Taking the First Step: Rebuilding Home After Fire

If you are one of the thousands of Southern Californians whose home was damaged or destroyed in the recent fires, this story is for you.

But we know you’re not reading it. You’ve got far more important things than newspapers on your mind right now. But maybe a relative, friend, co-worker--or even a lucky neighbor--can clip the story and save it for you.

Because sooner or later, once you’ve dug your life out of the ashes and jump-started it, you’ll be facing a huge challenge--repairing or rebuilding your home. And that means you’ll be working with a contractor or maybe lots of them.

To help you avoid the costly mistakes and misunderstandings that can bedevil any home construction project, we are presenting, today and on several Sundays to follow, edited excerpts from “What You Should Know Before You Hire a Contractor,” published by the Contractors State Licensing Board (CSLB). (For a free copy of the booklet, please see the informational box at the end of this story.)

Today, the topic is how to choose a reputable and qualified contractor.

Selecting a Contractor

There are some 41 types of contractors (plumbing, electrical, etc.), each of which requires a separate specialty contractor’s license. If your job requires three or more types of work, then the work should be done by a licensed general building contractor.

One of the best ways to select a contractor is to seek out personal recommendations from friends or relatives who recently had work of the type you want completed by a licensed contractor.

If the work you are considering is valued at $300 or more, a valid California Contractor’s License is required for the license category in which the contractor is going to be working. If you contract with someone who does not have a license, the contractors board may not be able to assist you with a complaint. A remedy in a complaint against an unlicensed contractor may only be available in civil court.

Check the Contractor’s License

Ask to see the contractor’s pocket license and some additional form of identification. The name on the pocket license should be the same as the name of the contractor or the business name under which the contractor is working.

It is illegal for a contractor to use another contractor’s license just as it is for someone to use another’s drivers license.

When you establish that the contractor’s or company’s name matches what appears on the pocket license issued by the Contractors State License Board, then call the board and ask if the license is valid.

Finally, if the contractor is operating with a valid license, you may also want to find out whether the person is a member of a professional or trade association that has a code of ethics or standards for their trade. Find out if members of the association have pledged to arbitrate disputes. You may want to contact the local chapter of the association to see whether it will act as an intermediary in case of disputes or arrange for an impartial arbitrator.

Arbitration is voluntary. If you want an arbitration clause in your contract, make sure the contractor you are considering will agree to arbitrate any disputes that arise out of the contract.

Check the Contractor’s References

Ask the contractor for local references and call them to see if they were satisfied with the contractor’s work. Look at finished projects. Some consumers even try to find jobs in progress to see how the contractor works and to speak with the homeowner about work habits, inconveniences and the sensitivity of the contractor to the living needs of the homeowner. Remember, the person you hire to work in your home will be a part of your home until the job is completed.

When speaking to the contractor’s customers, ask such questions as:

--Did the contractor keep to the schedule and the contract terms?

--Were you pleased with the work and the way it was done?

--Did the contractor listen to you when you had a problem, and seem concerned about resolving it?

--Did the contractor willingly make any necessary corrections?

Ask the contractor for the address of his/her business location and business telephone number, and verify them. A contractor who operates a business out of the back of a pickup truck with a cellular telephone may be difficult to find to complete a job or fix something that has gone wrong after the last bill is paid.

You may also wish to check out the contractor with your local building department, trade association or union, local consumer protection agency, consumer fraud unit in your city or district attorney’s office and the Better Business Bureau.

Call these organizations to see if they have information about the contractor you are considering. Ask how long the company has been in business and find out if there are any complaints about the firm or other relevant file information.

Don’t be fooled by a smooth-talking salesperson. Take the time and effort to make sure that the person or business doing your home improvement is going to perform in a professional manner.

Make Sure Contractor Has Workers’ Compensation and Liability Insurance Coverage

Ask the contractor if the company is insured against claims covering workers’ compensation, property damage and personal liability in case of accidents. Ask to see a copy of the certificate of insurance or ask for the name of the contractors’ insurance carrier and agency to verify that the contractor has this insurance. In California, workers’ compensation insurance coverage for contractors is required by law.

This is important for you as a homeowner because if a worker is injured while working on your property and the contractor does not have insurance, you are the one who is going to have to pick up the bill for an injured worker’s injuries and rehabilitation, if necessary. Don’t let your home owner’s insurance policy become your contractor’s liability coverage.

Check Status of Contractor’s Bond

Some bonds are designed to protect you against substandard work that does not comply with local building codes. Bonds do not assure the financial or professional integrity or competency of a contractor. For example, they do not cover situations such as a contractor who leaves town after doing only half the job.

Bonding is generally required for large jobs financed by institutional lenders such as savings and loans, insurance companies or commercial banks. In addition, many owners and lenders as well as other contractors require bonding. Bonds can be obtained from bonding companies for a percentage of the contract price, usually in the 1%-2% range. This should be recognized as a cost of doing business when a bid is submitted.

Bonds may be classified as:

Contractor’s License Bond--A bond with a surety company or a cash deposit of $5,000 with the state is required of all licensed contractors in California. Swimming pool contractors must post a bond or cash deposit of $10,000. This bond is not a guarantee of performance or competence or financial responsibility for the contractor.

Performance Bonds--This kind of bond guarantees the project’s completion according to the building plans and specifications. If the job is abandoned or the work is unacceptable, the bonding company has the option of hiring another contractor to complete the work or of settling for damages.

Payment Bonds--A payment bond assures the owner that no liens for labor and material will be filed against the property.

Contract Bonds--A contract bond guarantees both job completion and payment of all labor and materials. In general, the bonding company will not have to pay more than the face amount of the bond.

Consumers should realize that bonding requirements may exclude a new contracting business from bidding on desired jobs. Bonding companies will not take a risk without verifying the technical and resource capabilities of the bonded contractor. For a contracting business to qualify for bonding, it must practice sound business techniques.

Funding Control of Your Project

Even if your lender doesn’t require one, you may want to consider the use of a funding control company to disburse contract payments.

A funding control company is a licensed escrow company that specializes in handling funds for construction jobs. Instead of giving the money to your contractor, you give it to the funding control company, which then makes payments to your contractor, subcontractors or other companies that supplied labor or materials for your job. However, using a funding control company is not a substitute for a payment bond.

Caution: Funding control companies are not required to inspect your job to see if has been completed or the materials supplied. They generally provide vouchers for the borrower to complete and present to the funding control company as authorization to pay the contractor based on bills from the contractor. The borrower should be careful not to authorize payment to the contractor in advance of any work to be performed. The vouchers should be guarded as if they were checks used for paying bills and only signed and used as each phase of the project is completed.

In looking for a funding control company, check with your lender or your contractor for recommendations. For a small percentage of the contract price, a reputable funding control company will probably eliminate or reduce many of the financial problems that may arise on your construction project.

If you want a completion bond or funding control company, or both, make sure you clearly state this in the contract. If you need further information regarding bonds, contact your attorney.

Before you sign anything, call the Contractors State License Board office in your area to make sure the contractor is properly licensed in the class for which work is to be performed and the license is in good standing. You should also ask about the contractor’s disclosable complaint history and any prior legal actions that may have been taken against the contractor.

Complaint history information is available from the CSLB in Southern California by calling (800) 321-2752.

Free Booklet on Hiring Contractor

For a free copy of “What You Should Know Before You Hire a Contractor,” call the Building Industry Assn. of Southern California at (909) 396-9993 or write to BIA/Firehelp, 1330 S. Valley Vista Drive, Diamond Bar, Calif. 91765.