Tips on Paying Contractors
Summary: Contractors should be asked for an itemized bid. Obtain an affidavit from each party at time of payment. Do not pay for unfinished work. Compare bills with work performed by the contractor to assure they match. You will avoid many headaches with your construction bids if you follow these simple procedures.
Tips on Paying Contractors
1. Demand itemized bids from your contractors. Ask who will work on your job. Will the individuals be employees or subcontractors? Obtain a list of all subcontractors and suppliers who intend to work on or deliver materials to your property. The effort will be worth it.
2. Negotiate with your contractor one of two things: #1- Obtain signed, notarized affidavits from each sub and the contractor himself at each payment period. Get materialman's certificates at the same time. The totals of the affidavits and materialman's certificates should EQUAL the amount of your payment!!! If not, you have a problem. #2- Negotiate the right to pay each individual yourself. If you do this, you must also receive the same affidavits and materialman's certificates.
3. Resist paying for goods and services not rendered. Often contractors ask for money up front. This is an extremely dangerous thing for you to do. Deposits should only be forwarded for special order non-returnable items that a contractor may have to purchase for your job, or where state law requires it. If possible, only pay the minimum amount required by state law. Monies for anything else are a sign that the contractor is either financially weak, or possibly doesn't trust you. Trust in a building relationship is a two-way street. You are entrusting your most prized possession to the contractor. You are trusting him or her that they will not harm your property. You are trusting that they will start and finish the job in a timely fashion. Etc., etc., etc. Surely they should trust you!!!!
4. Demand itemized bills from the contractor at each payment period. Compare these bills with the amount of work performed and the itemized bid you received at the beginning of the job. If there is a discrepancy, investigate what is wrong. Do not pay the bill unless you feel it is correct. If you pay too much money as the job progresses, quite possibly you will have, for example, $10,000 worth of work yet to complete, but only $2,000 of your money left to pay. Thousands of homeowners have found themselves in this precarious position.
5. Do not issue final payment to a contractor until you are satisfied with the work. However, do not abuse this practice. For example, if there is a tiny $100 scratch on a cabinet, it is unfair for you to withhold a $10,000 payment. Hold back $200 and release the rest. Be reasonable. Treat the contractor as you would like to be treated. Remember, if you pay a contractor before all work is complete, you will be relying on HOPE alone with respect to the uncompleted work. Never rely on hope.
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Comments:
Terry Cox 30 Jun 2008, 15:16
When does the clock start on Time and Material projects and what is the
consumer responsible for in terms of time?
Chin Lai Huat 24 Aug 2008, 20:49
Mr Tim,
I have to agree with you that trust and respect goes hand in hand. TQ regards, lh
andrew jackson 25 Aug 2008, 07:24
I suppose the stories would never end if we all told about the time when we
paid someone too soon. Actually this two sided coin has horror stories on
both sides.There are two bad pay masters one pays before the job is done
the other does not pay after it is finished. I suggest up front agreements
to have scheduled progress meetings. Make time to inspect and ask
questions, informed questions! No contractor likes having to explain
something to someone that after the explaination you still don't get it,
besides that's embarrassing. Allow the contractor to perform suggest
progress payments. Unless the job is too large for you to understand the
flow and how to inspect involve someone else you know. Most of us know
someone smarter than us; Who would that be ? the person you would likely
call if things went wrong. Finally, when possible get familiar with what
materials will be needed for the job then arrange to pay for the materials
yourself, pay to have them delivered this avoids liens for unpaid invoices.
Avoid arguments by having meetings with your contractor before during and
after. Remember all the materials are paid for by you and stay with you
when the crew is gone unless you wish otherwise so,most jobs are labor only
contracts. If you don't have the time to do these steps don't start the
work until you do. Doing this will save many hours and money spent trying
to get an attorney to get back money that has been spent!
Chin Lai Huat 25 Aug 2008, 20:00
Andrew's comment sounds logical. I ageed about the two two sided coin
scenario.
Renovation works for houses that belong to individuals:- most probably the owner will honour the payments. A "Contractor" that may abscond just a small amount of money is probably a Middle man. As for large scale projects, I think the Contractors are always at the mercy of the Developers. A Payment Bond from the Developers to the Contractors could act as a security. What's your opinion? TQ. Regards, lh
Britta Mckinley 22 Dec 2008, 03:25
Howe do I pay, hourly ore for the whole project?
Cory C 02 Apr 2009, 09:17
For a labor only contract- As the homeowner/GC I am paying for all the
materials, but there is a greyline between materials and tools. Something
like nails and fasteners I believe to be materials because they are left at
the job, but what about something like saw blades? This seems more like a
tool to me.. Should I be paying for something like saw blades?
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