When hiring a contractor, keep permit needs in mind

I read an article you wrote on how to hire a contractor and thought it was good, but two items that were not brought up were permits and inspections.

Often, the homeowner doesn’t factor in the cost of pulling permits and hasn’t decided who will be available to meet the inspector. The inspector might have corrections that the homeowner doesn’t understand or might need access to areas that require ladders or certain tools.

It should also be pointed out that while the contractor might be done with the job, and the homeowner might be happy, there could be code issues at a final inspection that require the contractor’s attention, which is often difficult to get once he has been paid in full.

I always advise homeowners to wait until the permit card is signed off and final before considering the job finished.

Thanks for your insightful information. Your suggestions are quite good and will help all homeowners considering renovation projects.

Finding a good contractor only means you now have vetted the person who is going to do the work at your home. That’s a good start, but you still need to follow through on items such as the ones in your letter that will protect you during the course of your home renovation, repair or construction.

When a homeowner plans for a home renovation, construction or major repair project, he or she should definitely have a budget in mind for the project. That budget should include the cost for the permit fee from the local municipality. In some places, those permit fees are downright cheap. The homeowner might find himself paying a flat fee of $25 for the permit. However, in other places, the permit fee might be a percentage of the costs of construction. That cost can mount quickly. If, for example, a local municipality charges 2 or 3 percent on the construction cost for a $100,000 project, you might have to budget $2,000 or $3,000 just for permit fees.

During the construction process, the homeowner should still be involved in making sure the job is completed properly. In larger renovations and construction projects, you might need an architect or a project coordinator to assist with technical issues.

As the construction progresses, the homeowner must make payments to the contractor, subcontractors and the suppliers, and he or she must make sure that the payments mirror the budget. That is to say, if the budget has a certain amount to be paid for the roofing material, the payment should be very close to the actual amount. The homeowner needs to have a basic (or, preferably, quite sophisticated) understanding of how much things cost and keep tabs of the hours that trades have worked on the project.

If the homeowner has this understanding, it will be easier to identify where things can and do go wrong. If a bill comes in from an unknown source, for an unidentified or unidentifiable project, it should be questioned and not just paid outright. If the homeowner makes all his payments to the contractor, and doesn’t ask for proof of payment, the homeowner runs the risk that the contractor might fail to pay one of the subcontractors or suppliers, who will come knocking on the door.

In just about every state, contractors, subcontractors and suppliers have the right to lien a home when they are not paid — even when the contractor received the payment. For this reason, homeowners need to make sure that all subcontractors and suppliers are actually paid during the course of the project, whether directly by the owner or by the contractor.

To verify these payments, the homeowner should receive a lien waiver document from each supplier, subcontractor and contractor. The lien waiver given to the owner generally states that the subcontractor or supplier received a sum of money and the subcontractor or supplier waives any lien for that amount against the home.

Finally, homeowners shouldn’t make the final payment to the contractor until the work is complete and the municipality has signed off on the work. In some municipalities, that sign-off comes in the form of a certificate of occupancy, while in others it might be a final signoff on the work permit. Some municipalities issue a document that evidences the completion of the work and signoffs from the building department and other departments that inspected the work site during the construction period.

Once the municipality has signed off, it’s somewhat safe to say the work has been completed. However, in most cases, on larger projects the homeowner should know that the contractor might still need to come back to the home to complete “punch-list” items (that is, final tasks that still need to be completed or fixed). These items might be minor, but they still require the contractor to come back even after the municipality says the job is done, and even when you can say the job has been substantially completed.

Thanks for your comment.

Ilyce R. Glink’s latest book is “Buy, Close, Move In! Samuel J. Tamkin is a Chicago-based real estate attorney. Questions? You can call Ilyce’s radio show toll-free (800-972-
8255) any Sunday from 11 a.m. to 1 p.m. Contact Ilyce and Sam through her Web site, www.thinkglink.com.

 
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