As law firm who handles a lot of real estate law matters, our office represents numerous contractors, subcontractors and suppliers in the construction industry. They are a great group of hard-working, trustworthy people. Because of our many relationships, we are often asked by property owners who have become dissatisfied in the construction process, to look at issues involving contractors, subcontractors and suppliers who we do not represent. Given the contractor issues that have been prevalent in the news over the past several years, we though it would be helpful to provide a few tips to avoid a disappointing experience:
Get References. Ask for the names of the last 3-6 people for whom they did work, and call them. Ask specifically if the contractor or subcontractor communicated well with them during the process and kept them informed. The biggest problems we see often deal with a lack of communication.
Licensing. Make sure the contractor or subcontractor is properly licensed. We’ve run across several situations lately where the contractor was not properly licensed in the State of Michigan. While you are checking on their license, ask if they are bonded. It doesn’t hurt to ask for documentary proof.
Get Estimates. Ask other comparable contractors or subcontractors for estimates. If you were to contemplate major surgery, you would probably seek a second opinion. The same holds true in the construction industry. Make sure you understand the proposed contract, and what you are paying for – and just as importantly, what you are not paying for.
Structure of payment. Do n’o pay for everything up front! Progress payments have many benefits for all parties. Require the contractor or subcontractor to provide you with a detailed sworn statement of expenses, justifying the payment request, as well as corresponding lien waivers for other subcontractors and suppliers. This is important to protect you as the owner with respect to potential construction liens.
Know Your Contract. Look at the penalty, guaranty, and warranty provisions. Talk to a real estate lawyer so you understand the risks and how certain contract terms can play out in a construction process.
Do Your Research. Be an informed owner and find out all you can about the construction process before you begin.
Communicate, communicate, communicate. Communicate well and work to resolve any issues as they arise. The contractor and subcontractors genuinely want you to be a happy customer, so communicate with your contractor or subcontractor to work through issues.
If you end up needing a real estate lawyer after a disappointing construction experience, it’s likely 
due to a breakdown over one of these issues. And if you really want to know, pick up the phone and call us – we’ll counsel you through the process and also give you some good references of contractors and subcontractors that we would trust with our own properties.
-JWB
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