Six Steps When Considering Contractors and Before Entering Into a Construction Contract

Construction lawyers at our firm get involved once damages start showing up from improper construction. That means we know a lot about why construction goes wrong, and unfortunately, we often see problems that homeowners or a homeowners’ association could have avoided or at least made easier to deal with by taking steps earlier in the process. We regrettably often see owners who hired a contractor who did the work improperly or walked off the job and has no assets or insurance to recover from in a lawsuit. We pride ourselves on helping owners get the compensation they deserve when damaged by poor construction work, but we also hope we can help people avoid ever having to deal with construction problems. Following the old advice that “an ounce of prevention is worth a pound of cure,” we offer the following tips for anyone considering a construction project:

1. Make Sure the Contractor Is Licensed

In South Carolina, residential builders and general contractors must be licensed. While it sounds obvious, it is important that you hire a contractor who is licensed to perform the work. There are contractors out there who will tell you that they are licensed when they are not and contractors who will try to do work under someone else’s license. To avoid hiring an unlicensed contractor, you should:

• ask the contractor you are considering hiring for a copy of the license;
• check to make sure the license is valid and has no disciplinary issues; and
• once the job begins, compare the license the contractor gave you with the license information shown on the building permit issued for the project.

If a contractor balks at giving you a copy of the license that is not a contractor you want to hire. Once you have a copy of the license, you can check whether the license is valid through the South Carolina Department of Labor, Licensing and Regulation’s website. You can also use the LLR website to see if any disciplinary orders have been issued. Disciplinary orders are issued when a contractor is found to have done something that violated the standards governing contractors.

Except for small projects, a building permit will be required for any work. That building permit will list the license information the contractor used to obtain the building permit. You should compare the license information listed there to the license the contractor gave you. If the contractor does not give you the building permit or tells you that a building permit is not needed, those are red flags, and you should contact your local building official to get a copy of the license or confirm that a building permit is not needed.

Finally, if a contractor tells you that a contractor’s license is not required for the work the contractor will be performing, confirm that is true before hiring the contractor. Contact your local building official, the South Carolina Department of Labor, Licensing and Regulation, or a construction attorney who can determine whether the contractor is telling you the truth.

2. Make Sure the Contractor Has Insurance

Too often it seems owners assume a contractor has insurance. The assumption make sense because insurance protects the contractor. However, too many contractors try to cut their costs by not purchasing insurance. If anything goes wrong, either while the construction work is underway or years later as a result of sloppy construction work, it is essential that the contractor have insurance to cover your damages.

You can ensure a contractor has insurance by asking the contractor to give you a certificate of liability insurance. A certificate of insurance is the name for a form issued by insurance agents as evidence of the insurance coverage a person has. For an example of the form, see here. While important for a contractor to have automobile liability and workers compensation insurance policies, the important policy for purposes of improper construction work is the “General Liability” section under the “Type of Insurance.” You want to see information there that lists an insurance policy with effective dates that will apply to your project. If a construction project will last longer than the effective dates shown there, ask the contractor for a new certificate of insurance once the effective dates on the certificate end. You should be aware though that some contractors have used fraudulent certificates of insurance to obtain work. If you have any concerns that the certificate may be fraudulent, contact the insurance producer listed on the certificate to have them confirm the certificate is valid.

Also, especially for larger projects, ask for a copy of the contractor’s insurance policy. Some general liability policies issued to contractors have exclusions (provisions that make it so the policy does not provide insurance coverage for something) for work on residential buildings or for work on multi-family residential buildings. Obviously, if your project is a house, you do not want a contractor who does not have insurance coverage for residential work. Similarly, if you are a homeowners association looking for a contractor to perform work on townhomes or condominiums, you want to ensure the contractor’s insurance policy does not exclude coverage for work on multi-family buildings.

3. Have a Written Contract

Always enter into a written contract for construction work. The written contract should, at a minimum, specify exactly what work will be performed (the “scope of work”) and how much will be paid for the work. Without a written contract, it becomes far too easy for a contractor to argue about what the parties agreed on. Also, there are numerous provisions regularly included in construction contracts to protect property owners, and you want to make sure you have a written contract so you have those protections.

The complexity of a construction contract often depends on the complexity of the work being performed. If you are hiring a contractor to replace the flooring in a room in your home, a fairly simple contract will probably suffice. If you are hiring a contractor to build an entire building, a much more comprehensive contract is probably necessary.

4. Have a Lawyer Review the Contract Before Signing

Often a contractor will hand an owner their standard contract and push the owner to sign it. Don’t just sign the contract the contractor puts in front of you. That contract almost certainly has been drafted to be favorable to the contractor. Except for small projects where it may not be cost effective, it is wise to have a construction lawyer review the contract. The minimal cost for a quick review can save an owner massive amounts of money later in the project when issues arise. For small projects that don’t warrant hiring a lawyer to review the contract, review the contract yourself and push back on any parts that seem wrong or unfair to you.

5. Take Photographs Before and Throughout the Project

Taking photographs before construction work begins and then as it progresses can be very helpful in addressing any problems that arise. Taking photographs before the work begins allows you to show what the property looked like and the condition it was in before any work was performed.

As construction work is performed, each new component of the work will cover up other components. Certain parts of the building, for example the wall cavity, will no longer be visible once the finishes are installed. Taking photographs as the work progresses allows you to show what the covered portions look like. Taking photographs as the work progresses also allows you to show what happened when.

6. Save Your Documents

The contract you enter into for the work, the certificate of insurance you get from the contractor, the photographs you take, and the emails or text messages you have with the contractor are all more valuable when something goes wrong if you saved them. While we can often get the contract or insurance information in a lawsuit, some of these documents may be lost forever. You should save all documents you have related to the construction work because you may eventually need them to prove what went wrong and your right to compensation for your damages. Some problems resulting from improper construction work may take many years to be discovered so you should retain these documents for an extended period of time.