Building or Renovating? 6 Must-Do Steps When Hiring a Contractor

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By Jason E. Handin

A fresh start can be exciting, especially when it comes to building a new home or renovating a current home. However, for homeowners inexperienced in working with contractors or design professionals, the undertaking of a major construction project can be a daunting task. The highest probability for success in a construction project relies upon the homeowner being educated in protecting themselves against any potential conflicts that may arise.

In this article are six important steps to take when hiring a contractor or design professional for a new build or renovation.

  1. Research Contractors

The first step in initiating a construction project is researching contractors. A contractor will be a homeowner’s primary point of contact and will oversee and supervise the entire project.  In this role, a contractor may also be referred to as the construction manager.

The first place to begin searching for a contractor is through personal references, such as if a friend or family member previously hired a contractor and was pleased with the quality of work. A secondary source is through various home improvement websites that allow clients to rate and review contractors.

  1. Know the Types of Contractors

There are three types of contractors who oversee construction projects, defined as Division I contractors in Chapter 489 of the Florida Statutes:

  • The first type, a “general contractor,” is unlimited in the type and size of the projects he or she oversees and undertakes.
  • The second type, a “building contractor,” is limited to handling commercial projects and residential projects that do not exceed three stories in height, or handling renovations of projects of any size, as long as the renovations do not affect the structural elements of the building.
  • The third type, a “residential contractor,” may only work on and oversee residential projects that do not exceed two habitable stories over no more than one inhabitable story (such as an unfinished basement).

In addition to the distinction between the three types of Division I contractors, each may be either “certified” or “registered.” A certified contractor meets certain criteria and has passed the applicable state licensing examination, meaning that he or she can practice anywhere within the State of Florida. A registered contractor, however, has not taken the state licensing examination and is registered only within particular counties or cities with the local licensing board, meaning that he or she can only work within those particular counties or cities.

  1. Ensure the Contractor is Licensed

As a matter of practicality, certified contractors are typically more experienced and have gone through more rigorous training and education. Based upon the scale and type of project a homeowner wants to undertake, it is crucial to choose the appropriate contractor to oversee the project.

Equally as essential is the homeowner’s responsibility to ensure that the contractor is duly licensed by searching the licensing database on Florida’s Department of Business and Professional Regulation website, which also indicates if the contractor has been subject to any disciplinary action in the past. Unlicensed contracting is rampant in South Florida, so a homeowner must ensure that his or her contractor is appropriately licensed.

  1. Get Various Bids Before Choosing a Contractor

The next step is to obtain bids from at least four contractors. The homeowner should be sure to clearly explain what he or she wants the project to include, so that the homeowner and the contractor have a unified vision for the project. Clear communication will aid in avoiding conflicts later.

Additionally, the contractor may want to inspect the property, whether it is an existing structure or a vacant lot, to ensure that he or she understands both the size of the project and the site conditions. In either new construction or the renovation of an existing home, engineering or architectural design work may be necessary. A homeowner should be sure to discuss with the contractor the cost and extent of any necessary design work. Pricing out a construction project is the same as paying for anything else: you get what you pay for.

As a general rule, once all four bids are completed and the scope of work has been thoroughly discussed, a homeowner should discard the cheapest bid and the most expensive bid and choose one of the bids in the mid-range of the bid prices. A homeowner should be sure that all bids encompass the same scope of work so that when a homeowner is comparing the bids, he or she is comparing apples to apples.

  1. Create a Construction Contract

After a homeowner selects a contractor, the relationship between the two parties is memorialized into a construction contract.

Because the contract governs the project, a number of provisions should be included to protect the homeowner:

  • The contractor should be required to produce a copy of his or her effective certificate of insurance, which lists the carrier names, policy numbers, and policy limits for each of the contractor’s insurance policies in the event damage occurs during the project.
  • The contractor’s subcontractors, also known as Division II contractors, as well as any design professional (such as an engineer or architect), should also be required to have their identity disclosed and to also be licensed and insured.
  • The contract should clarify that the contractor is the supervisor of all work performed on the project, so that the contractor is responsible for the quality and timing of the work performed.
  • A draw schedule should also be included in the contract, which dictates when each periodic payment is to be made by the homeowner to the contractor as the project progresses.
  • Typically, a deposit is required to be paid at the inception of the project, with percentages of the total contract price paid as certain thresholds are met. A portion of the total contract price should be required to be withheld at the end of the project until all work is approved by the homeowner and all final inspections are passed by the building department. This provides leverage over the contractor to properly complete the project before receiving final payment.
  • Any changes to the contractor’s scope of work or the project’s design should be required to be authorized by the homeowner in written change orders to ensure that the homeowner is aware of and has consented to any changes that alter the scope of work or the contract price.
  • Lastly, the contract should include terms dictating when and how the parties may terminate the contract, along with an attorney fees provision stating that should a legal dispute arise, the prevailing party will be entitled to his or her incurred attorney’s fees.
  1. Hire an Attorney

Most importantly, a homeowner should retain an experienced construction attorney to not only undertake due diligence of the selected contractor, but also to negotiate the contract terms and guide the homeowner through the project’s completion.

In this regard, a construction attorney should be considered an investment in safeguarding from potentially costly disputes later. Ward Damon has a team of highly-experienced attorneys who focus on construction law, both commercial and residential, and can provide counsel in regards to laws, contracts, compliance and any disputes that may arise.

Jason E. Handin concentrates his practice in the areas of construction law, commercial law, and business law for Ward Damon. If you need help with construction or business matters, please contact Jason at jhandin@warddamon.com or call 561-842-3000.

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