When you hire a contractor to repair, rebuild, or improve your home, the Better Business Bureau urges you to take the time to choose and hire the contractor who can perform work you'll be well satisfied with on terms you've agreed upon in advance.

What Contractor Does What

California licenses general building contractors, as well as contractors in more than 40 specialty fields. A general building contractor is the person you would hire for a job that requires three or more unrelated building trades or crafts. The general contractor might bid on a job to, say, remodel a kitchen. If his bid is accepted, he will hire specialty contractors to do, in this case, the flooring, cabinet, electrical, and perhaps other work. The general contractor doesn't do all the work himself but is responsible for seeing that the required building permits are obtained and that the job is done according to building code standards.

Requirement and Importance of License

In California, a general or specialty contractor--and this includes even a handyman you may hire--is required to hold a valid contractor's license in the license category in which he or she will be working in order to perform any work valued at $500 or more. This $500 includes the cost of both labor and materials.

In choosing a contractor, it is extremely important that the contractor be licensed. This means not automatically accepting the lowest bid for the work. Unlicensed contractors can underbid licensed contractors because often they don't have the expenses of a contractor's license, a city license, workers' compensation, and other insurance and expenses licensed contractors have. However, their workmanship is often inadequate and their materials inferior. They may also dis-appear as soon as they've been paid, leaving the homeowner with no address for them and no recourse.

How to Hire a Contractor

The Better Business Bureau recommends taking these steps before hiring a contractor:

Getting Bids

• Obtain bids from at least three licensed contractors. The estimates should all be based on the same building specifications, quality of materials, labor and time needed to complete the project.

• Discuss bids in detail with each contractor to make sure you understand the variations in price.

• Ask for customer references and, if possible, take a look at some of the contractor's previous work.

Checking out the Contractor

• Call the Better Business Bureau for a report on the contractor.

• Ask to see the contractor's pocket license and another form of identification. (The name on the pocket license should be the same as the name of the contractor or the business under which he or she is working.) Note the license number.

• Call the Contractors State License Board to inquire about whether a particular license is valid. (Many Bureau reliability reports contain license information. Our reports also contain a link to the CSLB’s website.) Don't assume that a license number appearing on a bid or contract necessarily means the license is valid. Call the CSLB in Sacramento at 1 (800) 321-CSLB or access their website,www.cslb.ca.gov, to check. You may also obtain complaint information by calling this number.

• It’s very important that your contractor have property damage and personal liability insurance coverage, as well as workers’ compensation if the contractor has any employees. In the case of workers’ compensation, if the contractor does not have it, you would be held responsible for the medical expenses of an injured worker.

You should insist that the contractor have his/her insurance broker or agent send you certificates of insurance. If these coverages are later cancelled for any reason, the insurance company will notify you 30 days in advance of the cancellation. Remember, the certificate must come from the insurance company, not the contractor. Do not accept a copy the contractor may provide you.

• Contractors are required to main-tain a bond, which gives you some protection, if only minimal, against any willful violations on the part of the contractor. If the bond is not currently in force, the Contractors State License Board will tell you that when you call about licensing. More important, though, is to make sure the contractor is reputable and performs quality work.

Precautions

• Be wary if you're asked to pay for the entire job in advance. A contractor may not ask for more than ten percent of the total contract price, or $1,000 (or two percent or $200 in the case of swimming pools), whichever is less, as a down payment.

• If you're rebuilding after a fire or other disaster, don't abandon your former prudence for the sake of rapid rebuilding. A disaster brings out unscrupulous contractors and repairmen who seize the opportunity to con victims caught with their guard down.

Signing the Contract

First, realize that anything you sign may constitute a contract, so be sure you know what you are signing. Before you sign a final contract, be sure it includes the following information and provisions:

• the name, street address (not just a post office box), and local telephone number (not just a toll-free number) of the contractor;

• if you must obtain a loan to pay for the project, that the agreement is valid only if you obtain financing at given rate;

• a written description of all work to be done, including a detailed description of the kind and quality of materials to be used;

• a bid based on the job, not by the unit (hour, gallon, board, etc.)

• a price breakdown for both labor and materials;

• starting and completion dates;

• the schedule for releasing payments to the contractor;

• a written statement reiterating any oral promises made by the contractor or sales representa-tive, including any warranties on materials or labor.

• that the contractor will obtain the necessary building permits.

A building permit is generally required whenever structural work is involved or when the basic living area of a home is to be changed. If your contract does not provide that the contractor will obtain the permits and he doesn't, you may be held legally responsible.

Do not get any permit yourself. If you do, you will be considered to be the contractor, and you could be held liable if the work does not comply with the building codes.

Also, if you want changes after you’ve signed the contract, be sure they are spelled out in a signed "change order."

If you Change your Mind

If your contract was solicited at your home or some other place that is not the contractor's place of business or appropriate trade premises, you have the legal right to cancel your contract within three
business days after you sign it. Your contractor is required to notify you of this right. Use those three days to review the contract again, and if you should cancel, do it in writing and send your notice of cancellation by certified mail. Keep a return receipt.

Protect Yourself Against Liens and Dissatisfaction

Once the work begins, if your contractor will have to use subcontractors, you should protect yourself from liens against your home in the event the primary contractor doesn't pay the subcontractors or suppliers. You can do this by insisting upon a lien release from all subcontractors and suppliers before you pay for any work. Or, you can use the services of a construction control company. For a small percentage of your contract price, you may deposit your payments with them and they will disburse the funds and secure the lien releases for you. Although they are not required to inspect the work, they generally do.

Finally, don't sign a completion certificate until you're satisfied that the job has been properly completed according to the contract and until inspection has been completed by local building authorities.