August 31, 2012 9:14 am
Pitfall #1: A homeowner makes a large deposit, then gets no work done.
This is one of the most common scams among unscrupulous contractors. They ask for a big deposit or to pay for all of the materials upfront, then the homeowner never hears from them again. To avoid this pitfall, homeowners should not pay for work or materials upfront and should avoid any large deposits.
In some states, it is against the law for contractors to ask for more than 10 percent or $1,000 (whichever is less) for a downpayment. They cannot legally ask for upfront payment for materials or work. The one exception is if the contractor is ordering customer-requested custom materials.
Pitfall #2: Suppliers or subcontractors come after the homeowner for payment.
Homeowners are responsible for suppliers and subcontractors who do not get paid on their job. They can even put a lien against the home where they did the work. To avoid this pitfall, there are several strategies a homeowner can use:
-Pay the supplier or subcontractor directly.
-Issue joint checks to the contractor and supplier/subcontractor.
-Get an unconditional lien release from suppliers/subcontractors.
Pitfall #3: Homeowner is liable for an injury on the job, including lost wages.
If the general contractor does not have valid insurance, the homeowner is liable for any injuries on the job. This includes paying lost wages, if someone gets hurt and cannot work for a period of time. To avoid this pitfall, check that the general contractor has valid liability and workman’s comp insurance.
Of course, the easiest way to avoid these and other potential pitfalls is to work with a reputable contractor who has a history of paying suppliers and subcontractors on time.
Source: Cornerstone Design & Remodel
Published with permission from RISMedia.