In wake of Hurricane Harvey damage to Houston properties, our firm gets regularly contacted by residential or commercial property owners with issues with their contractors. The aftermath of Harvey created a high demand and a short supply of contractors, leading to many ethical and legal violations by contractors.
Many contractors have defaulted on their contracts by performing partial or no work at all after getting paid in full. For most the home owners, the FEMA benefits for alternate accommodation are reaching an end in 2018, leading to many homeowners living in hotels while fighting expensive legal battles with their contractors.
Based on these recent experiences, here are some of the things we ask all property owners to consider before hiring a contractor.
Sign a Contract
No matter how well you know the contractor, protect yourself and place all the terms in a contract. An invoice is sufficient in most cases, but a savvy property owner would get the details of the work to be completed, the timeline on the work, and the cost of material and service in writing, with all parties’ signatures at the bottom. Date it and place the detailed contact information for all parties in the document. While Texas law recognizes oral agreements, a written agreement is much easier to prove in a court of law than a verbal one.
Chech the Contractor's Credentials
Do your homework before you sign an agreement with the contractor. Is he/she licensed by the Texas Department of License and Regulation? Does his/her company carry liability insurance? Does the contractor have a company registered in the state? Does he have an office location. All these factors are important in preventing potential lawsuits in the future.
Texas law does not require a general contractor or a subcontractor to be licensed by the Texas Department of License and Regulation, however, the state does require any electrician, plumber or air conditioning contractor to carry a valid license. A contractor may try to convince you that a license is not required, but if the contractor is conducting all remodeling work on your property that includes plumbing or electrical work, the state requires him/her to have an active license. Check their license on www.tdlr.texas.gov before you hire.
Research the Contractor’s Reputation
Whether a contractor claims he/she has done the type of work before, a property owner must conduct his own research on the reputation. Ask the contractor for references and inquire into the type of work the contractor has done with those references. Do not hesitate. Homeowners pay contractors hundreds of thousands of dollars to conduct work, and contractor work is very skill dependent. There are no refunds in contractor work. Don’t hesitate to ask the contractor for references and find out whether the contractor enjoys a good reputation in the community.
Set Boundaries On the Payment Schedule
Whether you are paying the contractor out of your pocket, or your mortgage company is disbursing the insurance proceeds to the contractor, ensure there are boundaries set on the work and payment schedule. These could include having a piece-meal payment schedule, clear agreements on payment for material, and getting written confirmation for each piece of work completed before releasing funds.
Payments based on piece-meal system keeps the contractor motivated to work and ensures quality work. It also secures large amounts of funds from being paid out at once. A property owner can check the workmanship of the work completed and pay for the piece of work. If parties are dissatisfied by the completed work, the contract can be terminated without any loss for either party.
Know that A Lien Can Be Placed on Your Home by Contractor
In Texas, mechanics, artisan and materialmen enjoy certain rights and protections under the Texas Constitution and the Texas Property Code. Article XVI of the Texas Constitution provides all contractors, and in some cases, sub-contractors, a claim or interest upon the buildings and articles made or repaired by them, for the value of the labor done or the materials finished. Both the Texas Constitution and the Texas Property Code yield great protections to contractors for the work completed.
What does this mean for a property owner? A contractor can place a lien on the home and place the home under foreclosure if not paid for the work completed. Another reason why having clearly written agreements, and a piece-meal system would protect all parties.
These considerations with help homeowners or property owners in conducting a thorough research before hiring a contractor. In the event of a lawsuit, a property owner is entitled to various causes of action, such as Breach of Contract, Fraud, violations of the Texas Deceptive Trade Practices Act under Chapter 17 of the Texas Business and Commerce Code, and so forth. With a well written agreement, and pre-hiring precautions, a property owner can protect herself from a future lawsuit, or aggressively represent herself in the event of a lawsuit.