Home Contractor vs. Homeowner

The Strength of a Mechanic's Lien

2008-06-12T10:32:00.000-07:00

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 legal fees that are frequently not recoverable.

So, in order for a contractor to protect his or her interests, she should file the necessary documents for a mechanic's lien. It is much less costly than filing suit and a very effective means of pursuing payment.

When the Subcontractor Does Not Get Paid

2008-05-29T00:20:00.000-07:00

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 on an owner's property as long as they follow the specific requirements of the statute. For those who want to read the section of the law that applies to subcontractors, here it is:

Chapter 254: Section 4. Subcontractors; written contract; notice; filing; form; indirect contractual relationship; notice of identification

Section 4. Whoever furnishes labor, including subcontractor construction management services, or who furnishes material, or both labor and material, or furnishes rental equipment, appliances or tools, under a written contract with a contractor, or with a subcontractor of such contractor, may file or record in the registry of deeds for the county or district where such land lies a notice of his contract substantially in the following form:

For a complete version of that section, you can go to:

http://www.mass.gov/legis/laws/mgl/mgllink.htm

Filing a lien is a bit complicated, and it is very easy to do it wrong.

So, the homeowner may ask, how can a subcontractor place a lien on my property when my contract is with the general contractor?

The answer is: that is the subcontractor's right, but whether she will prevail is another story.

The owner is only liable to the subcontractor for the amount of money that is still owed to the general contractor.

So, how does this work in practice?

General contractor abandons the job and has been paid in full. Subcontractors have not been paid. Subcontractor files a lien. Homeowner goes to court to dissolve the lien, proving that the GC has been paid in full. Subcontractor loses. Subcontractor still has a claim against the GC for payment.

GC finishes the job and is still owed $30,000.00. Subcontractors have not been paid and the aggregate amount owed is $50,000.00. There is $30,000.00 left in the pot, and the subcontractors will not be paid in full.

The contract designates that certain payments are earmarked for subcontractors. Those payments are made, but money is still owed to the GC. I would argue that the GC has been paid for the work done by the subs, so no money is owed. However, I have not read case law regarding that scenario.

So, if I am a homeowner, and the subs are not getting paid, what can I do?

1. Write joint checks to the GC and the sub so both have to endorse the check before it is cashed.

2. Ask the subs for lien waivers as they finish their work.

3. Sometimes it is better to pay the subs twice just to get the work done and avoid legal fees and extra costs to complete the job. It's a hard pill to swallow, but try to be level-headed about what you do.

When the GC is in trouble, the first sign is frequently that subs start to complain about not getting paid. The homeowner should respond at the first sign of a problem and address the issue as quickly as possible.

There are some additional technicalities in the lien law that a homeowner may follow, but those would only add further confusion to the issue.

Maintaining Control During a Home Renovation Project

2008-05-08T23:15:00.000-07:00

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 improvement projects. They learn from the experience and incorporate these obstacles into the contract to protect future parties.

Rule #2-Communicate! Keep the lines of communication open. If you are going to destroy the homeowner's prized azaleas, warn her. If you do not want the contractor to damage your family heirloom, remove it or warn the contractor. If something is getting on your nerves, nip it in the bud, and discuss it.

Rule #3-All change orders must be in writing and signed off on by the parties. It's worth saying one more time. The parties should agree how the change order is going to affect the contract price and the date of completion.

Let's face it. No one likes to give up control; especially of his house or control over her workmanship. However, in the unlikely marriage between homeowner and home contractor, each side must work with the other and compromise in order to achieve the final goal.

The Contractor-Discussing Increases in Price

2008-05-01T22:51:00.000-07:00

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 about money. The contractor discovers that the project is going to cost more than he anticipated, and is afraid to admit it and give the homeowner options. Or, he does not keep up with his accounting, and is slammed at the end of the job, when he discovers that he has been operating at a loss.

So, the moral of this post is that the contractor has an obligation to both himself and the homeowner to bid responsibly and monitor the project as it progresses. If he does run into a problem, he is better off being honest and working with the homeowner. Trying to build in extra costs surreptitiously, or sneaking in an extra bill at the end only provides fodder for irresolvable disputes and ultimately, lawsuits.

So, talk about the money openly and honestly. It will payoff at the end.

Contractor Show on YouTube

2008-04-22T19:45:00.000-07:00

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

Yes, You Really Have to Read the Construction Contract

2008-04-06T22:30:00.000-07:00

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 fees. Why give away legal fees? The party creating the contract should put in a clause allowing him to collect legal fees if he has to bring a claim against the other party. Let the other side negotiate to protect her interests.

Choice of law. I can't tell you how many times I've seen contracts where some other state's law controls, or the parties agree to go to a given court or county. Just make sure that these terms are intentional.

Interest and/or late fees. Payment requirements are also negotiable. Do not agree to pay interest or late fees unless you have to.

I could give many more examples, but by now, you've gotten the point. The homeowner must read the contract before signing it. The contractor must make sure that he has a contract that is in compliance with the law and that protects his best interests.

Finally, if the contract is for a significant amount of money, extremely complicated, or you just can't bear the thought of reading it, ask your attorney to review it. Dare I admit, I actually enjoy reading and writing contracts, and it is my job to protect your interests.

The Payment Schedule

2008-04-04T12:52:00.000-07:00

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. Sometimes payments are broken down further.

For example:

$x on signing
$x on the start date
$x once framing is completed
$x electrical
$x plumbing
$x at rough inspection
etc.

The advantage of this kind of payment schedule is that it gives both sides the incentive to keep to a schedule and perform.

The kind of payment schedule to avoid is one that is based on percentage completion (who will decide?) because this becomes an opportunity for debate on both sides about how to determine this percentage.

Finally, in Massachusetts, final payment cannont be demanded until the work is done to "the mutual satisfaction of the parties."

So, when preparing a contract for construction work, give some thoughts to the payment schedule. It may have more of an impact than you might think.

PREPARE FOR A SAFE SPRING CONSTRUCTION SEASON

2008-03-27T20:44:00.000-07:00

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 option. OSHA citations for inadequate fall protection account for almost $1 million of last year’s total penalties against residential contractors.

Close behind in dollars and frequency are citations for inadequate scaffolds. A scaffold is any elevated work platform. You’ve got to think about a stable base, the load capacity, proper bracing to the building, proper planking or pics, safe access, and fall protection. The OSHA fines are not all there is to worry about. There was a recent report of a roofer at a condo site who fell 17 feet when the scaffold he was working from pulled away from the building. He was paralyzed. The general contractor was sued as was the contractor that erected the scaffold. The case was settled for over $2 million. Imagine what a settlement like that will do for your future insurance costs. For some contractors the worst part is thinking about the guy who fell and how some small additional precautions might have avoided this accident.

The third most frequently cited OSHA violation is for ladders that don’t meet proper standards. Get rid of those old crappy ladders. If you build ladders on site, make sure you know the rules and do it right. Open step ladders before using them. Make sure your extension ladders are at the appropriate angle and braced at the top. And keep your ladders away from electrical lines.

OSHA also frequently cites residential contractors for electrical violations. Make sure everything is grounded. Throw away cords that are frayed or where the grounding pin has been cut off. Don’t use extension cords where they can be pinched or cut or crushed. The use of GFCIs is the norm. Don’t allow work on live circuits. Even the old-timers are starting to come around on that. Don’t cut corners on electrical safety. Lives may be at stake.

Jerry Solomon
Law office of Jerrold Solomon
617-244-7345
www.oshastrategies.com

Preparing Yourself for a Home Renovation Project

2008-03-19T23:33:00.000-07:00

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 must be addressed. A recent change in the building code in Massachusetts is also placing new demands on contractors and there may be more work involved to bring your project up to code.

7. Communicate, communicate, communicate. Keep the lines of communication open and many problems will be prevented.

By the way, this is my 100th posting!

Calling in the House Therapist

2008-03-16T20:31:00.001-07:00

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

The Reality of Legal Fees

2008-02-24T12:35:00.000-08:00

A couple of weeks ago I was having lunch with another attorney, and I was lamenting about the fact that clients have such a difficult time understanding legal fees. The public tends to think that all lawyers set out to take advantage of their clients and charge inordinately high hourly rates without justification. Nothing could be further from the truth for most attorneys.

The moment a client calls, the first thing I do is determine whether their claim merits the involvement of a lawyer, and whether the ultimate recovery will exceed the cost of pursuing the case. We attorneys recognize that most disputes ultimately come down to money, and the goal is to end up with the most money in your pocket, or prevent a payout on your part.

There are really very few situations in which you will recover your attorney's fees. Even though most of the claims I file on behalf of homeowners will entitle them to attorney's fees, when it comes to settlement, they are rarely included. Most (in my case over 90%) cases settle. The cost of a trial and the chance of collecting on a judgment are just too great and too risky for most parties. For that reason, we always keep the attorney's fees in mind.

Principle is expensive. I wish I had a dollar for every time a potential client tells me that it's all about the principle, and not about the money. I always say, "Do you know what you will be telling me six months from now?" They look puzzled and answer "what?" "Your bill is too expensive!" Even if it's about principle now, at the end of the day, it will almost always be about the money. It is my job to be objective and level-headed and keep reminding you of that.

Fees. Attorneys are in a service profession. We have put in many years to learn our profession and you are paying us for our expertise. We charge for meetings, phone calls, e-mails and the time spent working on your case. I had one client who would always talk as fast as she could when she called me, until I assured her that I want my clients to feel free to call me, and I will only charge for the time spent discussing the case. I do not charge for the time spent talking about the Red Sox (unless you are a Yankees fan).

There is a constant debate in the legal profession about how to make our billing system more palatable to clients. We talk about flat fees, billing in phases, etc. The problem is, in litigation, too much of what we have to do is completely unpredictable. Most of the tenor of the case and the amount of work involved is dependant on the other side and their approach to the dispute. A cooperative opposing counsel may have the goal of resolving the dispute in the fairest, most expedient fashion possible. On the other hand, someone with a difficult, highly combative client, or an attorney who acts like a bulldog is going to drive costs up immensely. That is why we always try to keep the end in mind and keep costs down as much as possible, but cannot always do so.

I always say if I had a crystal ball, I would start a hedge (investment) fund. I want you to win as much as you do, but I cannot guarantee outcomes. So much of what occurs in a lawsuit is outside the attorney's control. I can only promise to put in my best effort and provide quality service and do excellent work. That is why you pay for my services. It is my hope that at the end of the day I will reduce the impact of your claim enough that you can move on with your life without having suffered a financial disaster. If you are made "whole," that is a win. If you get a windfall, which is extremely unlikely, that is an incredible bonus. Lawsuits are not intended to make you win the lottery.

So, when thinking about hiring a lawyer, make sure that you hire someone who factors in the cost of his or her services, and keeps the net result in mind. The goal is to minimize the damage you have suffered, and if that is achieved, the cost involved will have been worth it.

Anatomy of a Claim Against a Homeowner

2008-02-19T19:10:00.000-08:00

The other day I posted on the usual procedure for bringing a claim against a contractor. Today I am focusing on what the contractor should do when bringing a claim against a homeowner. Some of these steps specifically apply to Massachusetts law.

1. Make sure you have a good contract that is in compliance with your state law. In Massachusetts this means complying with the Home Improvement Contractor Act, M.G.L. c. 142A. Keep in mind that you cannot collect attorney's fees in MA unless you include that provision in your contract. Decide whether you want an arbitration and/or mediation clause in your contract.

2. Make sure you are registered with your state, if required.

3. If the homeowner refuses to pay, file a mechanic's lien. Remember that the law regarding mechanic's liens is very specific and it is very easy to fail to do it properly.

4. Write a demand letter to the homeowner with a clear explanation as to why you are owed the money. Give the homeowner a chance to say why he/she does not want to pay, and try to resolve the situation without being forced to take further action. It is much easier for a contractor to address a punch list item and get paid quickly than to be forced to file a claim against a client. In Massachusetts, you could be subject to double or triple damages, attorney's fees, interest and costs if you violate the MA Home Improvement Contractor Statute.

5. File suit to enforce your lien, or make a demand for arbitration or mediation.

Mediating Home Contractor/Homeowner Disputes-On Television

2008-02-18T20:36:00.000-08:00

This posting is from David Leavitt, who is developing a television show to mediate home renovation disputes. Anyone who is interested should contact David directly. This sounds like an interesting way to resolve disputes without pursuing litigation:

I am casting Homeowners and Contractors for a home renovation dispute mediation and resolution TV show.

The scope and breadth of the dispute can range from any of the problems you usually see including, but not limited to, type of work, budget, build problems, personal problems, and homeowner changes.

Since we are a television show, we MUST complete the project in a relatively short amount of time (about 6 days), which will fit nicely with the needs of a homeowner and contractor. This means we seek projects that are large enough in scope to show a good before and after experience, and small enough in scope to be finished in no more than about three weeks. Some examples would be a kitchen expansion, new room, bathroom remodel, garage build, etc. Please keep in mind that we will consider all sizes of work if the people and the project appear good for the show.

We intend to make absolutely sure that the dispute is solved to the satisfaction of both parties and that the project gets done right, on time and on budget. It should be a benefit for the homeowner via dispute resolution and project management, and for the contractor for the same reasons as well as excellent publicity for his or her business. And of course, it could save them both the time and cost of legal action.

Interested parties should contact me immediately!
The sooner we speak, the sooner we can try to resolve your dispute!
Please call or email me ASAP!

David Levitt
Casting Producer
Superfine Films
60 Grand Street, 4th Floor
New York, NY 10013
O: 212-941-6838
david@superfinefilms.com

ABOUT THE COMPANY:

Superfine Films is a Manhattan based film and television production company specializing in high-quality social issue documentary and reality television.

Our mission is to create unique, compelling, genre-redefining content that challenges, excites and engages viewers from start to finish.

Founded five years ago by award-winning filmmaker and television producer Steven Miller, Superfine has since grown to include the talents and energies of a tightly knit corps of writers, producers, shooters and editors, and is represented by N.S. Bienstock.

Superfine is currently in production on the sixth season of the hit show Psychic Detectives, the Court TV crime documentary series that explores the use of psychics by law enforcement and how psychics have helped to actually solve crimes; and Rock and Roll Acid Test, the Fuse Network series that plays a wild game of Truth or Dare when we put music myths and legends under the hot lights of our ultimate scientific testing.

Past work includes Heroes, a reality recreation based series for the Hallmark Channel, which depicts stories of ordinary citizens in acts of extraordinary courage. Superfine was nominated for an Emmy for the documentary film Meeting with a Killer: One Family¹s Journey, a story of redemption and forgiveness set inside one of Texas most notorious prisons.
Superfine has won two Gold Awards from the Houston International Film Festival and a CINE Golden Eagle for the acclaimed series Adoption.

Anatomy of a Claim Against a Contractor

2008-02-14T22:20:00.000-08:00

Even though every client's claim is different, there is a common approach to most home contractor/homeowner disputes. Clients want to know the big picture and the pros and cons of the options available to them. From the homeowner side, the steps to take are fairly consistent:

1. Send a demand letter-In Massachusetts, any violation of the Home Improvement Contractor Statute is a per se (automatic) violation of the Consumer Protection Statute, M.G.L. c. 93A, which affords one the possiblity of double or triple damages, attorney's fees, interest and costs. In order to comply with the requirements of 93A, one must write a 30-day demand letter describing the unfair and/or deceptive practice that has occurred and making a demand for damages or action on the part of the contractor.

2. Evaluate-Evaluate whether there has been a response from the contractor and see if settlement is possible.

3. File suit or file for arbitration-In order to file suit, determine the likelihood of success and see whether a judgment would be collectible. See whether the contractor has any assets that can be attached (if one can put a lien on the asset).

See if the case qualifies for the state run Home Improvement Contractor Arbitration Program. Read the contract to see if there is an arbitration clause. Determine if the other side will consent to private arbitration or mediation.

Discuss the pros and cons of arbitration vs. litigation.

Continue to see whether settlement is an option.

Even though the consumer may be able to claim attorney's fees, he should always keep in mind that they are not usually included in a settlement figure, and judgments are not always collectible.

Homeowners should therefore try not to throw good money after bad, and should continually re-assess as the process continues. Litigation can become quite costly fairly quickly, so parties should make informed decisions about how to proceed.

Tomorrow-Claims From the Contractor Side

Contractors Say Recession Is Here

2008-02-12T21:12:00.000-08:00

http://www.thebostonchannel.com/video/15284867/index.html

The Boston Channel ran a story about the current economy and how it has affected contractors.

Contractors and Criminal Liability

2008-01-23T11:23:00.000-08:00

I have occasionally had clients who have been grossly mistreated by contractors. They have paid large sums of money for little or no return. The contractor may have done a little bit of work at the premises, but then disappeared. Perhaps the contractor took money in advance and then the homeowner discovered that even though the money was designated for subs, they were not paid.

At this point, homeowners frequently feel that they have been robbed. I have often been asked, "can I press criminal charges against the contractor?" I am not a criminal lawyer, but I have had experience with pursuing contractors criminally. Homeowners need to understand that bringing criminal charges will only succeed in the most extreme cases. One has to prove that the contractor took money and used it for other purposes. In addition, in a criminal case, it is necessary to show intent.

In my experience, most district attorneys hate contractor cases. They believe they belong in the civil arena. If the contractor has done any work, he can claim that there were change orders and the money was used to cover additional costs or materials. In order for criminal charges to be brought, the contractor has to intentionally take the homeowner's money. In most cases, this is very hard to prove.

My New Website!

2008-01-17T09:46:00.000-08:00

I am proud to announce my newly redesigned website! Please take a look at www.andreagoldmanlaw.com.

Top Ten Clauses to Have in Your Contract-The Homeowner

2008-01-01T18:33:00.000-08:00

The interesting thing about the contract from the homeowner's viewpoint is that many of the same clauses that I listed yesterday are just as important for the homeowner. For example, #1 is exactly the same:

1. ALL CHANGE ORDERS MUST BE IN WRITING AND INITIALED BY BOTH THE HOMEOWNER AND THE CONTRACTOR! Should I say it again? The change orders should spell out any change in the contract price and include information about whether the completion date will be affected.

2. The contract should clearly spell out the price for the job along with a clear cut payment schedule and a list of which aspects of the work must be completed before payment is made.

3. The contractor should indicate how often he will be at the job and who has authority to authorize changes orders. The homeowner should ask for that person's cell phone number and/or e-mail address.

4. There should be a complete description of the scope of the work and the materials to be used.

5. The homeowner should include a provision that will allow him or her to collect attorney's fees if he has to bring an action against the contractor for breach of contract.

6. The homeowner should include a clause about what constitutes breach of the contract and what the remedy will be if the contractor breaches.

7. Warranties should be clearly spelled out and include the items that are not covered as well as covered items.

8. The homeowner should decide whether he wants to include a mediation and/or arbitration clause in the contract.

9. The contract should include a detailed description of what constitutes punch list items and how to determine when the punch list is complete in order for final payment to be made.

10. The contract should clearly define unreasonable delay and what the penalties will be for finishing beyond the date of substantial completion. It should also indicate what will occur if the work fails inspection, is in violation of the building code, or is deemed substandard by a third-party inspector.

Remember, the best protection for the homeowner and for the contractor is a contract that clearly spells out how the job is going to work, and what will happen if problems arise.

Happy 2008 everyone!

Top Ten Clauses to Have in Your Contract-The Contractor

2007-12-31T14:13:00.000-08:00

As a post for starting off the new year, I have been thinking about the most important clauses to have in home contractor contracts. So, in an attempt to add to the top ten lists that are generated at this time of year, here is my list for contractors:

1. ALL CHANGE ORDERS MUST BE IN WRITING AND INITIALED BY BOTH THE HOMEOWNER AND THE CONTRACTOR! Should I say it again?

2. The contract should clearly spell out the price for the job along with a clear cut payment schedule.

3. The contractor should list reasonable start dates and end dates for the project with exceptions for delays caused by unforseen circumstances or homeowner delay.

4. The contractor should include a provision that will allow him or her to collect attorney's fees if he has to pursue payment from the homeowner.

5. There should be a complete description of the scope of the work and the materials to be used.

6. The contractor should ask the homeowner to designate who the decision makers are and make that person's cell phone number and/or e-mail address available to the contractor.

7. The contractor should include a clause about what constitutes breach of the contract and what the remedy will be if the homeowner breaches.

8. Warranties should be clearly spelled out and include the items that are not covered as well as covered items.

9. The contractor should decide whether he wants to include a mediation and/or arbitration clause in the contract.

10. And finally, the contract should include a detailed description of what constitutes punch list items and how to determine when the punch list is complete in order for final payment to be made.

I am sure there are more, but these are what come to mind for how contractors can best protect themselves. Tomorrow I will list my top ten from the homeowner's side.

Happy New Year!

Contractor Found Guilty of Criminal Charges-From the Metrowest News

2007-12-20T19:38:00.000-08:00

Contractor sentenced to 3-5 years in prison By Norman Miller/Daily News staff GHS Wed Dec 19, 2007, 11:44 PM EST

CAMBRIDGE - A Leominster contractor accused of bilking customers in Natick, Marlborough and Arlington out of thousands of dollars in unfinished work was sentenced to state prison yesterday.
Michael J. Corda, 50, was sentenced to three to five years in prison and to pay a yet-to-be-determined amount of restitution to the homeowners.
Corda, who owned Northeast Building and Design, was found guilty by a jury of seven counts of larceny of more than $250 and 16 counts of 142A violations, which is the law that prohibits certain acts by home contractors.
"When homeowners enter into an agreement with a contractor, they deserve to be dealt with honestly and to get the services that they paid for," District Attorney Gerry Leone said. "This contractor violated the trust of these homeowners and took thousands of dollars from them for work that he had no intention of performing."
Corda was indicted by a Middlesex grand jury on Sept. 26, 2006. Authorities said he agreed to five contracts in Natick and one each in Marlborough and Arlington.
Assistant District Attorney Elisha Willis said during Corda's trial he never intended to fulfill the services he promised in the contracts. She said Corda knew he did not have the resources to complete the jobs, and did not complete any of the services.
All of the incidents took place between November 2003 and August 2005. Along with the prison term and the restitution, Corda will be on probation for seven years after he gets out of prison. He will also be banned from working as a home contracting project manager in Massachusetts.
(Norman Miller can be reached at 508-626-3823 or at nmiller@cnc.com.)

When Contractors Fail to Pay Subcontractors

2007-11-28T17:07:00.000-08:00

In most home improvement contracts, the contractor serves as the general contractor (GC) and hires the subcontractors to do various aspects of the job. It is understood that it is the homeowner's duty to pay the contractor, and the GC then pays the subs. At least, that is how it is supposed to work.

One of the most upsetting experiences for a homeowner is when a subcontractor knocks at his door or walks off the job stating that he has not been paid. It is even worse when a sub files a lien on the property. The homeowners are caught off guard and frequently between a rock and a hard place.

They face a difficult choice: Should they re-pay the subs in order to get the work done, or rigorously defend against subcontractors' claims? In Massachusetts, if the sub's contract is with the contractor, he cannot prevail legally against the homeowner for payment. However, this is no consolation for a homeowner who is defending against a lawsuit, or living in an unfinished house.

The reality is that one has to weigh the cost of paying the subs, the likelihood of success in collecting against the GC, the cost of defending against a lawsuit and the consequences of have a lien on one's property, in order to decide what to do. That said, the best remedy is really prevention.

There are two ways to prevent claims from subs. One is to insist on lien waivers as the subs finish their work. This will immediately put the homeowner on notice if there is a refusal to provide the waiver . The other is for the homeowners to check in on a regular basis with the subs and ask them directly if they are getting paid. If not, they can immediately confront the GC and nip the problem in the bud.

In any event, it is a nasty surprise for homeowners when they discover that the subcontractors are not being paid. That is why they need to be vigilant and make sure that the situation does not get out of hand.

Attorney's Fees and Construction Contracts

2007-11-24T08:13:00.000-08:00

Many of my clients come to me with their claims and assume that the law will afford them their attorney's fees if they prevail in their case. Unfortunately, nothing could be further from the truth. The law does not provide you with attorney's fees unless there is a law that applies to your claim that gives you attorney's fees, or, they are provided for in the contract.

There are a variety of ways of wording attorney's fees provisions in contracts. They can be very one-sided, or more equal. I was just reviewing a contract for a client that allows for the contractor to recover his attorney's fees if he has to pursue payment from the homeowner. This is the contractor's contract, and not surprisingly, it does not afford the homeowner the same benefit. Since in this case, I represent the homeowner, I would be inclined to cross that line out. However, it is unlikely that the contractor would agree to such an exclusion.

The compromise provision would allow the prevailing party to collect attorney's fees. This spreads the risks equally between the contractor and homeowner. In many ways, this is a good clause to include in a contract, because it makes both sides think carefully before filing a claim. It actually promotes settlement because their is greater risk involved and the penalty for losing can be quite high.

One has to think quite carefully before signing a contract that gives either party attorney's fees. I have never seen a contract with a cap on the fees, although courts have been known to reduce them if they think they are unreasonable.

So, before creating a contract, or signing a contract, think about your goal, and think about what is fair. Here in Massachusetts, any violation of the Home Improvement Contractor Statute is a per se violation of the Consumer Protection Statute, which provides for attorney's fees, up to double or triple damages, interest and costs. Given that the law protects homeowners, I try to ensure that contractors have a clause that gives them attorney's fees in their contracts. It equalizes the playing field and makes both sides try to work together to resolve disputes.

The Home Improvement Contractor License and the Construction Supervisor License

2007-11-01T23:23:00.000-07:00

Both contractors and homeowners alike often do not realize that there is more than one type of licensing for contractors in Massachusetts. From the Office of Consumer Affairs & Business Regulation (OCABR) website:

A Home Improvement Registration certificate and a Construction Supervisor License are different.

The Home Improvement Contractor (HIC) Registration Program is primarily a business registration program designed to protect consumers. The registration process identifies the responsible party for the contracting business, who is responsible for the company’s business practices. A registration does not certify that a contractor has a set of construction skills.

A Construction Supervisor's License, however, does fulfill that function. If a contractor is going to be supervising certain structural work, then that person will need to have a license, which presently requires that the contractor has at least 3 years of construction or design experience and has passed a written examination on the State Building Code. Exams are intended to test the literacy of Building Code requirements and general construction practices.

The Department of Public Safety’s Board of Building Regulations and Standards (BBRS) requires an individual who supervises building construction for certain building types to be licensed as a Construction Supervisor.

Here's the confusing part: all contractors who do home improvement work must register for their HIC license unless they fall within certain exceptions. Contractors frequently believe that if they have their CS licence, they do not need the HIC license. However, this is not true.

Homeowners should make sure they hire only contractors who have their HIC license, or they will not be able to avail themselves of the benefits of the Home Improvement Contractor Arbitration Program or the Guaranty Fund.

Depending on the kind of work they do, contractors may need to have both licenses. They can check with the Board of Building Regulation and Standards to make sure that they are complyng with the law.

CONSTRUCTION WARANTIES – A TRAP FOR THE UNWARY

2007-10-19T15:15:00.000-07:00

From guest poster Attorney Steven R. Striffler, who is a construction attorney with construction experience:

“Attorney's fees for the review of a contract before it is signed are a fraction of the cost of their fees after the project has gone bad.”

I received two calls last week on warranties, one from a contractor and the other a homeowner. Without going into specifics, the scenario is something similar to this:

It has been about two years since you put that addition on your home, or if you are a contractor – have completed the project, and the roof starts leaking after that recent Nor’easter. Does the homeowner have recourse against the contractor? Is the contractor obligated to repair the roof? Well, that depends on the warranty clause contained in the construction contract, if in fact, the contract contained a warranty clause.

Most construction contracts contain an express warranty that the contractor will correct deficiencies and failures associated with the work for a certain period of time after the work is completed. The custom in the construction industry is for a one-year warranty. The theory being that most defects will manifest themselves within one year and contractors do not want to be subject to claims, and rightly so, for an indefinite period of time.

But what if your contract does not contain a warranty clause, or if it does, the defect arises after the warranty period has expired? Construction contracts also contain implied warranties. An implied warranty is an obligation imposed by law and is independent of any promises between the homeowner and the contractor. The most common implied warranties are (1) the implied warranty of habitability, which generally only applies to new homes, and (2) the implied warranty of workmanlike construction. However, implied warranties may be modified or disclaimed by contract. Also, these warranties are subject to different statute of limitation periods, which is outside of the scope of this discussion.

So, even if your contract does not contain an express warranty you may be able to recover on a claim for a breach of an implied warranty. And if you are a contractor and you think that your liability to correct any defects ceased after the contractual period, you may still be subject to claims. The moral of the story, if you are unsure of any of the terms of the contract, engage counsel before you sign it.

Nevertheless, the best assurance of long-term performance is a combination of quality materials and skillful workmanship. No warranty can adequately compensate for the lack of these key elements.

Steven R. Striffler Attorney At Law 268 Summer St., Suite 300 Boston, MA 02210-1190
Tel: 617-290-1573 Fax: 866-314-2716

Servicemagic.com

2007-09-28T21:24:00.000-07:00

I am not in the habit of endorsing contractors or contractor referral services, but I do like to make the public aware that they exist. I recently had a problem with a garbage disposal and contacted servicemagic.com. They responded with the names of three contractors in my area and I could read reviews of their services online. At least one or two called me right away. As it happens, I solved the problem myself, but I was impressed by how organized and efficient they are.

A potential client had a similar experience with servicemagic when looking for aluminum siding and roofing contractors. They responded quickly and he was pleased with the service. I am going to follow their website and review their advice from time to time, but so far, I am happy to report that customers have been satisfied.