Craftsman Book Company

  • The Wrong Way to Close-Out a Project

    A few years ago, Eric Novelli, a Tennessee contractor, agreed to have Wagner Heating & Air install the HVAC system in a new 3-story home Novelli had under construction. There was no written contract.

    When work was done, Wagner called for final inspection by the City of Chattanooga. The inspector found no deficiencies. Two months passed. Novelli didn’t make a final payment on the job. Instead, Novelli showed up at the inspector's office with pictures showing what he claimed were defects in Wagner’s work. A senior building inspector re-checked the job and found some problems. Wagner made repairs and called for another inspection. This time, the entire system passed. But that wasn’t the end of the story. When Wagner presented his final bill, Novelli wadded it up, threw it away and told Wagner not to come back to the job. With no other option, Wagner filed a claim for $12,000.

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  • Contract Termination Your Way

    Earlier this month I got a question from a construction contractor negotiating a deal with the owner’s attorney. The attorney wanted a termination clause in the agreement. The contractor wanted the job but didn’t want to give his client the right to back out of the deal once work started.

    “Why even have a contract if the owner can terminate the job any time he wants?”

    Good question. But there’s a good answer. First, a few basics.

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  • The No-Contract Contract

    Construction contract law can be more than a little complex. Every state has different requirements – notices, disclosures, warranties, waiting periods, penalties. The list grows longer every year as consumer protection laws multiply. What’s a contractor to do?

    I’m going to have a suggestion a little later. But first I’ll offer an example of what not to do.

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  • Get the Name Right on Your Contracts

    In January of 2015, Nicholas and Monica Koudela selected Bill and Bob Johnson to build their new single-family craftsman style home in Willowick, Ohio. The Johnsons offered a contract to do the work for $227,200. The heading on the signed agreement showed "Johnson & Johnson Builders" as the contractor.

    Johnson & Johnson Custom Builders, LLC is a limited liability company licensed to do business in Ohio. The Johnson’s contract with the Koudelas omitted the words "Custom" and "LLC" from the company name. A little mistake. But it kept the Johnsons in court for two years, as you’ll soon see. Continue reading

  • Changes in Construction Contract Law for 2018

     Eighteen states have made changes to construction contract law in the last few months. Some of these changes are trivial. A few will affect nearly every contractor in the state. Here’s a state-by-state summary of the highlights: Continue reading

  • Should I Set Up My Own LLC?

    I’ve heard that contractors should do business as an LLC so they can’t be sued. Is that true?

    A conversation I had earlier this month answers the question.

    But first, let’s define some terms. Members of an LLC (limited liability company) get the advantage of limited liability (like a corporation) but have the option of paying tax as either a partnership or a corporation. The IRS considers a single-member LLC to be the same as the owner for tax purposes but a separate company for employment purposes. The cost of setting up an LLC to comply with law in your state will be at least several hundred dollars for filing and recording forms. Plus, most states charge LLCs a minimum franchise tax. In California that’s $800 a year plus a fee on gross revenue that adds another $900 for up to $500,000 in income.

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  • What Warranty Do I Have to Offer?

    Last week I got a question from a contractor who had read the June 2016 Consumer Reports article on home improvement. He told me that nine out of 10 contractors in the CU article claim to offer a written guarantee of their work. He wanted advice on the guarantee he should offer. My answer: “Fine. We can work up a written warranty. But understand that all your jobs come with a warranty already – even if you never breathe a word about it in the contract.”

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  • Can’t I Just Fire My Contractor?

    This blog is for contractors. But I get questions from owners too. The most common is “Can’t I just fire my contractor – order him off my property?”

    I had a question like that last week. The owner was disgusted when his home improvement contractor damaged the existing electrical system, didn’t show up for days and didn’t return calls. “Can’t I just fire this guy?”

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  • Directions to the Montana Supreme Court

    Mike Mandell owned a residential lot in Paradise Valley, just outside Livingston, Montana. It was a beautiful site for a home – overlooking the Yellowstone River. Mandell asked the Bozeman firm of Bayliss Architects to design his new home. Mandell and Bayliss met on the site and struck a deal: Bayliss would design a 2,000 square foot home that could be built for $170 per square foot. His fee would be 8-10% for architectural design and structural engineering. So far, so good. But Mandell had one more request. And this is where Bayliss got into trouble. Mandell wanted Bayliss to handle construction management. For an extra 7-10%, Bayliss agreed to act as project manager and general contractor for the job.

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