How to Avoid Contractor Disputes

If you speak to any real estate investor who has worked with a contractor, chances are you will hear at least one horror story. As with any profession, there are always some bad apples—and a savvy real estate investor needs to build in protections for their contractor relationship that will prevent the relationship from souring. Based on an extensive review of online discussions relating to contractor disputes, we have developed the following list of recommendations for how best to prevent such disputes:

Contractor Selection

The first way to avoid a contractor dispute is to select a contractor who has an excellent track record and comes highly recommended. We previously wrote a blog post about how we selected our contractor for the renovation of our new office space.

Based on our review of online discussions relating to disputes with contractors, there are a few additional pointers to consider:

Contractor Agreement

We recently listened to a presentation by a real estate attorney who spoke about contracts with contractors. He made a few statements that really resonated with us. First, he stated that if something is not included in the contract, it was never discussed. Second, he stated that if someone were to pick up the contract a year from now, it should be clear to that person exactly what work was going to be done, by whom, and when—even if that person had not been party to the contract negotiations. Third, he stated that the homeowner must make certain that the contract is clear in terms of who is a party to the contract. Contractors will sometimes have partial names or DBAs as parties to the contract; the homeowner needs to be certain (and it needs to be memorialized) exactly who is a party to the contract.

Some additional pointers that we have gathered regarding best practices for the contract include: