Southeast Texas has started to move from immediate recovery, including evacuations and draining of flood waters, to removal of water-damaged materials in homes and business and preliminary efforts to start rebuilding. Although all are hopeful to rebuild, the following are some tips and warnings for both owners and contractors about the rebuilding process.
DUE DILIGENCE ON YOUR CONTRACTOR
Everyone affected by Hurricane Harvey wants the remediation and repair process to move quickly. But due diligence on any potential contractor is important to avoid unscrupulous and fraudulent contractors, payment disputes, potential liens, and poor workmanship which may lead to construction defects. Some tips to finding reputable and qualified contractors are:
1. Make sure the contractor has a permanent business location:
- You will want to know the contractor will be around to honor warranty obligations.
- If it is not a local company, there are rules regarding these non-local contractors – see information below “Statute Governing Disaster Remediation Contractors.”
2. Inquire as to how long the company/contractor has been in business:
- There is no mandatory licensure or training of contractors in Texas (with few exceptions); therefore, you will want to confirm the contractor has requisite experience in construction, but also experience in appropriate flood-damage remediation procedures; and
- Some municipalities in Texas require that contractors be registered and bonded. Depending on where the work will be performed any potential contractor will need to comply with local requirements.
3. Ask for and verify references:
- Previous clients are generally the best source of information;
- Find out if the contractor has good relationships with banks and/or suppliers – when requesting information to verify this make it clear that is for the purpose of verifying references only; and
- Check the Better Business Bureau (“BBB”) for complaints against the contractor.
4. Enter into a clear written contract with the contractor:
- A written contract will assist in defining the project scope and potentially help avoid disputes;
- Non-local contractors must have a written contract (see below);
- For questions about contract language and its affect, consult a construction law attorney.
5. Do NOT pay for the entire job prior to work being performed:
- Some contractors may state that they cannot work until the entire balance of the project is paid up front. Be cautious of these contractors. It may be reasonable to pay for supplies up front, but be wary of requests for a large down payment or up-front payment for the work (non-local contractors have specific prohibitions regarding up-front payment – see below);
- Prior to each payment, require that the contractor provide executed, conditional lien waivers on the forms required by Chapter 53 of the Texas Property Code;
- Do not pay in cash. Records of payments to contractors are necessary for various reasons, including but not limited to in the event of a payment dispute or lien claim and for tax purposes. Retain copies of all payment records.
6. Be wary about contractors who offer “sign today” discounted prices, pressure to sign, or unusually low bids.
There are many excellent contractors (local and non-local) to assist recovery efforts. But there are also unscrupulous and fraudulent individuals who would prey on hard times. Please use caution. If it sounds too good to be true, or not in line with what colleagues or peers are experiencing in the market, it may be a scam.
In the wake of Hurricane Harvey, Southeast Texas has seen the best in mankind. But unfortunately, every natural disaster also brings with it a host of those trying to exploit the most vulnerable, which is why in 2011 the Texas Legislature promulgated the Disaster Remediation Contracts Act (the “Act”). The Act contains certain prohibitions and requirements for “disaster remediation contractors” as discussed below.
What contractors are subject to the Act?
“Disaster Remediation Contractors” are defined to be any person who – for compensation – performs removal, cleaning, sanitizing, demolition, reconstruction, or other treatment of improvements to real property performed because of damage or destruction to property caused by a natural disaster (with few exceptions).
Essentially, local contractors who maintain locations in the county (and adjacent counties) are not considered disaster remediation contractors. Specifically, the Act does not apply to a contractor who maintains a physical business address in the county or adjacent county for at least one year prior to the natural disaster.
Disaster Remediation Contractors may not:
- require a person to make a full or partial payment before the contractor begins work; and
- require that partial payments exceed an amount reasonably proportionate to the work performed, including materials delivered.
Thus, Disaster Remediation Contractors may not require a down-payment or up-front payment until work begins.
Disaster Remediation Contractors are required to have contracts in writing, and contain the following disclaimer in a conspicuous, boldfaced type of at least 10 point:
“This contract is subject to Chapter 58, Business & Commerce Code. A contractor may not require a full or partial payment before the contractor begins work and may not require partial payments in an amount that exceeds an amount reasonably proportionate to the work performed, including any materials delivered.”
Importantly the requirements of the Act may not be waived by any party. Failure to comply with the Act subjects Disaster Remediation Contractors to the Texas Deceptive Trade Practices Act (“Texas DTPA”), which provides for recovery of attorneys’ fees and treble damages in certain instances.
If you have questions regarding hiring a contractor, lien waiver forms, contract requirements, or disputes, please contact a construction lawyer.