1. Carefully Choose Your Contractor and Verify All Credentials
A Minnesota building contractor must be licensed with the state. Verify this fact independently by checking with the Minnesota Department of Labor and Industry (“DOLI”). Their license lookup tool can be found at: https://secure.doli.state.mn.us/licensing/licensing.aspx. You can also call DOLI and learn of any history of discipline. If the contractor is unlicensed when he/she starts working on your project and you suffer loses due to fraudulent, deceptive or dishonest practices by the contractor, you will not be entitled to assistance from Minnesota’s Contractor Recovery Fund.
Also, make sure the contractor has insurance in effect and has pulled the necessary permits BEFORE he/she starts work. Request a copy of the contractor’s insurance policy to make sure the insurance will cover the type of work being performed and ALL of the workers while at your house. If the contractor’s insurance does not cover his/her specific workers, or the type of work they are performing, the workers could sue you in civil court for compensation for their injuries.
2. Reduce ALL Agreements to Writing
Too often a case ends up in trial because the homeowner and the contractor each have an entirely different perspective on what was agreed to and the cost. Insist that everything be put in writing, even the simplest changes. If the contractor does not confirm in writing, send a letter yourself that simply confirms the agreement.
3. Verify Whether Sub-Contractors Will be Used
A subcontractor is someone who is not an employee of the contractor you hired who will perform labor or services at your home. These individuals can assert a mechanic’s lien on your home in the event the general contractor does not pay them. Generally speaking, a sub-contractor has an obligation to provide you with a lien notice within 45 days of starting work. However, there are exceptions. If you are unsure whether sub-contractors have been used, request the information from your contractor in writing.
4. Do Not Pay Everything Upfront
Most reputable contractors will not require a full payment upfront. Usually, payment of 50% is due up front, and 50% upon completion of the project. This gives you time to verify that all material-men and sub-contractors have been paid, and that the project has been completed to your satisfaction. Once you have made final payment, it is exceedingly difficult to get your contractor back to fix that small problem or detail, and you may be left paying additional money out of pocket for sub-contractors or material-men who were not paid.
5. Verify That All Sub-Contractors and Material Suppliers Have Been Paid
Under Minnesota law, you have 120 days from the last item of service provided by your contractor to make a final payment. During this period of time you should verify that all sub-contractors and material-men were paid and that they have provided “lien waivers.” A lien waiver is a form whereby they waive any right to a lien in the future. Although many unscrupulous contractors will tell homeowners that they must pay the final installment so the general contractor can pay the sub-contractor or material-men, that is improper. Under Minnesota law, a general contractor must first pay these individuals before paying himself. If the general contractor does not provide these lien waivers, do not pay the final installment and contact a qualified attorney.