The  thing you must absolutely know more about before you sign a contract to remodel is mechanic´s liens.

What is a mechanic´s lien?

A mechanic´s lien is, basically, a claim that can be levied against real property (your home).  It is used to protect the interests of those that have done work on your property.

For our situation, this would include general contractors, sub-contractors, material suppliers, bathroom or kitchen remodelers, etc. Basically, anybody that has given labor or materials has the right to place a lien… if they haven´t been paid in full.

When used, a mechanic´s lien goes against your home´s title and would either have to be resolved or paid off during any sale or refinancing.

Why is this important to know about?

Obviously, having a lien put against your property is not a good thing to happen.  Especially if you are not at fault, or are being taken advantage of by a dishonest contractor.

In worst case scenerio, a mechanic´s lien can lead to being enforced by a judicial foreclosure sale.  The court can literally force the sale of the property in order to pay off the lien.

How do you protect yourself?

Plain and simple, with a lien waiver.

A lien waiver is a legal release from recourse (i.e. mechanic´s lien) that is signed by your contractors/suppliers.  It serves as a record and reciept of payment in full for all labor and materials used on your project.  By signing on the dotted line, they cancel their right to use a lien against you.

Make sure to get all necessary lien waivers signed BEFORE you pay them.  This is very important.  If you´ve already paid, what´s to make a dishonest remodeler sign the waiver?  Nothing…

This is what the business men call “negotiating from a point of weakness”. So get the signature in return for further payment. Keep in mind this includes before you hand over the check for 30% or whatever youve agreed upon for initial payment.

Furthermore, its important to get waivers from any sub-contractor´s involved in the project as well.  If, as an example, the remodeler is going to sub-contract the painting work you need to get a waiver from both even if you are just paying the general contractor.  Otherwise, the painter would have room for a claim in the case that the GC didn´t pay him.

If he needs the money from you to pay the painter, simply arrange for both to be present to sign off on waivers. Again, DO NOT fork over your cash before you get a waiver for that section of the work order.

Despite what the contractor may tell you, getting waivers before payment is standard practice.  They may not like it… but remember who is paying who.

According to Wikipedia, there are four type of lien waivers:

• Conditional waiver on progress payment – This waiver states that if the contractor has been paid to date (barring a returned or stopped check/credit card), the waiver relinquishes any lien claim.
• Unconditional waiver on progress payment – A complete release of all claimant rights through a specific date unconditionally. This would still be valid, even in the event of a returned or stopped payment check/credit card payment.  This waiver is more safe for the homeowner than a conditional waiver, but is less common than the conditional waiver on progress payment.

• Conditional waiver on final payment – Similar the the conditional waiver on progress payment, this waiver relinquishes any lien claim in the event that the contractor has been paid in full.
• Unconditional final waiver final payment – The same as the unconditional final waiver for progress payement, with the exception that this applies to the completion of the projcet. This is the safest waiver for a homeowner to get and should be demanded upon payment in full.

So, what combination should you use?  That is up to you, but I generally use a conditional waiver as we move through the milestones and an unconditional waiver upon completion of the project.

But, as always, it is a personal decision.  An unconditional waiver would be safer for me (the homeowner) during the project, but you have to balance whether or not to piss off your contractor… they may feel you are trying to rip THEM off.

Either way, do the legwork, get your waivers signed and sleep better as your home improvement progresses.

An unfinished job. Check.
Materials that are breaking already. Ditto.
Sub-contractors at your door because the General Contractor didn´t pay them. Your project just keeps getting more and more interesting, doesn´t it?
And let´s not forget the mechanics lein you now have against your property…

There ARE ways to protect yourself.  Certain warning signs stick out like a sore thumb; it makes sense to look out for them.  Keep your eyes open, be cautious, and stay aware, and you should avoid any major issues with your project.

Be wary if the contractor:

• Tells you that a written contract isn´t needed.
• Only accepts cash as payment.
• Gives you a verbal estimate on the spot without thoroughly looking at a complex project.
• Has no established business address beyond a P.O. Box. How do you find them if something goes wrong?
• Won´t give you any referrals of previous clients.
• Asks you to get the required building permits. This may mean that they are not licensed or have some type of problem with the licensing office.
• Tries to pressure you into making a decision immediately.

If not, ask somebody. Anybody. Your barber, your accountant, your grocer… almost everybody has had or knows somebody who had a bad experience when hiring a contractor to remodel.

But you dont have to make the same mistakes.  There´s certain steps you MUST take before you sign that contract.  Follow these recommendations and you´ll dramatically decrease the likelihood of a botched job.

1. Get between 3 and 5 written estimates, with 3 being the bare minimum.

Make sure the estimates are IN WRITING.  This is important:  its not uncommon for the price to “unexpectantly” go up once work has been begun.The more contractor estimates you can get, the better position you´ll be in.

2. Only use licensed and bonded workers.

Go to your local licensing board website to make sure your contractor is suited for the job.  Some of the information you should look for there would include:

• Whether the contractor is licensed to do the type of work you require
• If the contractor has a surety bond
• Verify that the contractor has current liability insurance and worker´s insurance

3. Ask questions

Some questions you probably want to ask each remodel contractor you´re considering :

• How long have you been in business?
• Do you have experience with remodeling jobs such as this?
• Do you have references of similar jobs I can check on?
• How many jobs do you currently have going? How many workers are used to manage those jobs?
• Will you be working or just supervising? If your only supervising, how often will you be on-site?
• How often do you communicate with your customers as the job is progressing?
• The last time you had an unsatisied customer, what went wrong and how did you correct the situation?

Find out as much as you can about your contractor before agreeing to any work order.

4. Check for complaints.

The licensing board should also have information about any complaints filed against the contractor.

You also want to check with the Better Business Burea and Chamber of Commerce.  Its best to check as many places as possible in order to be safe (and not sorry).

5. Ask for references, and check every one of them. Go to see similar jobs the contractor has completed.

• Were the customers happy with the job?
• Were there any delays/missed days/etc. ? Was the deadline met as agreed upon?
• Was the contractor prompt and curteous about returning phone calls?
• Was there any price overruns and, if so, how come?

One question I ALWAYS ask:

“It sounds like <contractor> did a great job for you. Im curious, if he could´ve improved on one thing on this job, what would it have been? ”

Sometimes you dodge landmines by asking this simple question.

6. Once you´ve found a suitable remodeler, get the contract in writing

This sounds like common sense, but you would be surprised how many people dont get a contract because they don´t want to “insult” the contractor.

Do NOT make that mistake.  In the case of a dispute, without a contract it will be your word against theirs. Never a good situation.

Make sure your contract is clear, concise, and clearly describes the work to be done and the compensation involved.  Some of the most common things you want included would be:

• Clearly state that the contractor will clean up after the job and be responsible for any damages incurred
• How changes to the agreement (change orders) will be handled.
• Spell out the work and the materials to be provided. Be as specific as possible with the materials to assure a certain level of quality.
• The projected date of completion and what recourse there is for missed deadlines.
• The payment schedule.

7. Use milestones to mark your payment schedule.

I suggest that, assuming the project is big enough, you split up payment dates into at least 3 milestones.  This will help protect against loosing all of your cash if the contractor doesnt finish the job or is doing it badly.

8. Inspect the work frequently.

This is the only way to make sure that the project comes together as agreed, on time, with the quality you have in mind.

Now this doesn´t mean to be a pest… we dont want an angry contractor remodeling our bathroom.  Dont be a babysitter, just be a responsible BOSS… because at least in this situation thats what you are.

Good luck on your remodeling project!