5 Ways to Protect Yourself when Hiring a Construction Contractor in California

Many of the problems that are caused by Construction Contractors in California are the result of poor workmanship, lack of supervision and a lack of financial resources to stand behind their work, when the work is defective or substandard. While these issues are difficult to prevent, these issues provide a series of inquiries and steps that an owner or developer can take when hiring a contractor. 

1. Are they licensed

This may seem like an obvious question, but many contractors have lapses in their licenses, and rely on the licenses of others to comply with the State licensing requirements. When the contractor is a corporation, the corporation would not technically hold the contractor’s license. Rather, the actual license holder would be a person, the licensee, who is associated with the company as a Responsible Managing Officer or Responsible Managing Employee, that is RMO or RME. Before hiring any contractor, and in particular, a contractor that operates through a corporation, one would need to know who the RMO or RME is, how long they’ve been with the company and what their experience is. The RMO or RME is responsible for exercising direct supervision and control of the construction operations, which under Business & Professions Code § 7068.1, includes supervising construction, managing construction activities by making technical and administrative decisions, checking jobs for proper workmanship or direct supervision of the work site. The RMO/RME’s duty of supervision is imposed by law and is non-delegable and the RMO/RME is not relieved of the supervisory duties by entrusting them to an independent contractor. In other words, the contractor cannot simply entrust the supervision of the work to their subcontractors, or the City inspectors. They bear the responsibility of direct supervision of the work and it’s important to find out at the outset who tha. t will be, and whether they’re able and committed to being on your construction project jobsite in a direct supervisory capacity, or not. Many take on numerous jobs and don’t have sufficient time or RMO’s to properly direct and supervise the work, and simply drop by from time to time, and then expect the subcontractors to supervise themselves, and depend on City inspectors to identify problems.  Find out in advance who will be supervising the work, what their understanding is of their supervision responsibilities is, and whether they’re committed to direct supervision of the entire project. 

2. Are they Insured

Insurance is critical. The contractor must carry insurance and provide you with a copy of the Certificate of Insurance, and must provide copies of the renewal for each year the project is underway. Often these policies provide insufficient coverage because the contractor insures multiple projects with one policy, thus exceeding the project limits, and exposing your project to a lack of insurance. Also note, that these policies only cover specific types of resulting property damage, and do not cover errors or omissions such as defects and deficiencies that have not resulted in physical property damage or bodily harm. It’s also vital that the contractor only hire subcontractors with sufficient insurance coverage also, to provide insurance coverage for property damage or bodily harm resulting to other property from their operations. And, since insurance only covers property damage, one must inquire as to the financial viability of the contractor, both personally and within his contractor corporation or LLC, to be certain or at least reasonably assured that the contractor has the financial capacity to stand behind the work, to repair or reimburse for the cost to remedy all defects, not just property damage, and who has a history of standing behind their work and doesn’t have debts, liens, judgments, CSLB complaints or lawsuits arising from their work, or disputes with unpaid or the use of unlicensed subcontractors. 

3. Background Check

Some simple background checks are essential before entering into construction contracts for a significant amount. An online check of their license with the CSLB, and whether there are any complaints or outstanding issues, will give you important background information, as well as identify the license hold, RMO/RME names and dates of their affiliation. Contractors who switch RMO/RME’s frequently should be noted. Contractors with multiple projects and one license holder may not have the capacity to directly supervise the work. An online name/party search of the Los Angeles Superior Court records will show any lawsuits pending or past-resolved in the Los Angeles County Courts. These searches cost $1 and are extremely useful. Similar searches can be done in neighboring counties as well. An online search can also be performed on the California Secretary of State website business portal to get basic formation and status information on entities such as corporations and LLCs. And, finally, asking the contractor whether they have been involved in any lawsuits or CSLB complaints is a vitally important question. 

4. The Construction Contract

The California Business and Professions Code § 7159 contains a number of specific requirements that certain “Home Improvement” construction contracts in California must have. The requirements for arbitration provisions are contained in Business and Professions Code § 7191. Many contractors insert boilerplate arbitration provisions in their contracts which do not comply with the requirements and are therefore not binding or enforceable. Perhaps the best, most detailed, most complete and most fair and balanced contracts are those issued by the American Institute of Architects, AIA contracts are available online for purchase and cover the essential elements of a construction contract, including the most important, scope of the contract, duties of the contractor, contract documents and plans, specifications, costs and payment, change orders, which must be addressed and adhered to, time for completion and dispute resolution. The use of AIA contracts for construction contracting either directly or as a template is highly recommended. 

5. Disputes and Construction Defects

When disputes with a construction contractor arise, or when construction defects are discovered, contact Timothy Norton for an in-depth evaluation of your dispute, the defects and your avenues to recovery. Whether your project is completed or still in progress, you need to know what your rights and remedies are, and the best course of action. With 34 year experience handling and resolving disputes and construction defect claims against contractors and their subs, with us, you’ll be confident you’ll have the experience and the sound and strategic advice to protect your investment and your property. 

Timothy Norton has 34 years experience in construction defect and real estate litigation. $190m in jury verdicts, $70m in punitive damage awarded, and millions more in settlements. Norton & Associates has 2 office locations in Los Angeles, Downtown and Manhattan Beach. Call or write today for a consultation: Tel: 310.706.4134. Email: [email protected]. Or visit us on the Web at: constructiondefect.com.

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