Hiring a Contractor Transcripts July 30, 1997 9 a.m. - 10 a.m. GUESTS: PETER KOFFLER, REAL ESTATE ATTORNEY TOM THOMPSON, INTERNATIONAL CONFERENCE OF BUILDING OFFICIALS The following are excerpts from the viewer call-in portion of the program. Laws of Hiring a Contractor Troublesome Contractors Tips from Professional Contractors Laws of Hiring a Contractor JUNE GRASSO: Good morning. I'm June Grasso, and welcome to Legal Cafe, your daily wakeup call to the law in your life. Let's talk about the laws involved in hiring a contractor. Most of us don't know a great deal about the law in this area, and we know even less about plumbing, carpentry, and sheetrock, so there's a really good reason to be concerned when it's time to make repairs. After all, your home is your castle. Joining me now is Peter Koffler, an attorney from New York who specializes in home and real-estate issues. Welcome, Peter, and let's begin with the very basics, and that is what kind of a relationship legally do you have with your contractor? MR. KOFFLER: When you sign a contract, or if you don't sign a contract, just establishing a relationship is a contractual one. You're paying somebody to perform work in your home. MS. GRASSO: So even if you don't sign a formal contract with the contractor, you're still -- you still have a contractual relationship? MR. KOFFLER: In a sense, yes. MS. GRASSO: Okay. If you decide -- what are the benefits of signing a formal contract and what are the disadvantages of it? MR. KOFFLER: The advantages of a formal contract are generally to protect the consumer, to protect the homeowner who's signing it. The contract can provide a number of things, again, most designed to protect them -- things like when are monies going to be paid, exactly what is the scope of work that's going to be done, what are your warranties, what are the contractor's exact obligations, what is he or she in charge of? MS. GRASSO: You know, one thing, though. When you start getting into contracts, a lot of people freeze up because then they start thinking, well, if I'm going to sign a contract, maybe I should get a lawyer, and the cost is going to go up, so do those considerations -- suppose you have someone who doesn't want a lawyer -- do you have to get a lawyer, first of all? MR. KOFFLER: You don't have to get a lawyer, and this is coming from a lawyer, but it's money well spent, it really is -- MS. GRASSO: That's what lawyers always say on this show. MR. KOFFLER: -- but it's true. I mean, you know, for every horror story you hear -- and, granted, lawyers don't solve everything and they can't avoid all problems. If you do a contract correctly and you have a lawyer involved, even if it's just to eyeball the contract, read it over, make sure it says what it's supposed to say and you understand what you're signing, it's money well spent. MS. GRASSO: Suppose you don't have a contract, though, and you have a problem. Then what do you do? MR. KOFFLER: Well, hopefully you've done your homework to start with, which is you've gotten a contractor who's licensed and you've checked their references. If, in fact, someone's doing work and presumably there's a dispute, you're not happy with them, and they are licensed, you have certain avenues -- for instance, your local consumer agencies and such often regulate licensees, and that's why you have them there. You can often get them involved, and their leverage, in a sense, is to revoke or suspend licenses. MS. GRASSO: Peter, suppose you have a situation where you're trying to save money -- this can be very expensive, remodeling, even if you're putting in a bathroom, and you have a friend -- because I have a friend who has someone who comes after his regular work, he comes at night and works at his house, and he's putting in a kitchen this way. Now, suppose you want to do it that way because you really want to save money and because it's so expensive. What risks are you taking there? MR. KOFFLER: Gosh, there's a whole number of risks and a whole side issue, of course, depending on what type of environment this is. Is it an apartment building or -- MS. GRASSO: It's a home. It's a home. MR. KOFFLER: I won't say you get what you pay for, because there are a lot of people who do work inexpensively and are very good, so I won't generalize, but if someone is coming in, you've got a whole bunch of building codes -- there are laws, essentially, regulations which must be complied with if you're doing anything structural -- for instance, doing an addition, or a bathroom may or may not qualify, depending on if the plumbing or electric's being tampered with. But, you know, if you do work by somebody who just comes in, who knows what they're doing but isn't licensed and isn't getting the proper permits and such, you can have a lot of problems if something goes wrong, and even if nothing goes wrong. At the end of the day, you go to sell your home, and the buyer does their homework and says, "Well, do you have a permit," you know, "Did you get the signoffs, did you get a certificate of occupancy for this?" MS. GRASSO: So the licensed person, they know exactly what -- and they get the permits? You don't have to worry about the permits. MR. KOFFLER: Obviously, it has to be dealt with in a contract, but, generally, yes, your general contractor or architect will be in charge of getting any permits, et cetera, and if there are none and they tell you there are none, that may be fine, but they're responsible for having made that decision. Troublesome Contractors MS. GRASSO: But let's go to the phones right now. Lynette from Pennsylvania. Welcome to Legal Cafe, Lynette. Q Well, last year, I purchased a new roof on my home, which cost me $2,000. It was 1750 (dollars) for the full price, and they charged me an extra 250 (dollars) once they got here and they said I needed it for plywood that they said was damaged. Now, they took the whole roof off. It's a whole new roof. They took all the old shingles off and everything and applied a new roof. Now, my contract says that I have a 25-year warranty. Now, if I let anyone else on the roof, then it's void. Their warranty is void, and they're not guaranteed to complete any work, but it also has on there that they're not responsible for any damages, interior or exterior damages -- it's like fine print at the bottom -- before, during, or after work is completed, and I wanted to know if I can take this to small claims court, because as of right now, they did it last year. It was leaking in one spot in my house in my bedroom -- MS. GRASSO: Right. Q -- which is why I called them, but they told me I had three layers of coating on my roof, which was against the guideline codes or something for my state, and they said that they couldn't put another coating on, so instead of having it patched, I just said, "Well, just give me a new roof so I can be secure that it was fixed." That was what they told me -- MS. GRASSO: So, Lynette, let me stop you for one second, just to get this straight. Right -- in other words, they're the only people who've touched your roof. They redid the entire roof, and they have a 25-year warranty on it. Despite that fact, you have a leaky roof and they won't come and fix it? Q No, they have been out, but they've been out like seven or eight times now, and I have all these little slips that they keep coming out, but it's damaging my home. I mean, I had one leak in my bedroom. Then I've had a leak where the heating unit was, I've had a leak in my second bedroom, I've had a leak in -- like two different leaks in my living room spot areas. I've had a leak coming down the side of my wall in my kitchen where my wallpaper has peeled off. Now, I've taken pictures of all of these things, and every time I call him in, he has a nasty attitude, he gets nasty with me, but he comes -- he doesn't talk to me, he leaves notes on the door saying he's been there. I have an attic in my apartment, and I asked him could come in the attic with the ladder -- I don't have -- it's not the type of attic that you step on, but you can get in there, access, by ladder. I asked him if he could come on a day after it rains so he can see up in the roof where maybe it has leaked where he knows exactly where to go -- MS. GRASSO: Okay, Lynette. It sounds like you have -- rain must be a horrible time in your house, the way it sounds, but hang -- stay right there and let's see if Peter can help you. Peter, boy, this sounds like a classic example of, you know, they're always so sweet and nice before you sign the contract and then once the work is done and you want them to come back and repair, and I've had problems with different things like this -- what do you do -- they've come back and they can't seem to fix the problem. MR. KOFFLER: Well, that actually goes further than most. Often the problem is they just don't come back -- MS. GRASSO: They don't come back, right. MR. KOFFLER: They don't come back, they don't return your calls. In a sense -- MS. GRASSO: She's got a warranty, though. MR. KOFFLER: -- in a sense, they disappear. The warranty -- you have to, you know, simply the words "a warranty" doesn't quite do it. You've got to be specific. I'd be curious to see the wording of that warranty. Is it, you know, what exactly, are they warrantying, and also, you know, to the extent that the manufacturer has put a warranty also on the shingles themselves, you've got other issue. If they're coming back and trying to fix it, I think that's a very good start. If they can't fix it and they say simply, "Your roof is defective and it's a problem" -- did they tell you in advance that it was going to be a problem, that there wasn't going to be a way to do this properly, or did they say, "This will be fine. We'll fix it, no problems"? Q No, well, it was only leaking in one spot when I first hired them -- And three men came out and put the roof on. It started with three men, and they took three to four days to put this roof on, and one of the guys got fired. I was told by the owner himself that he fired one of the guys because they were getting hired, and on the last day, he had to come back and complete the job -- MS. GRASSO: Lynette, are they a reputable company? Are they well known in your area? Q Well, I got them out of one of our area newspapers, so, I mean, I didn't check into them like I think I should have, but I called like three different, you know, roofing companies, and I took the average price. I didn't take the least price, you know. I called a couple people. A couple people came out, and they seemed to be the one more qualified. You know, they showed me the roof across the street and said how it should look and how my shingles was crooked. MS. GRASSO: All right. Okay. Let -- you know what I think the real question is, is whether she can take them to small claims court. She paid $1700 in Pennsylvania, she should find out what the limit is in small claims court, but she's got the pictures. I mean, that seems to be her option at this point. MR. KOFFLER: At this point it's her option, although before going to court, and I sometimes recommend court as a last resort, should could check with her local consumer agencies and see if they could step in and get something done. MS. GRASSO: Okay. So, Lynette, first check with your local consumer agencies and your Better Business Bureau, but then also call your small claims court and find out what the limit is for small claims fees. You can go there very easily, go to small claims court. Usually the clerks will help you fill out the papers there, and then when it comes time for trial, you can bring all your pictures and your story to the judge. You don't need a lawyer there, so it's pretty cheap to do it that way, and good luck with you on your roof there. Hope it doesn't rain anytime soon in Pennsylvania. MS. GRASSO: Our next caller is Joe. Good morning. Welcome to Legal Cafe, Joe. How's the -- you're remodeling, re-roofing, what? Q Oh, I hired a contractor in October. I had a fire in the house. The house was on Long Island. MS. GRASSO: Sorry. Q He, you know, got most of the work done, but he was supposed to finish it in about 60 days. By the time February came, I had asked him to sign an addendum to the contract, because I said, you know, I'm paying $2,000 -- the insurance company didn't cover my mortgage payment. They covered to have the house fixed, which was about a $50,000 job, but they didn't cover my mortgage every month, so every month I had to pay the mortgage, so when February came, I said, "Look, I can't keep paying the mortgage like this." You know, "If you want" -- he wanted more money, is what it was, and I said, "If you want more money, you know, you're going to have to sign an addendum that says that after March 15, if you're not finished, you're going to start paying me $60 a day off the job." He agreed to it, he signed it. March 15 came and went, and he never finished the job. So now we're into July. He has more than used up what I had owed him left on the job, and he never finished the job. MS. GRASSO: Well -- Q I hired -- I had a couple other contractors come in and give me estimates on how much it's going to cost to finish the job. There was about seven (thousand dollars) or $8,000 left that he was owed, as of March 15. Had he finished the job on March 15, I would have had to pay him 7,000 (dollars) or $8,000. MS. GRASSO: So you're not in the house yet? Q No. MS. GRASSO: It's still uninhabitable. Q Right. Right. And I'm still paying $2,000 a month mortgage payments on it, and it's still empty, and he has not finished the job, and the estimates to finish the job are like 10 (thousand dollars), 11 (thousand dollars), $12,000. MS. GRASSO: Are you in contact with him? I mean, do you talk to him and say, "Are you going to finish the job?" or -- and what's his response? Q We went back and forth like that for about -- from March till about June. As of June, I haven't had any contact with him, because he called -- I kind of kept in touch with him through my parents, and what happened was he said to my parents, "Look, I got hurt," you know, "as soon as I get better," you know, he was on another job, he got hurt. He gave me some excuse to walk off the job and he just never called me back now -- MS. GRASSO: And, of course, you haven't gotten any of the money, I assume, the $60 a day that he's supposed to pay you? Q Well, no, of course, he hasn't paid me anything yet. MS. GRASSO: Of course not. All right. Okay, stay right there. This sounds like a very costly situation, Peter. MR. KOFFLER: Yes, and it's not that uncommon, although it sounds like Joe was pretty savvy to start with in getting a contractor, that sounds like he was on top of things to some degree. So, aside from the $60 a day, have you paid him monies for which he's not performed work, or is it a matter of him simply having walked off the job? Q Well, out of -- this whole job was $50,000. He had gotten $42,000 of the 50 (thousand dollars). The only problem is is that it wasn't really broken up proportionately. Like he had not done $42,000 worth of work. And the other -- you know, he'd probably done like maybe 37 (thousand dollars) or $38,000 worth of work, but the problem is, too, is that when one of these other contractors came in, I got two other ones to come in and look -- to finish the job, both of them said, "Well, there are things in here that he did that we need to fix." He did things wrong, you know, like the windows don't line up right, they leak in some places -- MR. KOFFLER: That's not uncommon. Q -- there's a problem with the roof. MR. KOFFLER: Did you check out his licensing and such, his credentials before you -- Q No, he originally told me he was licensed and insured, because I asked everyone that I got estimates from, you know, when I first started getting estimates on the job, and he lied to me. MR. KOFFLER: So you never saw an insurance -- you didn't see insurance certificates or permits, licenses? Q No, he said to me he was licensed and insured, and then after he started, when I started having all these problems, I called consumer affairs, and they said, "No, we don't have any record of him being licensed." MS. GRASSO: Okay. So we know that he should have done -- he should have checked out his insurance before -- MR. KOFFLER: Right. MS. GRASSO: -- and he should have checked out his actual licensing, but now that he's in this situation what should he do? MR. KOFFLER: I would go to court. I would -- well, let me back up. I would talk to your attorney. I would talk to any attorney about it locally and find out what it would cost to bring a lawsuit, if possible. If you've given up on negotiation with this person, and it sounds like you've stopped dialogue with them and you're simply -- you're not communicating and you've got a situation -- you've got to finish your house, you've got to live in it, and you've got to bring, you know, you've got to stop the damage, in a sense, of paying your mortgage, you've got to get the job done and you've got to recoup your costs. MS. GRASSO: Okay. MR. KOFFLER: Because they're not licensed, you can have problems in using consumer agencies. MS. GRASSO: Okay, Joe. Sorry about that situation and good luck with it, and I want to just go quickly back to Tom Thompson. Tom, do you have any advice for Joe and people who end up with contractors who just don't complete the job and do lousy jobs? MR. THOMPSON: Well, along with the civil action that could occur would be to, again, check with the local government, find out if a permit was required, and then discuss with them the fact that there was not a permit obtained and encouraging everyone listening that their contract should also have a clause in them that mentions the contractor needs to obtain any required permits from the local jurisdiction. MS. GRASSO: All right. MR. THOMPSON: If they would do that, there may, in addition to the civil action, be some sort of a criminal sort of offense -- it may be a petty type of offense, but some type of action like that could also cause the contractor to know that the consumer's not going to let go of the matter. MS. GRASSO: All right, Tom Thompson, thanks so much for being here by telephone, and it's a good thing for all of you who are going to hire a contractor to remember not only to ask whether he's licensed, but don't be embarrassed to ask to see his license and to check up on his credentials -- his or her credentials, I should say. Tips from Professional Contractors Our next caller is Ahiam from Delaware. I understand you're a contractor. Q Yes. MS. GRASSO: Hi. Well, thanks for calling. Do you have any helpful hints for us? Q With the permits, you had a -- let's first start with Lynette. She called about three layers of roof. Lynette said that the contractor said that she was not allowed to have a third layer put on. That's true, BOCO, which is the building code that contractors throughout the nation are responsible to, and that's what the inspectors learn from, you can put the second roof on, but you cannot put the third roof on. Once you have the second roof on, you do have to strip it down to the decking and then come back with new roofing. MS. GRASSO: Ahiam, let me ask you some specific questions, because do you think that contractors, first of all, have a bad name, or are there as many good contractors out there as there are bad? Because we certainly hear more about the bad ones. Q You know, as a contractor, I've met many contractors. I think there are more bad ones than good out there. MS. GRASSO: Well, thanks for being honest. So what do you advise the average person who is about to hire a contractor, what do you think is the most important thing they should do? Q Well, I think trying to find a good contractor goes by what good qualifications he has behind him, and good qualifications in this case would be insurances, because it costs a lot for a contractor to start up with the proper insurance. This contractor probably is going to be more reputable. Also, you had the other guy -- for example, the guy with the $50,000 project. If he would have gotten his money put in escrow with his addition, then he wouldn't have problems with having lost money -- MS. GRASSO: Well, would you take a job if the money's in escrow? How do you, you know, arrange to buy all the materials and everything? You have to put that money forth yourself then. Q All right, well, if the job was -- total bid was $50,000 and they put the money in escrow, I myself and they themselves cannot touch the money. We both have to sign off on it. So therefore, my money's guaranteed, so I don't have a problem with initially putting out $8,000 or $10,000, because I know once I meet this requirement of the first draft -- of, say, the roofing torn off, then I get another thousand dollars. MS. GRASSO: So you sound like a good contractor. And how would -- I mean, do you believe in going to the building department and trying to find the best contractor through a list or asking your neighbors and friends who've done work? Q No, I don't. I think the -- anyone can become a contractor. For example, in Delaware, I can get you a contractor's license, and you're out of state. It's just a simple matter of filling out forms. MS. GRASSO: That's scary if you can get me a contractor's license, because I don't even know what sheetrock is, so that's very scary. Q It doesn't matter. That's how a lot of minority business get bids, because they use women and other nationalities to get the minority bids, and they're not -- and a lot of times -- for example, you said you don't know about sheet rock. A lot of these people do not, either. MS. GRASSO: So okay. Well, listen, thank you for calling and for giving us some helpful hints from the other side of the fence or the roof, as the case may be. Jessie from Minnesota is on the line. Jessie, I understand you're a contractor. Q Yes, we have a small construction company and have been in business for 42 years -- MS. GRASSO: Jessie, you know, we're running out of time, but I want to ask you your number one quick tip for people out there who are going to hire a contractor. Q Well, two things that I think are very important. Number one, don't always accept the lowest bid. We have lost bids to companies that their bid is lower than what our material cost is, so the lowest is not always the best. And, secondly, I would advise any customer to be sure to get lien waivers from the contractor before they make that final payment so they make sure that everything is paid for. MS. GRASSO: Now, what's a lien waiver? Can you describe that simply? Q A lien waiver is required in Minnesota, which a lien waiver is given by each subcontractor -- for example, the plumbing contractor will give a lien waiver to the customer, saying that all materials and labor has been paid for by us. MS. GRASSO: All right. Well, Jessie, it's very nice to have a female contractor on the phone, and thanks so much for calling in and for watching. Q Okay. Thank you. MS. GRASSO: We appreciate it. So there are many, many tips out there for hiring a contractor. One, check out the credentials of the contractor, one of the number one things to do, and make sure the contractor is licensed. And then you heard some of our other tips there. One thing you should do is when you do have a contract with a contractor, make sure it contains all the provisions that we've talked about today, specifically warranties and termination clauses. Okay. And that wraps it up for just hour one of our Wednesday Legal Cafe.