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HOW TO HIRE A HOME CONTRACTOR AND STAY OUT OF TROUBLE
Most people approach a home renovation project with a combination of excitement, anticipation and fear. The idea of adding an improvement to one's home is quite attractive. It can make the house more livable, modern and increase resale value. At the same time, however, most homeowners have heard at least one horror story about a job gone badly, where the contractors never show up, delay the project endlessly, perform substandard work, or increase costs dramatically beyond the budget. Unfortunately, these same homeowners are often unaware of the numerous protections offered by Massachusetts state law when hiring a home contractor. By following some simple procedures, homeowners can go a long way toward protecting themselves from foreseeable problems, and end up with a satisfying and rewarding result.
The first step in any improvement project is determining what it is you would like to do. The amount of preparation involved will vary depending on whether one is redoing a small bathroom, or putting an addition on a house. You may be talented enough so that you can design the project yourself. There are many software programs now available for creating the desired renovation. Before running out and seeking bids however, it is important to find out the guidelines for the project. Call your local building inspector and get answers to the following questions:
Will permits be required?
Does a formal plan have to be filed with the city?
Is it necessary to have a professional architect or someone with another specialized license prepare the plans?
As you think about your project. Make two columns. They should be labeled “Must Haves” and “Desired.” Whatever your designation, try to limit your requirements and be flexible. Most homeowners tend to be unrealistic about the potential cost of a project and should be ready to cut items in order to stay within their budget.
Once a plan is prepared, it is time to start compiling a list of potential contractors. Word of mouth is best. Think of anyone you know who has had a renovation done (who is happy with it) and ask for the names of their contractors. If you've always admired work done at a house in the neighborhood, it would not hurt to stop in and ask for a name. Try to come up with names of contractors who have done the same type of work as your potential project. Contractors who do a great job in renovations can cause disasters if they have never installed aluminum siding. There are also home contractor listing services.
Next, go to the Board of Building Regulations and Standards (BBRS) website and check to see if the contractor is registered with the state. If the contractor is not registered, cross him or her off the list! It is actually a criminal violation for a contractor to fail to register with the state, so you should not feel any remorse about refusing to hire someone who is not registered. It has also been shown that people are less likely to have problems with registered contractors. Keep in mind that certain types of workers (plumbers and painters for example) do not have to register, but they may have their own licensing requirements. Look up whether any complaints have been filed against them with the BBRS and if they have a history with the state Home Improvement Contractor Arbitration Program at the Office of Consumer Affairs and Business Regulation. You can even check the court dockets in towns where they do most of their work.
After checking registrations, ask for at least three references, and call them. I have come across one contractor numerous times in the courts who always appeared to be charming and competent. He has a list of judgments against him for poor work and abandoning clients that is incredibly long. Ask the references about the pertinent issues that are important to you. Did the contractor keep to a schedule? Did he leave the house a mess at the end of the day? Did he show up consistently? Were his workers considerate and respectful? Did he provide you with reasonable expectations? Were change orders in writing? Did he try to stay within budget and suggest alternatives if aspects of the job were more expensive than anticipated? Was the work finished according to schedule? There are also websites rating contractors, such as Angie's list, that one can consult.
At this point, it would be helpful to provide an overview of the protections offered by Massachusetts law for homeowners hiring contractors. The Massachusetts Consumer Protection Act, Massachusetts General Laws (M.G.L). c. 93A, provides protection for consumers against unfair and deceptive practices by businesses. A violation of the act may provide for double or treble damages, attorney's fees, interest and costs. The Massachusetts Home Improvement Contractor Act, M.G.L. c. 142A, controls the acts of home improvement contractors. Any violation of MG.L c. 142A is an automatic violation of MG.L. c. 93A. In addition to the laws protecting consumers, the state runs a Home Contractor Arbitration Program that provides a less expensive alternative to pursuing litigation against a contractor. Finally, the state has a Residential Contractor's Guaranty Fund that will pay up to $10,000.00 in damages if a homeowner is unable to collect a judgment or arbitration award from a contractor. Both the Arbitration Program and the Guaranty Fund have specific requirements that must be satisfied before consumers can avail themselves of their benefits.
The Massachusetts Home Improvement Contractor Act, M.G.L. c. 142A, regulates contracts between homeowners and home improvement contractors. It applies to contractors who solicit, bid on, or perform residential contracting on an existing one to four unit owner-occupied building. Some of the persons exempt from registration include: electricians, plumbers or architects, students, landscapers and interior painters. The contract must be for work costing more than $1000.00. The law does not apply to commercial real estate or new construction. The work must also be on property located in Massachusetts.
The contract between the parties offers the best protection against potential problems. Although it may seem obvious, all contracts between homeowners and contractors must be in writing. If a dispute should arise, it would be difficult to prove the agreement between the parties when the only available evidence is each person's word. M.G.L. c. 142A has numerous requirements for home improvement contracts, and the list is too extensive to include all of them here. Some important provisions include full names, social security numbers, addresses, registration number of the contractor, names of any salesperson who solicited or negotiated the contract, and the date the contract was executed by the parties. The contract should also include the date the work is scheduled to begin and the date the work is scheduled to be substantially completed. It must give a detailed description of the work to be done and the materials to be used in the performance of the contract. It has to state the total amount to be paid for the work to be performed under the contract as well as: a time schedule for payment to be make and the amount of each payment in dollars, including all finance charges. Any deposit required cannot be more than one-third of the total contract price and the actual cost of materials or special order or custom made equipment which must be ordered in advance of the commencement of the work.
In addition, homeowners cannot avail themselves of the Home Improvement Contractor Arbitration Program if the contractor does not obtain the permit himself. The parties should discuss how to handle any disputes that arise (whether mediation or arbitration is an option, whether certain county courts must be used), and whether any penalties should be imposed for failure to adhere to the agreement. The contract should also provide for a retainage of approximately ten percent at the end that will not be paid until the work is done to the “mutual satisfaction of the parties” as required by Massachusetts law.
Depending on the size of the project, both homeowners and contractors should consider consulting with an attorney before signing the contract. There are many problems that could be prevented by preparing a complete agreement in which there is a total “meeting of the minds.” I have come across numerous cases where clients believed that an agreement had been reached regarding materials or the scope of the job, but then a problem develops when materials used are not up to par, or contractors ask for additional money for work that is done but was not included. It is important to establish the parties' expectations while the relationship is good.
Once the contract is signed, hopefully the work will begin on time and go smoothly. If unexpected situations occur (and they usually do), it is imperative to make any change orders in writing, and have both parties sign off on them. This includes additional work to be done, changes in the work schedule, total amount of the contract, and the payment schedule. If these guidelines are followed, everyone involved will be aware of the full details of the agreement, and there will be fewer nasty surprises along the way.
Despite everyone's best efforts, disputes may occur that the individuals may be unable to resolve. In that case there are more alternatives available for the parties than for a typical disagreement. Under M.G.L. c. 93A, the consumer or his lawyer must write a 30-day demand letter explaining the problem and the type of action that is expected in order to resolve it. The contractor then has thirty days in which to make a reasonable offer of settlement or he may be subject to double or treble damages, attorney's fees, interest and costs. If the demand letter does not resolve the problem, a consumer may seek out legal advice and decide to sue in the courts, or pursue mediation or arbitration.
Mediation is a process in which the parties meet with a third-party neutral whose job is to try to help the parties come to some kind of resolution of the dispute. In arbitration, the arbitrator acts as a private judge, and his or her decision is usually binding. The state also runs a Home Improvement Arbitration Program where for a fee, the state will choose an arbitrator and administer the proceedings. The Office of Consumer Affairs and Business Regulation provides a great deal of information about these alternatives on its website.
Finally, the state offers an unusual remedy for homeowners who obtain arbitration awards or judgments against contractors. If the contractor does not pay, the homeowner may collect up to $10,000.00 in damages from the Residential Guaranty Fund. Under M.G.L. c. 142A §5, the homeowner must show “that the owner has exhausted all customary and reasonable efforts to collect the judgment but the contractor has filed for bankruptcy, fled the jurisdiction or the owner is otherwise unable to collect such judgment after execution.” The application for the Guaranty Fund must be filed within six months of the date of the arbitration award or judgment. Other requirements are listed at the Office of Consumer Affairs and Business Regulation website.
A home improvement project can be a good experience for all involved. For the homeowner it can increase property values, create more space, aesthetically add to the home and make life more comfortable. The contractor can create work of which he is proud. By following some guidelines and adhering to the law, both parties will be protected from outcomes that are expensive, unpleasant and time consuming. If the legwork is done at the beginning, all involved can achieve a rewarding experience with home renovation.
Andrea Goldman is the principal in the Law Office of Andrea Goldman in Newton, Massachusetts. She is a litigator, mediator and arbitrator. Ms. Goldman focuses on construction, contractor/homeowner and business matters. She is fluent in Spanish and French and has served international clients in their native language. For more information about Andrea Goldman visit andreagoldmanlaw.com, or call (617) 467-3072.