Subs and suppliers expect to be paid on time. That’s a problem when an owner is slow to pay the prime contractor. So what are you supposed to do about slow-pay? The obvious answer is a “pay-if-paid” clause in your subcontracts. With “pay-if-paid,” a prime contractor doesn’t have to pay subs until paid by the owner. That’s legal in about half of all states. If you’ve never used a “pay-if-paid” contract clause, keep reading. There’s a lot to learn.
Craftsman Book Company
Seventeen states have made changes to their construction contract law in the last few months. My partial list is below. Some of these changes are trivial. Others will affect contractors throughout the state. Don’t expect to find much on this list that makes your life easier. That’s not how it works. Most changes in the law make it harder for contractors to earn a living.
I like arbitration. Contractors tend to get a fair shake when they arbitrate disputes. Arbitration is usually faster and cheaper than a lawsuit. Another advantage: Most construction disputes are questions of fact, not law. You need an arbitrator with common sense, not a judge and two attorneys with law degrees. Maybe the best reason to arbitrate: It puts the owner’s attorney at a disadvantage: Your dispute isn’t going to court. Threatening to sue is pure hot air. If your construction contract requires arbitration, no court will hear the dispute.
Home improvement projects in Pennsylvania got more complex last month. I’ll explain what changed. But first, a little background.
Pennsylvania’s Home Improvement Consumer Protection Act (HICPA) became law on July 1, 2009. The law had teeth. Home improvement contractors had to register with the Attorney General. Every job over $500 required a detailed written contract with 13 notices and disclosures. Time and material contracts were illegal. A contract that didn’t comply with HICPA was “void and unenforceable against the owner.” That means contractors had no right to collect. Violation of the Act was consumer fraud and carried heavy penalties.
When was the last time you had a pleasant surprise on a construction project – something that cost less than estimated or was easier than expected? It’s probably been a while. Most surprises are bad news – extra work and higher cost.
If you know a way to eliminate surprises, congratulations. You’ve got a rare gift. The rest of us have to deal with the unexpected. And that’s what I’m going to explain.
You’ve heard an owner say, “I’m not going to pay until . . .” or “I’m a little short right now because . . .” or worse, “My attorney tells me . . .”
Words like that are serious when a progress payment is late. But while work is still under way, you’ve got plenty of leverage. For example, you could walk off the job until payments are brought current. Continue reading
You finished the job last week. This week you get a call from the owner:
The floor squeaks -- or a door or windows doesn’t close quite right -- or there’s a wet spot on the ceiling -- or a pipe in the basement is leaking.
If you’ve been in construction for a while, you could add more examples to my list. So what should you do when you get a call-back? I’ve got a suggestion -- a suggestion that could save both your reputation and some grief.
Insurance is like a hard hat – a good choice on nearly any construction project. But many contractors don’t have full coverage. Let’s take a realistic look at a contractor’s insurance options.
We’re talking about two types of coverage; liability insurance and workers’ compensation insurance. Liability insurance protects the general public. If there’s a loss and if the contractor is at fault, the liability insurance carrier steps in. Workers’ comp covers employees injured on the job.
Warranty isn’t a popular topic with contractors. Warranty claims come in two sizes, expensive and even more expensive. Worse, no one wins a warranty dispute. And there’s almost nothing a contractor can do to avoid warranty claims. Better to cross your fingers and ignore the subject.
If that’s how you feel, keep reading. I’ll offer another viewpoint.
Once a month or so I give a talk to a class of young men and women studying for careers in construction. I usually make a point that wasn’t true 50 years ago but is true now without question. Construction is a heavily regulated industry.Government takes an interest in every construction project, from the moment the contract is signed through final inspection. You could probably cite a dozen examples. I’ll mention just one.
All states set standards for construction contracts, especially residential construction. And among residential jobs, home improvement gets the most scrutiny from government. A prime example: Six states prohibit time and material (“cost plus”) contracts for home improvement work: