« Fire Protection? | Home | The Case Of Flying Royalty »
Considerations Before You Start That Construction Project
By Edward Robinson | November 5, 2007
The last few days I have gotten several phone calls regarding clients who have had problems with their contractors and have had to remove them from the project. These calls have ranged in scope from a kitchen remodel to construction of a commercial building. Although they differed in scope and cost, they all had generally the same problem related to a disagreement in the quality of the work being performed and financial issues between the general contractor and the client. In most cases, these problems can be avoided with proper planning.
Regardless of the size of the project there is a need for well documented planning prior to hiring a general contractor. The detail level of the planning can be adjusted depending on the project. You may not need the same level of detail for a kitchen remodel as for construction of an addition, but the process should follow the same general plan. Generally planning should include the preparation of plans and specifications to fully document how and what work is to be completed.
The first thing that should be done is to determine the scope of work to be performed. Depending on the size of the project, the scope of work to be performed may be developed with the assistance of knowledgeable contractors or an architect and engineer. It is generally acceptable to work with general contractors at this stage to develop a budget and ideas, but bidding should not be pursued until the full scope of the work is developed. You should develop any plans or specifications necessary to clearly define all aspects of the work to be performed so that your planning can be used to asses the work in the future. The more detailed your plans and specifications are at this stage the better control you will have related to the quality of the work that will be performed and what control you will have over the project. If the plans and specifications are lax, you will have little influence over the materials and their quality of installation. Once you have determined the scope of work to be completed and you have developed any necessary plans and specifications for completing the work, you need to develop a contract for the work to be completed. This is a necessary step often overlooked on medium sized to large projects where it is most important. Contracts are necessary to protect the client by specifying to what standards and specifications payment for work will be performed, how payment will be made and under what criteria, and to set a plan for resolution of disputes in the event a disagreement arises between the general contractor and the client. Often, contracts are negotiated between the client and contractor but should always be negotiated with an attorney familiar with construction law.
Keep in mind that insuring good work means keeping your contractor accountable. Full payment of the contract cost should not be funded to the contractor up front. Some payment when the contractor starts, perhaps some payment as work proceeds, and then a final payment when all work is completed and approved as satisfactory. The final payment should have some part of the contract price withheld, usually about 10%, which is to be paid after a period of time which is allowed to see that all work is performing and has been completed satisfactorily. This payment arrangement must be made with the contractor prior to the work contract being signed.
Once you have clear plans and specifications and a working contract you need to finad a reputable contractor to complete the work. You may wish to ask friends and family members who they have used in the past. Contact your local Chamber of Commerce about contractors who are active in the community, The Better Business Bureau, state and local licensing authorities, local trade associations, and your local Yellow Page directory are also excellent sources of information. After you have compiled a list of possible contractors, take time to evaluate each one carefully. A professional contractor will be happy to provide any information you may require.
Set up a meeting with prospective contractors to discuss your project and their qualifications to complete your project, and be sure to pay close attention to the attitude of the company representative. Good contractors take pride in their work and will be enthusiastic about the possibility of helping you with your problems. You should be sure to discuss a contract provided by an attorney to determine if the contractor is comfortable working under its terms. If you feel confident that the contractor is truly interested in your project, ask for the company’s vital statistics - specific business information which will help you make your final decision.
You should request that each of the contractors provides you with a proposal for the work to be completed. The proposal should provide you with a list of the work to be completed and the cost of labor and materials in an itemized manner. A contractor who takes the time to prepare a good proposal will most likely do a more thorough job. All items to be accomplished should be written as part of your contract. Get it in writing and do not accept verbal promises. The contracts for the work should spell out the proposed work, prices, and completion date. Read the contract carefully and, in larger projects, always have an experienced construction attorney review your contracts. Misunderstandings are the most common cause of contract disputes.
You should be aware that under the laws of most states, a contractor who does work on your home, or a supplier of materials for such work, has a right to place a lien on your property. This can occur if you hire a general contractor and they do not pay their subcontractors. Always require that the general contractor provide confirmation that his subs are paid up to date prior to making any payments to the contractor for a period of time. If a general contractor does not pay his subs, you may have to avoid liens. Once again this requirement should be included in your contract with the general contractor to complete the work. To best control this concern, require the contractor to inform you of who his supplier will be along with any subcontractors that will be used on the job.
Keep in mind these are general recommendations on a blog and not intended to be authoritative on the subject. You should consult with construction professionals and your attorney regarding your specific needs to insure good planning makes your construction experience a positive one. Remember no job is too small to plan correctly for the best experience.
Topics: Real Estate Finance, Real Estate Inspections, Realtors |