How to Pay Your Contractor

There are a hundred recommendations for how to find a good contractor and none of them work all of the time. The truth is that a good contractor is still one man or one company that will experience good and not so good times. A good contractor can experience problems that make them a bad contractor on one job out of ten. This means that homeowners should be careful in selecting the best contractor they can find and diligent in signing the best legal contract for the work that they can.

One of the most common problems when working with a contractor is that the contractor is ‘finishing up’ their last job when they are starting your job. Often the most expensive parts of a renovation are the finishes, these are the costly flooring, lighting, cabinets, counter tops, taps, appliances, hardware and trims. It is fairly common for a contractor to borrow from his new job to finish his last job. This means that you give the contractor money for your permits and materials to start your job and he takes the money and spends it on the materials he needs to finish the last job so he can get paid from them. The contractor will then disappear to the last job to hurry up and install all of the finishes while you expect him to get started on your job. He then takes the money from the last job (when he is paid) to buy the materials for your job.

Not only is your job delayed but frequently the contractor will owe workers from the last job. This shows up when he doesn’t arrive with all of the materials he is supposed to have or he arrives with unhappy workers who haven’t been paid. This contributes to the contractor cutting more corners on your job to save money so he can pay his workers or subcontractors. None of this is good.

One way to resolve this issue is with a good legal contract. The contract can demand a full materials list from the contractor and a delivery, receipt and start of work date. Most contractors will tell you they receive a healthy discount from the hardware/lumber store and they are correct. However, on substantial orders you can receive the same discount simply by purchasing through the professional counter at the store. Your contract can be written so that you show up on the date of the materials order and pay for the materials. This will provide you with a receipt and your materials on hand and ready to go.

Base your contract on performance. Nothing is more frustrating than to pay your contractor when no person is actually working on your renovation project. Detail specific performance requirements for each payment to the contractor. Reserve 10 to 20 percent of the job price until your final walk-through at the end of the job. Require any changes to be written and signed by both the contractor and the homeowner and include a penalty clause for failure to complete the work within a timely manner. One way to include this in a contract is by offering a bonus for each stage of the work completed ahead of the schedule. By the same token, if a stage of the work falls behind a week, have an amount that will be deducted from the ‘contractor’s fee’. Include a section in the contract that stipulates no pay for days and weeks when no work is being done. A good building or construction attorney can assist you in developing the contract. The extra cost of the contract is often far less than the cost of the problems of a job without a contract in place.

Be very direct with your contractor when you meet with them that you do not want to experience a contractor horror story. Make sure all jobs are under permit and executed by licensed and certified professionals. Document the job progress in a daily journal and keep a log of how the job is being performed. Walk through the job site daily and take photos. Log all of your phone calls with the contractor and the context of the conversation.

Arrange to sit down with your contractor at regular times throughout the job time frame to assess the progress and discuss problems. Require the contractor to turn over all receipts on a weekly basis. Check the receipts to be sure they apply to your job only. Having stringent checks and balances gives the contractor notice that you are watching and documenting the job’s progress. In the end, you want the best job your money can pay for.

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