Q. We are in the same position with our home-improvement contractor as was reported in last week's Real Estate section. We signed a contract with the contractor and gave him several thousand dollars up front. That was several weeks ago. Although he did start work for one day, since then we have not seen him. What can we do?
A. The home-improvement industry is booming. But this is no excuse to ignore legal and moral principles.
You state that you signed a home-improvement contract? Was it the typical one- or two-page contract prepared by the contractor, or did you use a more comprehensive form, which contains a number of consumer protections?
I have given up being surprised at the number of homeowners who sign a simple document with a contractor, and then complain that the contractor did not properly do his or her job. If you want the contractor to do something, it should be spelled out, in writing, in your legal documents. If you want a particular model of kitchen counter top, air handler or window, make sure that the specific model number is included in your contract specifications.
Is your contractor licensed as a home-improvement contractor in the jurisdiction where your home is located? Ask the contractor for the license number, and confirm the license with the licensing department in your county or city of residence. The fact that the contractor may be licensed in Virginia will not help you if your house is in the District or in Maryland.
If your contractor is licensed, advise him--in writing and by phone, if you can reach him--that unless he resumes work immediately, you will file a complaint with the appropriate licensing department. While this may be an idle threat, since many of the licensing departments in the surrounding jurisdictions are overworked and understaffed, it may help prod your contractor into coming back to work.
On the other hand, if your contractor is not licensed, you may seriously want to consider canceling your contract and obtaining a refund of your deposit. Depending on the amount of that deposit, you may decide that legal involvement is not worth the effort.
If you are planning to hire a home-improvement contractor, your contract should contain at least the following provisions:
* A payment schedule, also called a draw, that has been carefully worked out and agreed upon by you and the contractor. Regardless of whether you or your bank will be making the actual payments, it is recommended that at least 15 percent of the contract price be withheld until the job is completed to your satisfaction. This is known as a "reserve."
* The contract should specify that each scheduled payment, including the final payment, must be approved by your architect, a building inspector or some independent third party before the payment is made.
* The contract should identify the beginning time and the approximate ending time of the job. I recommend that a contractor be given a bonus for early completion and charged a penalty for late completion. Ask the contractor approximately how long the job will take; add two weeks to that time period, and then assess a penalty at the expiration of the second week. Many contractors do not like a penalty clause, so this will be a business decision on your part as to whether it should be included in your contract.
* Inquire as to what kind of insurance you and the contractor will need in the event someone is injured on the job. Your homeowner's insurance company should be able to assist you. You can either increase your insurance on a temporary basis, or insist that the contractor carry adequate insurance for your job--and give you proof of insurance before the job begins. After your addition is completed, make sure that your homeowner's policy will cover the increased value of your house.
* What warranty will you get from the contractor? Review the terms and make sure that the warranty provisions are contained in the contract documents.
* The contract should give you the absolute right to terminate the contract if you are dissatisfied with the work. Obviously, you do not have the right to terminate arbitrarily, and the contractor must be given reasonable notice so he or she can attempt to cure any problems. This termination right is boilerplate language in most construction contracts. It would also apply if the contractor walks off the job, as it appears he has done in your situation.
* You should consider using one of the American Institute of Architects' form contracts; AIA document A107, titled "Abbreviated Owner Contract Agreement Form for Small Construction Contracts," is probably the most useful for the majority of homeowners. You can contact the AIA at 1-800-365-2724 to purchase one of the forms.
The AIA form calls for an arbitration process instead of legal proceedings in court to resolve any disputes that may arise. While I personally have reservations about arbitration, it is a cheaper, faster and less stressful route to take than litigation.
Finally, when the contractor has completed the job and is asking for the final payment, insist that the contractor give you a release of all mechanic's liens. The general contractor--as well as all of the subcontractors--should sign a release-of-liens form. There are numerous situations where a contractor is paid in full, but did not pay the subs, and the subs file mechanic's liens against the homeowner. While the laws in all three jurisdictions differ, mechanic's liens can be a nuisance, and potentially an expensive problem for you, but you can avoid these problems by having all subcontractors sign the release form--before final payment is made.
I urge the home contractor industry to recognize that while times are good now, that may not always be the case. Reputation is an important aspect of any business. If you get the reputation of being a "gun for hire" at the highest price, it may be a short-run gain but a long-term loss.
A contract is a legally binding obligation. If the contractor signs a contract that states he or she will begin work on a particular day, or within a particular span of time, he or she is both legally and morally obligated to honor his or her contractual obligation.
Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, Suite 1100, 1050 17th St. NW, Washington, D.C. 20036. Readers may also send questions to him at that address.