. THE FINE PRINT — Don't get taken for ride by unscrupulous contractors | Get 3 estimates for your project for free on Thu, 2nd Jan 2014 10:25 pm 

    […] THE FINE PRINT — Don't get taken for ride by unscrupulous contractors You don't want to get stuck with the liability for workplace injuries or damage. The only way to make sure you don't is to request certificates of insurance from the contractor. If a contractor can't produce these, get another contractor. Often … Read more on Bay View Compass […]

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