Litigation-I Win, You Lose vs. Mediation-Win/Win

Image
  Litigation is a zero-sum game.  It destroys relationships and fosters enmity between the parties.  Parties rarely walk away happy.  Even if they win, the expense of litigation is enormous, and collecting on judgments is difficult. Disputes ultimately resolve, but the focus on winning at any cost can lead to prolonged legal battles.  Living with a lawsuit causes ongoing stress, which can distract you from your business and even have an effect on your health. In a courtroom, the final decision lies with a judge or jury who may not fully grasp the complexities of the case. Parties relinquish control over the outcome, potentially leaving them dissatisfied with the final judgment. Mediation has the opposite effect.   Rather than polarizing people, it enables the parties to attack the issues and not each other.     The process promotes open communication, collaboration and problem-solving, which enables parties to actively participate in crafting ...

TEN NEW YEAR’S RESOLUTIONS FOR CONTRACTORS-2023

 

TEN NEW YEAR’S RESOLUTIONS FOR CONTRACTORS-2023

 

As I think about developments in construction in the last year, I would say that construction seems to have become more stressful.  Rising prices due to fallout from COVID-19 and inflation make money a more difficult subject.  Consumers are monitoring expenditures closely and contractors are having to account for price increases.  Trust between the parties is more important than ever.  Communication is paramount and transparency is key.  At the end of the day, running your business in a professional fashion is more important than ever.  My New Year’s Resolutions for 2023:

1.     Be An Educator     

Many people have never done home improvement projects before.  You have to teach them what to expect.  For example, I have seen many situations where homeowners want to bring in their own subcontractors or buy their own supplies.  You need to explain to them that you have your own subcontractors who you work with regularly who are trustworthy and dependable.  Your suppliers are also beholden to you.  They will make sure that materials arrive on time and in new condition.  Homeowners need to know that they are hiring you for your expertise, your team and your suppliers.  You don’t want them second-guessing your procedures or trying to do things on their own.

2.     Talk About Money

No one likes to talk about money, but if you are a business owner, you have to be prepared to discuss prices.  If prices are going up, homeowners need to be warned that their choices may become more expensive.  Both sides need to be flexible as price increases may require changes in scope.  Be open and honest about material and labor costs.  It’s better to be upfront about rising costs than to blindside your customers with a huge bill. That never turns out well.

3.     Set An Expiration Date For Your Proposals

Prices are fluctuating like crazy.  You do not want homeowners to sit on your proposal and then try to make you perform the work for the same price if a lot of time has gone by.  Say that proposals are good for thirty days and that prices are subject to change.

4.     Include Non-Disparagement Clause

I wish this were my idea, but I saw it in another contract.  Disgruntled customers who blast companies online can cause a lot of harm.  I always insist on confidentiality and non-disparagement clauses in negotiated settlement agreements once there has been a dispute, but many homeowners are very resistant to not being able to share their experiences.  Why not get them to agree to keep your relationship private as part of the initial contract?

5.     Do Not Use a Home Improvement Contract If The Job Doesn’t Fall Under M.G.L. c. 142A

Not all renovation projects fall under the auspices of the Home Improvement Contractor Statute.  Given that the law imposes so many requirements on contractors, it is better to avoid using a contract that includes the 142A language if that law does not apply to your job.  For example, the law only applies to 1–4-unit owner-occupied buildings.  If you are working at a condominium building with more units, it would not apply.  If you a performing a remodel for an investor, the HIC law does not apply.  There are numerous exceptions, so get to know them, or if in doubt, ask your lawyer.

6.     Record A Lien

If you are owed money and are concerned about being paid, record a lien.  As a general contractor you do not even have to inform the Owner that the lien has been recorded.  If you miss the deadline for recording, you lose your chance to lien the property.  You can dissolve a lien at any time, so it’s better to err on the side of recording.

7.     Get Ready For The Stretch Energy Code

The 10th edition of the Building Code is in the works.  From what I understand, there will be even stricter energy requirements than we have now. Keep in mind that these changes are going to increase the price of your projects.  Be prepared and include these additional costs in your estimating.

8.     Enforce Payment Schedules

There are reasons you need to have a payment schedule in your contract.  Most importantly, it is required under the Home Improvement Contractor Statute.  In addition, you do not want the work to get ahead of the money.  If there is a breakdown in the relationship, you want to be whole if you have to terminate the project.  For that reason, you should “front-end load” your profit in your payment schedule as well.  That said, a payment schedule does not do you any good if it is not enforced.  Bill regularly and stick to the deadlines in your contract.

9.     Make Your Bills Easy To Pay   

My contractor sends me bills from QuickBooks Online.  I know it costs him extra money for me to pay by credit card, but I pay his bills immediately when I receive them by email.  Getting paid sooner will make your life easier.  Make it super easy for your customers to pay you.

     Include Arbitration and/or Mediation Clauses in Your Contracts

Contractors who perform residential renovation work should always have a separately signed arbitration clause in their contracts that allows them to go to the state Home Improvement Contractor Arbitration Program.  The program is an inexpensive way to get disputes resolved.  It is fully appealable with a new trial in the courts if you are not happy with the result, but the arbitrator’s decision becomes a part of the case.  If you are incorporated, you can represent yourself in the state program, whereas you cannot represent yourself in court.  With the separately signed clause in your contract, you can force the other side to go through the program instead of having to deal with a lawsuit. 

As 2023 begins, most of you are as busy as ever.  It is hard to stay on top of your business practices, but you will benefit greatly if you review your systems and implement them.  I wish you all a happy and healthy new year!

* Please contact me if you are looking for an arbitrator or mediator for your construction dispute.  You should also email me your contracts and I will review them for free!  I will then quote you a price for updating them or drafting new ones.  I look forward to hearing from you.  617-953-3760 or agoldman@goldmanlg.com

 

Popular posts from this blog

Eligibility Requirements for the LEED Green Associate Exam from Green Building Education and Training

What are the eligibility requirements for the LEED Green Associate exam? http://www.green-buildings.com/content/78626-what-are-eligibility-requirements-leed-green-associate-exam After March 31st, 2009, candidates for the LEED Green Associate (GA) credentials must fulfill eligibility requirements. LEED Green Associate candidates are required to do ONE (1) of the following: Option 1: You must be (or have previously been) employed in a sustainable field of work This is perhaps one of the more nebulous requirements posed by the GBCI, because no definition of a "sustainable field of work" is given. The USGBC does state that the company needs to "relate to environmentalism or the green building industry". If you are in any doubt that your profession would qualify, contact the GBCI at gbci.org or by calling 1-800-795-1746. Option 2: You must be (or have been) involved in a LEED Certification Project To prove eligibility by way of LEED project involvement, you must have bee...
Read more

When the Homeowner is a Bully

I've seen a new trend in contractor disputes lately, and it isn't pretty.  Some homeowners are making unreasonable demands on contractors, and bullying them into doing work without getting paid.  They unreasonably withhold payments, or impose penalties for delays that they cause.  They expect contractors to do all kinds of extra work without being paid or changing the completion date. I have had a series of these recently.  What is a contractor to do? When first meeting with a homeowner, trust your instincts.  If you are sensing red flags, do not take the job. Never let the work get ahead of the money.  If there is a change order, make sure that the payment is contemporaneous with the work. Make sure that all change orders are in writing and reflect any change in the contract price and date of substantial completion. Include a provision in your contract that entitles you to get attorney's fees if you have to go after a client for payment. Make sure t...
Read more

Should a Contractor Have the Homeowner Test for Lead?

I would like to learn more about the advisability of lead testing.  Homeowners might not want their homes tested for lead, because it becomes public record, and may interfere with the sale of a home or the ability to obtain a mortgage or homeowners insurance.  In addition, I strongly advise contractors not to do the testing themselves.  Let the homeowner pay an independent company to do it.  Otherwise if the GC brings a claim against a lead testing company for a false negative, the company might state that the GC did not use the test kit properly.  If the homeowner does have the house tested, consider refusing to do the work unless the homeowner has lead abatement work done.
Read more