PART 4: PUTTING IT ALL TOGETHER
You did your research, you found a firm that specializes in construction and design, and you scheduled and completed your consultation(s)... You decide on the contractor/design firm that you feel completely comfortable with. They understand your vision, respect your budget, and have a solid portfolio of work. Now what???
- It is important that you review all of the paperwork that your contractor submits to you. Make sure that you completely understand the estimate, contract, and initial invoice. Discuss the terms of the contract and payment schedule with the contractor so that you are both on the same page. Most contractors will ask you to sign the initial estimate noting that any changes must come in the form of a "change order" signed by both you and the contractor. This will alert you to any changes in the original estimate before the contractor starts the work. A contractor's agreement or contract will state the job description and estimated costs. This is generally an additional piece of paperwork to protect you and the contractor (see below for further detail about homeowner and contractor protection). The initial invoice will most likely contain material costs and/or a deposit for the work (see below for further detail on payment).
- Florida's Construction Lien Law (Homeowner Protection)
- According to Florida law, those who work on your property or provide materials, and are not paid-in-full, have a right to enforce their claim for payment against your property. This claim is known as a construction lien. If your contractor fails to pay subcontractors or material suppliers, the people who are owed money may look to your property for payment, even if you have paid your contractor in full.
- What does this mean? In short, it means that even though you pay the contractor you hire in full, if they do not pay the people who work under them you may still be at risk. You can avoid this by asking your contractor to provide you with releases of lien for every payment that you make to them. This will ensure that no other sub-contractor will file a lien on your property. For more information on Florida's Lien Law click here: http://www.myfloridalicense.com/dbpr/pro/elboard/documents/florida_lien_law.pdf
- If you do not live in Florida, check your states construction lien law for more information.
- Contractor Rights
- Contractors have rights as well. If you sign an agreement with your contractor it is important that you pay your contractor. If they complete the work and you do not pay them, they have the right to file a lien against your home which could prevent you from obtaining financing or selling your home in the future.
- All contractors have different payment terms so it is important that you review and are comfortable with the terms of the contractor that you hire. Everything is negotiable so if you have an issue with the payment terms and/or schedule discuss it with your contractor and they will most likely compromise. However, please understand that it is not fair to have your contractor carry material costs throughout the duration of the project. Most contractors will ask for materials up front. Realize that your contractor is paying employees and/or sub-contractors throughout the process of your project so whichever terms you agree to it is important to adhere to those terms. It is also customary for a contractor to allow the homeowner to withhold a percentage (generally 5-10 percent) of the contractor until final walk-through of the property.
I talk to so many people who are scared of bringing in contractors and renovating their homes because they have heard multiple horror stories... "I hired XYZ Contracting and gave them a 50 percent deposit and they never showed up!" or "ABC Building left my home a complete disaster!" I promise you if you follow the guidelines I have laid out in this series you will have no problem hiring a contractor, understanding the process, and enjoying the end results!
This wraps up our HOW TO: Hiring a Contractor Series. If you have any questions regarding this series or construction industry practices in general, feel free to email us at INFO@INVESTCOVE.COM. We would be happy to answer any questions that you have.
1925 Historic Cottage Renovation Project, West Palm Beach, FL by Investcove
1924 Historic Spanish Renovation Project, West Palm Beach, FL by Investcove
Blog post by Aja De Los Santos, GM & Head Designer at Investcove Properties