I recently learned about a contractor who lost a suit from a homeowner who decided to stop paying for a completed project. It turns out the contractor did not receive several payments totaling over $40,000. He finished the job believing that the owner would eventually pay up. The contractor had never been sued in 15 years of business and has a good following in his community.
As it turns out the homeowner, who said they were happy for most of the project, sued the contractor and claimed that the work was not what they expected. The contractor returned the favor and sued to collect his balance.
An attorney reviewed the situation and found the contractor was not in compliance with the Mass Home Improvement Laws. There were so many contract violations that the court found in favor of the consumer and awarded them a sum significantly more than the balance. The contractor was advised to accept the decision due to the numerous violations. Ouch!!!
Unfortunately contractors often end up with the short side of the stick in these situations. Consumers are usually portrayed as the victim. Not to say that some contractors don't deserve it, but what about those contractors like you who do a great job? Are you sure your contracts and practices are in line with the contractor laws in your state?
In order to protect company, familiarize yourself with the laws governing contractors in your state. Your practices, contracts licensing and insurance should all be in line with the rules and regulations governing your industry. If by some chance you run into a knowledgeable consumer who doesn't want to pay at least you will have a leg to stand on provided you do your job well.
Some items to think about in Massachusetts;
1. Review the sample state contract on line at http://www.mass.gov/Eoca/docs/sampcont.pdf
2. Make sure you are registered properly with the right name, address, and city or town. Notify the state promptly if anything changes.
3. Use your registration number in ALL advertisements.
4. Make sure you have the required language, in the right size font on your contract, in the right places.
5. Provide every homeowner with a three day right of rescission.
6. Make sure all your sub-contractors are also registered per the law.
7. Have an attorney review your documents for compliance.
8. Don't charge more than 1/3 down except for special orders.
9. Study the law and know your responsibilities and rights.
10. Use the arbitration clause.
11. Educate the homeowner.
On insurance, make sure you properly protect yourself, your employees, your customer and also make sure you obtain insurance certificates from your subs. No comp on subs and you pay their workmen's comp. Refrain from the temptation to forgo workmen's compensation or misclassifying your workers to save on comp. Many contractors are audited and caught misclassifying their employees. Then they are whacked with a huge comp bill! Can your business afford that?
The professional contractor who follows the rules and knows how to explain this to the consumer, will stand out from those who don't and win jobs. Today's consumer is smart and wants the right professional to work on their most valuable investment. All you have to do is prove it. The cheaters are dead wood being expunged by the economic downturn. When the consumer returns, it will be you, the transparent professional contractor who is there to serve their needs.
mark the coach