Richard [MI], or any others.

Richard [MI], on Mapleaf18's post, you had mentioned about contract clauses. I really enjoyed your detailed reply on Mapleaf18's post and have printed it out for future reference to put in my Mr.LL Bootcamp binder.

Would you mind sharing what you will on contract clauses?

6x6,

Contract clauses relating to work between owners of property and contractors are somewhat universal around the country in general, but each state likes to throw in their special things. One thing you might do is look up a local law library (often found at colleges that teach law degrees or maybe at your library or courthouse). If you have any friends or connections that are lawyers, you should be able to get a "boiler plate" basic contract that is ok in your state.

It's in the fine details and expectations between the owner and the contractor or the worker where the problems often develop -- and that's with honest contractors. When you don't get specific about the details and the timelines for completing the job and don't do followups to assure the materials specified are used or that something gets 2 coats of paint plus a coat of primer or a hundred other things that real problems arise.

Now shyster contractors and workers could care less about anything that's on paper. They are crooks, thieves and worse. The same can be said for many owners who are the same way.

As a decent, honest owner, what you want is a job done as agreed, for an agreed price with a guarantee. You want to make sure all material suppliers, workers and subcontractors are paid in full and sign a lien and materials release BEFORE you release funds to the general contractor or workers. Sometimes there may be a "conditional lien release" which basically becomes unconditional (that is, no conditions on it) and these are subject to the check for payments clearing. Be careful on this because crooks will fake the releases, pocket your money and not pay material suppliers or workers or subcontractors and you will be left owing all these people while the crook laughs and runs off with your money.

I'd say the best thing to do if your job is over a few hundred dollars is to find a good construction lawyer who does these all the time and pay them the price to make a good strong contract.

I would bet, from experience, that most any bad contractor or worker will refuse to go through signing something like that or would make it through a good though screening like you should give a prospective tenant. What the crooks want is the same as what a bad tenants wants - someone that goes on a verbal agreement and a handshake and can be talked into putting up half down.

From experience, just refusing to put up a big down payment is a major safety factor.

6x6,

A couple other things:

If you keep the draws small and definitely less than the amount of completion done, it makes the possibility of getting ripped off lower, but not impossible.

No matter how good you are, you will always find new ways to get ripped off. If crooks put half the effort into doing a good job right as they do in trying to figure new ways to rip you off, they would be millionaires.

Verify everything. When a contractor says they have paid materials and workers, call the material house and the workers and verify that they got paid and the checks cleared.

No good contractor should ever come to you and say they need payment or a draw to pay their workers that day or the next. They should have enough reserves to deal with that. Bad ones will give you a story and rush you for payment , usually on Friday morning, then take off at lunch, and hit the bars or casino. Later, the workers will be at your door about 5:30 demanding their money.

6x6,

Yet some more: Larger projects where there is bank or third party financing use a "dual control" system for payment. This is where the contractor submits a progress report showing they have reached a certain stage of completion as specified in the contract, submits all the material and labor lien releases along with their bill. The bank/lender then sends out one of their people to verify it - actually look at the job and check everything. THEN, after verification the bank cuts the check to the contractor.

Now this is not really practical on small jobs, but you can implement the same type of system yourself.

On the big jobs, often the payment is made on a net 30 basis, where the contractor does not get the check for as much as 30 days after verification by the bank. In these cases, the contractor often uses a "factor" to get the money earlier. A "factor" is a company, usually owned by a group of lawyers, who advance payments on these draws for a fee (usually about 2 percent when I was doing it). They check everything and pay the contractor about 80 percent of the draw, with the remaining balance, less their fee, when money is supplied by the lender. This way they make their 2 percent, the contractor has most of the ready cash quickly and it all goes smooth. However, when there is a problem, these lawyers are quick to sue and they add their hefty fees.

Communication is key.

Most LL I know, go with smaller, Owner / Operator types.

The same guy who comes out to price the job,

Thank you for the post 6x6 and Richard. I also wrote up a "hold harmless" agreement that I found templated online.

My thing is do not pay until you have a W-9.

Thank you, Bonanza. I agree.