When hiring the services of a contractor or subcontractor, often referred to as a sub, there is a critical factor that you need to consider, such as payment terms. Usually the only leverage you have on them to get the job done well and on time is their good names and terms of payment. If you have hired professional is not popular or are new to you, then you hold at the end of the payment terms.

But before you determine the pay terms, you need to first understand the legal aspects of this process. In the event that you fail to make payments on completion of the project, they can file a lien against the house. And if you continue to fail in paying them, they can even initiate a foreclosure, which will prevent you from reselling or refinancing your home. Therefore, it is essential that you retain your own interests when it comes to making promptly payments.

There are instances where you hire a general contractor, and he in turn hires subs to complete your project. Often times you will pay him for the completed work, but he might fail to pay the subs. In such instances, there is a possibility that the sub can file a lien against you. The best way to avoid this situation is to pay the subs directly. While signing an agreement, you need to state these terms clearly. In this way, you can demand a release for each completed portion of work and inspect the quality of the finished job before you release the payment.

Another possibility of a lien arises from the material suppliers, whom the contractor would have failed to pay. Ensure that your agreement has a provision wherein you directly pay the suppliers. Further, ensure that you have several milestone payments instead of a lump sum advance. This gives you the benefit of releasing the payments after inspection of finished work. And in the event you end up with an incomplete project for whatever reason, your budget is still intact to allow you to hire a new professional.

Check references, analysis of past projects, and review their work history will help you avoid frustration and disappointment at a later stage. Although the general contractor will oversee the work of the submarine on a daily basis, it is important that you perform periodic inspection to ensure smooth progress and quality completion of your project. In short, signed an agreement with all terms clearly defined and payments after a release is necessary for the successful completion of the project.

Tags: Managing Contractors, Material Suppliers, Sub-Contractors

This entry was posted on January 3, 2011 at 1:18 am and is filed under Sub-Contractors. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.