Revealing General Tips
About Working with General Contractors

By Nina L. Kaufman, Esq

"Sallie" was nervous, but excited. She had found the perfect space for her growing PR firm - near the center of town in an area that wasn't yet high-end (so the rent was still affordable), but up-and-coming, with a vibe that fit her creative personality. The raw space had a lot of potential, and the designer's plans made it seem fabulous. The contractor the designer had recommended wasn't available for the work, so he recommended a buddy. They agreed on the specs and the contractor went to work. Six months later, the contractor still wasn't finished with the work that should have taken two, Sallie's landlord was v-e-r-y displeased. . .and Sallie was still out of a "home" for her business with no end in sight. What could she have done differently?


Short of dealing with a lawyer, there are few relationships that inspire more dread and trepidation for business owners than working with a building contractor (building a sophisticated website probably ranks up there, too). Get a handful of people in a room, and you'll have nightmare stories to keep you occupied for a month! Shoddy workmanship, ballooning budgets, cut corners - all raise the hairs on the back of your neck, because they all mean lost profits, missed opportunities, and a total disruption to your business rhythm. Here are the top five (5) guidelines that could have helped Sallie minimize her risks:

  • Don't hire a pig in a poke. Rather than relying on the original contractor's recommendation alone, Sallie should have done her homework. This includes getting references from at least three people who have used your contractor. If possible, visit the job sites. Ask the contractor for projects completed within the past 2-3 years to see whether hidden defects surfaced after the work was finished. Also, investigate whether any complaints against your contractor have been filed with the Better Business Bureau, Department of Consumer Affairs, and/or Attorney General. Find out if the contractor has been involved in litigation, as this may show a history of dissatisfied customers. If you can, obtain a credit report to see if your contractor is solvent.
  • Find competent advisors. It is essential to hire both a lawyer and an architect (or designer) who have experience dealing with these kinds of projects. Why? Because many contractors either do not use formal contracts or use form contracts like those from the American Institute of Architects (referred to in the industry as "AIA Contracts"). By their nature, AIA Contracts leave a lot of items open-ended -- where you either need to supply information or choose among options. Your architect/designer can ensure that your agreement with the contractor specifies the project scope in sufficient detail; your lawyer can ensure that the contract adequately protects you, should all not go according to plan.

     
  • Be crystal clear in setting expectations. Vagueness is the primary reason that so many relationships with contractors go awry. Be sure that you and the contractor agree on: the scope of the project; work deadlines; the total cost of the project; what will and will not be considered "extra costs"; the timing and amounts for installment payments; who decides when installment payments are due; and when interim inspections occur and who makes them. Most importantly, be sure to discuss what will happen if the contractor does not perform as promised - either in terms of quality of work or time frame for completing it. This is an area where Sallie could have protected her "down side."

     
  • Obtain landlord approval. Most commercial leases require landlord approval for any alterations to your premises. Therefore, make sure that your architect/designer provides the landlord with the same detailed project scope that will be included in the agreement with your contractor. Be sure that all significant parts of the job are included, because your landlord may approve your initial plans but refuse to approve something you want to add later to the project. Also, confirm whether the landlord will require building permits -- even if your alterations generally wouldn't.

     
  • Keep your eyes and ears open. Your architect/designer should visit the project frequently to ensure that the work is proceeding as scheduled and the materials meet the quality required and promised. Be sure that all plumbing and electrical work is properly inspected before the contractor covers it by walls or cabinetry. Check to see that there are sufficient workers on site to complete the work timely; inquire whether all workers and any sub-contractors are properly licensed and paid timely, as the failure to do so can embroil you in litigation or other costly delays. Do not be afraid to ask questions of your contractor, as it's crucial that you stay informed and closely supervise these kinds of projects. Be sure that you understand the answers your contractor gives you.

Expect the unexpected. No matter how well you follow these guidelines, things can and do go wrong. Build flexibility and cushion into both your budget and your deadlines so that you can plan for any hiccups that may arise - and keep the nightmare at bay.

 

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© 2004-2009 The Legal Edge LLC.  Want to save time, money, and aggravation with pesky business law issues? Award-winning business lawyer and Entrepreneur Magazine online columnist/blogger Nina Kaufman has user-friendly business law resources for entrepreneurs that demystify legalese. Get your free copy of her Entrepreneurs Business Law Primer from GreatBusinessLawResources.com today!


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