As I sit down to write my annual list of resolutions for contractors, I am amazed at how much things changed in 2020. Construction was going well and then, in March 2020, COVID-19 hit. At first, we thought it was going to be a disaster for the construction industry. States, cities and towns shut down projects and many applied for PPP loans. Then, something amazing happened. Construction was considered an essential service and everyone was back to work.  That said, the work world changed: companies were donating their PPE to frontline workers, COVID-19 protocols had to be followed and paperwork had to be filed. Everyone was scrambling to figure out how to comply and keep their businesses going. So, you may or may not ask, what was I, as a construction lawyer doing? I spent March and April thinking about the new risks contractors/construction companies were facing and developing contract clauses to protect the industry. I wrote a number of blog posts with clauses to add to your contra

Contractors-What to do in a Bad Economy

The construction industry is in a terrible state right now, and I know many contractors who are suffering the worst downturn in work in their careers. Now, more than ever, contractors need to protect themselves when they undertake projects and make sure they are operating their businesses correctly.

In my practice I see many distraught owners who want to file claims against contractors. They are now willing to fight over less and less money and their general level of anxiety has risen.

The best contractors recognize that maintaining good client relations is the best way to stay out of trouble, ensure future referrals, and stay in business. Particularly in this economy, this is not the time to ignore phone calls, disappear from the job, hit consumers with unexpected change orders and extra bills and cut corners. Many builders do not realize that their best source of future business is their current clients.

So, keep the following in mind:

1. Keep the lines of communication open at all times. Make sure you manage your clients' expectations. Let them know that the project may go over budget and that they should allocate for that. Address problems early before they accelerate.

2. Make sure you have a good contract that protects you. Include a provision that allows you to collect your attorney's fees if you have to sue a client for payment. Most of the contractors I meet with do not have this clause in their contracts. They are shocked when it costs them two-thirds of their payment in legal fees when they have to sue a client for their fees.

3. Follow the law. Would you drive a car without a license? There are so many contractors who do not have the proper licenses for performing their work. Do this at your peril. It will catch up with you at some point. In addition, make sure you know the requirements of the building code for your state. Code violations provide excellent evidence against you in a lawsuit. I know of a contractor who sued a client for a $7000.00 payment who ended up with a $130,000.00 judgment against him because he did not follow the law.

4. If you run into a dispute with a client, and you have committed a violation of some sort, resolve your disagreement quickly and protect yourself for next time. You may have to "eat" your fee in order to keep from suffering further consequences.

When business is slow, it is time to review your contract, brush up on the building code (Massachusetts recently published the 7th edition of its code), check the status of your licenses, and check in with former and current clients. If you do your housekeeping now, you will greatly reduce your worries when business is booming and you are too busy to pay attention to these important tasks.

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