The old saying, "If it sounds too good to be true, it probably is," can be especially true when hiring a contractor. Competition is fierce in the construction business and the consumer is in a good position to demand quality work at a fair price. But skimping on credentials is not the best way to get a job done cheaply. Hiring a contractor that is not licensed, bonded, and insured places the consumer at significant risk and can cost thousands more in the long run.
So what exactly does it mean to hire a licensed, bonded, and insured contractor? LICENSED
- The Washington State Department of Labor & Industries
requires contractors be licensed as either a general contractor or a specialty contractor, like drywall or painting. Licensed electricians, plumbers, elevator mechanics, and manufactured home installers require special certification, in addition to a license. The contractor's license number must be posted on any marketing materials such as their website, business card, or print advertising. Anyone can visit the Department of Labor & Industries website and search for a contractor
by name or license number. This search will tell you if their license and insurance premiums are current and if they have any judgments against them, as well as a lot of other information. Once licensed the contractor is bound to comply with state building procedures and standards. If a property owner hires a contractor that is not licensed, they may not be protected by state policies. There is often very little that can be done if an unlicensed contractor disappears from a partially completed job or does a job incorrectly. News stories are seen regularly of contractors disappearing with deposits or full payment in some cases, botched jobs requiring even more money to re-do them correctly, and sometimes much worse. In a down economy such as we are experiencing, many contractors have been forced for monetary reasons to let their license lapse. Construction companies have laid off many of their crew. These circumstances have resulted in many unlicensed contractors and construction crew willing to work for less and to be paid in cash. BONDED
- Contractors licensed in Washington State must be bonded. A bond
is essentially a pre-paid savings account with a bank or insurance company that sets money aside in the event a project is not completed according to the contract between the property owner and the contractor. This bond or agreement, binds the contractor to the contract with the property owner. If the work is not completed according to the contract the bond will cover any expenses (up to the bond amount) required to complete the job satisfactorily. General contractors are required to hold a $12,000 bond and specialty contractors a $6,000 bond. If the project is expected to exceed these amounts, the property owner can ask the contractor to post a performance bond
. A performance bond covers the full cost of the project and guarantees the property owner compensation for any monetary losses if the job is not completed according to contract. Only the property owner can make claims against a performance bond but it is important to ensure the contract is very specific about the work to be completed. INSURED
- Licensed contractors in Washington State must also have general liability insurance. Minimum requirements include $50,000 in property damage and $200,000 in public liability, or a $250,000 combined single limit policy. Damage to persons or property due to contractor negligence may be covered by this policy. In some cases, the property owner could be held liable for personal injury if the contractor does not have insurance. If the contractor has employees they are required to have a workers' compensation and industrial insurance policy. Contractor employees injured on the job would be covered by this policy. To verify if a particular contractor's employees are covered, first pull up the contractor details and click on the link to Verify Workers' Comp Premium Status
In addition to working with a licensed, bonded, and insured contractor, there are several other steps to ensure your home improvement project goes smoothly. Having a clear understanding of what you want done is important. The contractor must have a good understanding of your needs and wishes to provide a comprehensive bid and scope of work. This is especially helpful when interviewing multiple contractors to ensure estimates actually compare apples for apples. Speak with several qualified contractors and evaluate their written bids. A comprehensive estimate should include a scope of work, materials needed/agreed upon, subcontractors to be used, estimated time to complete the project, price, permit fees, payment terms, warranties, and procedures for change orders. For residential jobs over $1000, the contractor must provide the property owner a Disclosure Statement
outlining the customer's rights and responsibilities and information regarding liens. Once you narrow down your choices, speak with several references, particularly of jobs that are similar to yours. If possible, visit a job in progress. Once you have decided on a contractor and the project begins, meet with the contractor regularly. Make sure work is progressing according to the contract and schedule. Check that the proper permits have been obtained and required inspections are conducted. Once the project is completed, do a final walk-through with the contractor and make sure any pending items are completed before making final payment. If you request lien release
documents, avoid making final payment for work performed until you have received the lien release.