Mon09012014

Business & Real Estate

Checklist for choosing a building contractor

There are several key questions in choosing a reliable residential building contractor.

Start with checking out a contractor's past work as well as any current projects, advises Bob Dailey, head of Los Altos-based R.J. Dailey Construction.

That means going back to projects completed five to 15 years ago, Dailey said.

"Often problems, defects or failures don't show up for several years after completion of the project," he said. "Several years of drought might leave undetected a weak flashing that could cause a leak in rainy years. Only the people who built five to 10 years prior can testify to the time-tested integrity and service mentality of the builder."

Dailey suggested asking a contractor's clients such questions as:

After the one-year warranty period did the builder make repairs enthusiastically and without charge?

If a subcontractor's work failed after the warranty period and the subcontractor failed to perform, did the contractor find a substitute subcontractor and perform the repairs at no charge?

When an architect-specified product failed prematurely, did the builder pursue the manufacturer and service and install a replacement product?

Be sure your builder has enough skilled office staff, and be concerned if he says he can handle all the office work himself, Dailey said.

He said that for any one project a clerical staff often needs to write 15-20 subcontracts, check each sub's insurance and license status, place dozens of orders for tens of thousands of dollars of custom-built materials, monitor delivery dates and expedite the problem-solve delivery dates, monitor and organize material invoices from suppliers, verify discounts, organize billings to owner, perform the builder's payroll duties and pay suppliers and subs.

What about deposits before work starts?

By law, Dailey said, the builder can only ask for $1,000 or 10 percent of the contract, whichever is less.

"It's customary for the owner to make progress payments based on work that has been installed," Dailey said.

Often with a custom home, a manufacturer requires a 50 percent deposit on custom-made products with a six- to 12-week lead time. "For large deposits, the owner should write a two-party check to the contractor and manufacturer/supplier to insure that the deposit is actually received by the manufacturer," Dailey said.

Dailey also suggested a few simple measures to insure that you don't end up legally bound to pay twice for the same product or service.

"Ask the builder how he assures you that payments you make to him actually get passed on to the subcontractors and suppliers," Dailey said. "Providing lien releases at the end of the project is not sufficient to protect you. The builder should provide you with lien releases for every progress payment made to major suppliers and subcontractors that you have paid the builder for."

The law requires subcontractors and suppliers to deliver to the owner, by hand or certified mail, a 20-Day Preliminary Lien Notice, that makes clear who is performing work on a project and may have a potential claim if not paid.

"Keep track of these notices," Dailey said. "If final payment is due to the builder and the builder needs this payment to pay his subs, make sure the contractor supplies you with a conditional release upon final payment from the sub that states this is a final release when he receives X amount of money. The issue a two-party check to the builder and subcontractor that insures that payment is made to the subcontractor."

Builders are required to give owners a document entitled "Notice to Owners," Dailey said. The document advises that you can require a payment and performance bond from the contractor.

"In reality," he said, "few, if any, bonding companies will write payment and performance bonds for residential remodeling contractors. To protect yourself, require the contractor to provide lien releases from subs and suppliers for every payment you make to him and you will save yourself the cost of the bond."

Before any work begins on your project, make sure you have a certificate of insurance showing evidence of the contractor's liability and workers' compensation insurance, Dailey said.

"Note the expiration date on the policy and make sure the contractor's policies are valid throughout the project, not just at the start," he said.

R. J. Dailey Construction is located at 401 First St., Los Altos, telephone 948-5196.

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