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Contractor Disputes

10/30/2014

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Planning for trouble is the best way to avoid it.

A homeowner recently asked a question about a dispute with a contractor, so I thought this would be a good opportunity to review some key issues regarding contractors.

·       Licensing. You have more protection if you use a licensed contractor. The two licenses to look for are the Home Improvement Contractor license, issued by the NYC Department of Consumer Affairs, and the General Contractor license, issued by the NYC Department of Buildings.

If you use a licensed contractor, you know that the company working on your property has at least a basic level of insurance, and less unlikely to disappear in the middle of your job. To check both agencies, go to www.nyc.gov, click on “NYC Resources”, then “Agencies”. Consumer Affairs and Buildings are listed alphabetically. Each agency’s website has a link for consumers to search for licensees.

·       Written Contract. Get a written estimate and a written contract! The Department of Consumer Affairs requires that contractors give you a three-day right of rescission in any home improvement contract. This means that you can change your mind, without penalty, within three days after you sign the contract. You can see a sample contract, and lots of other helpful information, at the Department of Consumer Affairs’ contractor page: http://www.nyc.gov/html/dca/html/initiatives/contractors.shtml

·       Keep Everything in Writing. Put all of your communication with your contractor in writing, and insist that the contractor do the same. Use email. If you send regular mail, make it certified if it is important. Make payments by check or credit card so that there is a permanent and verifiable paper trail. Avoid making payments by cash.

·       Hold Something Back. Hold back final payment until you are certain that everything has been done as required by the contract. A contractor looking forward to final payment will be more motivated to make sure you are satisfied than a contractor who has already collected all the money required by the contract.

·       A picture is worth a thousand words. Make a photographic record of the job. Take “before” and “after” photos, and take photos of the work as it progresses. Take photos of any damage caused by your contractor.

·       Mechanic’s Lien. If a dispute arises over payment, your contractor may file, or threaten to file, a “mechanic’s lien”. This is something that can even be filed by a subcontractor or material supplier even if you never dealt with them directly. A mechanic’s lien is a formal claim for money that is filed in city property records. A contractor, subcontractor of supplier has eight months to file a lien from the time they last provided (or claimed they provided) work or supplies. They then have one year to start legal action to “foreclose” on their lien.

If you are served with a Notice of Mechanic’s lien, you can file a bond to “discharge” the lien. This procedure removes the lien from your title, but you still have to slug it out in court (or in arbitration, if your contract says so) with the contractor.

You don’t necessarily have to wait for the contractor to sue you. You can start legal action first. In New York City, depending on the amount, you might go through Small Claims Court (up to $5,000), Civil Court (up to $25,000) or Supreme Court. This is where your written and photographic record will really pay off and save you a ton of time and money.

The Prompt Payment Act. If your construction or renovation project is for an apartment building or larger commercial property, you may need to be aware of the Prompt Payment Act (Article 35E of the NY General Business Law). This law is complex, but it does not apply to the vast majority of residential construction contracts. Be aware of it if you a large property holder.
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    Roger Levy

    Brooklyn-based attorney and pilot.

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