Paying Contractors

Property builders commission project contractors to do their building project, or a component of the project. Contractors may be an individual, a group, or an organized contracting firm who supply the manpower.

Claims on failure to pay contractors can result in serious problems. In many states, the contractor's right to sue is always recognized in cases of payment default by the property owner or developer. In this case, big project builders are protected by credit insurance, but small project builders cannot afford to acquire insurance protection, like families or individuals remodeling a home or a small firm refurbishing an office space. Fortunately, a number of simple precautionary measures are available.

1. The most important step is the first step: Choose reputable contractors, whether an individual or group. Do not rely on Yellow Pages listing, instead, ask around. Friends, neighbors and other companies may have a worthy word or two to say about the contractor you are considering. Get at least three bidders for your project before signing up the best one.

2. Have a contract stating the start date and end date of the project, payment terms (rate, intervals and mode) and agreement on materials procurement and permit payment. Attach an option for cancellation at least three days on the project start date, which is your right as a consumer, as well as a contractor lien waiver, which protects you from possible claims right to your property by the contractor.

3. Do not make full payments, even if the contractor entices you with a discounted rate. Instead, pay in increments (down payment, middle-term payment and final payment) to ensure the agreed details are followed in every payment phase to save you on time and costly litigation for unfulfilled project specifications.

4. Choose the appropriate payment method that will give you proof of payment. Issuing checks will give you paper-trail and bank transaction record against cash where receipts between you and the contractor are the only proof. Bank records will always reconcile billing disputes and will stand strong in claims litigation.

5. Keep payment records well-organized in a safe place. There is no stronger proof of payment than the actual receipts that are in good condition, clearly date-stamped and duly signed by all parties involved.