Licensed or Unlicensed
Most landlords probably use unlicensed vendors more often than they use licensed contractors. The reason for this is simple - they're often cheaper. There is probably nothing inherently wrong with using unlicensed vendors for many routine non-critical tasks so long as you are aware of the risks and take the necessary precautions to protect yourself.
There are certain advantages to using licensed contractors. Sometimes these advantages outweigh the one major disadvantage - cost. However, sometimes an initially perceived lower cost turns out to not be lower after all because the unlicensed vendor may also be less skilled and less experienced.
Although not every advantage applies in every state, the re are numerous advantage s to using licensed contractors .
Independent Contractor or Employee
Whether you are hiring a licensed or unlicensed vendor, it is very important that the vendor be legally considered an independent contractor rather than your employee - unless you do in fact intend for him to be an employee.
The fact that the vendor might be considered an employee, even though that was not what you intended, can become a serious issue in a number of ways.
So, how do you avoid this risk? First, understand the legal definitions of an employee and an independent contractor as defined by these agencies. Second, if there is any doubt about the vendor's status, require that he sign document regarding his independent contractor status. Two samples of Independent Contractor forms are provided on our Forms Web .
Additional discussion regarding hiring vendors is found on our Maintenance Madness page.
Licensing Requirements
You should determine the licensing requirements of your state.
Find Contractor Candidates
If you are undertaking major construction or remodeling, or repairs it is important to use a contractor with significant experience in the type of construction, remodeling, or repair that you need done. A contractor may be very good at building garages, but know little about the intricacies of remodeling kitchens or bathrooms.
The best way to select a contractor is the same as the best way to select a dentist, lawyer, real estate agent, or veterinarian; by having personal knowledge of the individual and of his abilities and experience.
The worst way to choose a contractor would be to choose one at random from the yellow pages or based on the size of their ad. It is not exceedingly difficult for anyone to obtain a contracting license in even the most highly regulated states.
Interview Candidates
When interviewing a contractor, be sure to give each contractor the same information regarding the project. For larger projects, detailed drawings and specifications allow the contractor to more accurately estimate the cost and length of time involved, so it is usually best to have at least basic plans drawn up by a designer.
When you interview the candidates, you should seek answers to a number of specific questions and request certain information. The answers to most of these questions can be verified by the agency that licenses and regulates contractors in your state or by documentation provided by the contractor.
Verify Credentials
Call the state regulating agency to validate the license number, experience, record, etc. Many states provide this information directly from their Web sites. It is also constructive to review the licensing requirements of your state, as the value of being licensed is directly related to the degree of difficulty in becoming licensed. Contact the Consumer Protection and/or the Better Business Bureau to see if any of the contractors have been named in lawsuits or have otherwise been subject to complaints.
Check References
Call all references and ask a number of specific questions.
Check A Work Site
If possible, visit at least one previous work site, preferably where work similar to your project is currently underway.
Select Candidates
Hopefully, there are at least two, preferably three, from those you have interviewed who you liked and who checked out as being well qualified.
Obtain Estimates (Bids)
Now that you have two or three contractors who all seem highly qualified, you should next review the project in detail with each candidate contractor.
Review and Choose An Estimate
Once you receive all estimates, take time to compare them. There are a number of steps that must kept in mind before you make your decision .
Contract Information
Written contracts are essential when hiring a contractor for a major project. A professional contractor has a responsibility to provide a written contract with detail on all work to be completed. Having all of the information in writing helps minimize possible problems during the project and after the work is done.
Contract Information Checklist
Read the proposed contract carefully. There are a great number of items that should usually be in a contract.
Insurance & Legal Issues
Whether the project is large or small and whether you are using a licensed or unlicensed vendor, there are certain things that should be considered because ignoring them can be costly, in some cases result in financial losses that are far in excess of the cost of the project itself.
Liability Insurance
If your vendor, licensed or unlicensed, is doing any work that has a potential for causing injury or damage to others, including the tenants, be sure to confirm that he has adequate liability insurance.
Workers Compensation
This issue can be just as important as liability insurance.
Building Permits
Improvements made without the required permits can have an impact in a number of ways.
Building Codes
Improvements that are not performed in accordance with building codes can have an impact in a number of ways.
The above topics are discussed in much more depth
on our members' Selecting a Contractor page.
Non-Members' Homepage
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