Posted on Tue, Apr. 01, 2008

Planning a home improvement project? There is a lot you need to know before diving in.

Action Line has heard endless horror stories from homeowners who invested thousands into a seemingly straightforward repair or upgrade that somehow devolved into a nightmare. The surprising part is that, most of the time, the problem boils down to what the homeowner didn't do.

In this Mini-Guide, we'll outline some simple but direly important steps you need to take to protect your investment -- and your sanity.

CHOOSING A CONTRACTOR

• References: We can't emphasize enough the importance of good ole recommendations. While going on someone else's good experience is not enough, it is easily half the battle. Ask close friends, trusted neighbors and family who they hired and whether they were happy with the work, service, price and communication with the contractor.

In addition to word-of-mouth references, find out how other homeowners graded particular contractors in your area at www.AngiesList.com. Subscriptions are month-to-month ($22.50 the first month, $7.50 additional months), annual ($59 plus $15 sign-up fee) or longer. You can also call Angie's List, toll-free, at 866-887-6166.

Complaints lodged with the Better Business Bureau of South Florida (www.bbb.org; 561-842-1918) can also provide some insight on a company's dealings. Scrutinize the nature of complaints and a company's resolution history.

• Get multiple estimates: Do not hire the first contractor that comes along. Get at least three estimates from different companies, more for a major job such as an addition. Ask what's included in the price and get it in writing. This is also a good time to get the contractor's license number and ask whether he or she is licensed by the county or state. (If they can't give you one, send them home on the spot.)

• Check legal status: The majority of construction jobs -- roofing, shutters, electrical, plumbing, to name a few -- must be done by a licensed professional. Unlicensed contracting is a criminal offense. To ensure accountability, companies operate under the license of one person, or "qualifier," usually the owner or another principal of the company.

Licensing can come from the county or state you reside in and requires that the qualifier has demonstrated experience and passed a test in order to be qualified by the licensing authority to do specific kind of work, within the authority's jurisdiction. For example, contractors licensed only in Miami-Dade can't work in Broward and vice-versa; state-licensed contractors can work throughout the state.

Perhaps the single most important thing you do before hiring contractors will be verifying his or her licensing status and official complaint history. This can be done online or by phone:

In Miami-Dade, the Building Code Compliance Office is the licensing authority for construction contractors; www.miamidade.gov/buildingcode, 305-375-2901. In Broward, check with Building Code Services: www.broward.org/building, 954-765-5075. Contractors licensed by the state are under the authority of the Department of Business and Professional Regulation, based in Tallahassee; www.myflorida.com/dbpr, 850-487-1395.

Note: In Action Line's experience, county licensing authorities have proven much faster and more effective at addressing and resolving homeowner complaints than the state DBPR. Most large companies are licensed by the DBPR, but because it is painfully slow to take action when something goes wrong, we recommend you take that into consideration when choosing a contractor.

• Check for insurance: Ask your candidates for proof of liability and workers' compensation insurance, which they are required to carry by law. Workers' comp coverage can be easily verified online at the Department of Financial Services website www.fldfs.com/WC; click on the "Proof of Coverage Database'' icon on the right-hand side. The last thing you need is a lawsuit from a fallen roofer.

NEGOTIATING THE CONTRACT

• Reading the fine print: From the estimates you've gathered, you should have an idea of what will be included in the job. To be sure you're getting what you bargained for, take a look at the contract before you sign it. Sounds simple, right? Unfortunately, too many people don't take the time to find out what they're getting into -- and end up paying dearly for it.

The contract must have the company's name and license number on it, as required by law. Ask that they itemize material and labor costs, and get an outline of when payments will be due. NEVER pay the full contract price up-front.

• Installment schedule: For payment arrangements, we generally recommend the 30-30-40 approach: 30 percent upon signing the contract, another 30 after an inspection or halfway point, and a final payment of 40 percent upon passage of final inspection by building officials. Alternately, if a job requires several steps (as does roofing), you can break it up into 30-30-30-10, with the final 10 percent due upon final inspection. Industry norms vary -- shutter installers usually ask for 50 percent up-front to cover materials; gauge how others did it when you gather references.

• Get a timeframe: In the contract, ask the contractor to specify a timetable for the job. In periods of high demand or material shortages, such as after a hurricane, contractors may be more reluctant to commit to an end date. However, they should be able to give you a start date and, if they don't, they will be held to the state law that requires permits be applied for within 30 days of receiving a deposit totaling more than 10 percent of the contract price (state statute 489.126).

In times of high demand, if the contractor of your choice honestly tells you he won't be able to start for at least four to six months, you can either get in line and pay your deposit or ask if you can be put on a waiting list at no cost.

• Prevent liens: If the job requires work or supplies from an entity other than the company you are hiring, ask for a list of subcontractors and suppliers the contractor will be enlisting for the job. Florida's Construction Lien Law leaves homeowners responsible for non-payment to subs and suppliers. This means you could pay twice for the same job if your contractor heads for the hills with your money. Protect yourself from this disastrous scenario by getting a list of all subs and suppliers and making sure they sign to confirm they've been paid with each installment you give your contractor.

MONITORING THE JOB

As a homeowner, you shouldn't have to apply for the permits yourself or clean up after the crew. However, it is your responsibility to make sure the job is on track. Things to ask yourself:

• Have permits been applied for? Acquaint yourself with your local building department. It can tell you whether permits have been issued or whether they've even been applied for in the first place. It is public record and some cities have made permit information easy to access on the Web.

• Are inspections taking place? Once a permit is issued, it has to be prominently displayed on your property. Contractors will usually hang it on the door or tape it to a wall. At each step that requires an inspection, a building inspector will come and check the work, approving or disapproving it. Call your building department to find out the progress before handing over the next installment.

• Is anyone on the job? After permits are issued, if no work is done for 30 days, check in with the contractor. If you must, visit his or her office. After 60 days of no activity, send a certified, return-receipt letter to the company stating that, if work doesn't pick up within 30 days, the contractor's absence will be considered job abandonment, per state law. (For more details, look up state statute 489.126 at www.flsenate.gov.) At this point, you may file a complaint with the agency that licenses the contractor to seek restitution through mediation. If your contractor is county-licensed, the resolution process should take no more than a couple of months; if state-licensed, it could take years. (See Choosing a Contractor.)

• Are subcontractors and suppliers getting paid? Don't forget to ask your contractor for partial releases of lien from each sub and supplier involved in the job.

TYING UP LOOSE ENDS

• Make sure final inspection is approved before you hand over the final payment. Open permits can result in eventual fines from your municipality, and can also prohibit you from selling your home.

• Get a release of lien. After you sign the contract, the contractor will file a ''notice of commencement'' with the county recorder. Until the job is completed -- at which time the contractor must file a "release of lien'' -- that notice of commencement will also prevent you from selling the house.

WHEN THINGS GO WRONG

Even reputable, licensed contractors sometimes go bad. If your contractor disappears with $500 of your money more than work he or she performed, state law infers this as an intent to defraud. This can result in charges of fraud and/or grand theft.

To pursue recourse without hiring a lawyer, file a complaint with the county or state licensing authority. They have the power to mediate disputes and request restitution, or fine, suspend or revoke contractor licenses altogether.

If the county or state investigation yields a suspicion of criminal activity, the case is handed to the state attorney's office. It may die there. However, when several victimized homeowners come forward, the likelihood of prosecution is more likely.

If there's little hope of getting money back from the contractor, you may qualify for county or state funds. The Florida Homeowners Construction Recovery Fund is hard to squeeze money out of, but it's worth a shot. For details, visit www.myflorida.com/dbpr or call the DBPR (850-487-1395). Broward homeowners wronged by a contractor may be eligible for up to $5,000 in relief from the county; ask Building Code Services, www.broward.org/building, 954-765-5075.