If you listen to New Yorkers, they will tell you about delays in getting their homes repaired after Hurricane Sandy hit. There weren't enough contractors available to do the job. Non-union workers were not allowed to make repairs. FEMA was slow to approve repairs. Materials became scarce and their costs grew. All typical problems when a catastrophe takes place.
When there is major widespread damage, the fact of the matter is that there aren't enough laborers around to ensure speedy repairs. Typically, a contractor may have multi-state operations. As a result, workers from another state can be brought in to take care of repairs. Some of these jobs may be subcontracted to unlicensed or uninsured personnel. What then?
There are some remedies available although they would increase the cost of repairs. One such remedy would be to require the contractor to supply payment and performance bonds. These bonds are generally issued to only those contractors who have shown a history of being able to pay their workers and who complete their jobs satisfactorily.
The payment bond guarantees that workers will be paid and materials used in the repairs have also been paid for. If your contractor fails to pay his workers or pay for the materials he has purchased for your repairs, the subcontractors or vendors can attach a mechanic's lien on your residence. The laws concerning how this should be done vary from state to state. In general, the person who has not been paid files the lien with the courts after notifying you of their intent.
The filing of notice needs to be done within a specified period of time after the materials have been provided or after the work has been completed. The triggering event and the length of time within which the lien needs to be filed varies from state to state. You should check this out before contracting for any major work.
Once a lien has been filed against your home, you are subject to a judicial foreclosure sale. This is the same as a mortgage foreclosure. The court will determine whether the requirements have been met. If so, the priority of the lien is determined. This means that after sale, who is going to be paid first, second, etc until the proceeds have been used up. The court then orders the sale of your home.
To avoid foreclosure, you can require that the contractor supply a payment bond for the job. The cost of the bond is usually a percentage of the job cost. It might range from 1% to 5%, depending on the financial integrity of the contractor. Insurance companies will usually not pay for this cost. You might consider paying this cost yourself, especially in a situation where there has been widespread damage. The general contractor may be taking on additional jobs and may not have the money to pay the labor and materials cost on a timely basis. With a bond in place, the subcontractors and vendors would file a claim with the bonding company.
Then there is the situation with performance. How many times has a roof been repaired only to have it leak like a sieve during the first rain of the season? After major storms, a lot of subcontractors are hired that may not have the experience needed to assure that a job is completely properly. The performance bond is usually provided by the general contractor in favor of the property owner in the amount of the job. If the contractor fails to perform to the contract specifications, the property owner can file a claim with the surety (the bonding company) up to the bond amount for the proper completion of the job.
Again, the cost of the bond is usually a percentage of the contract cost. On large jobs, it may be wise to have one in place even if you have to pay for it yourself. Sometimes piece of mind is worth the price.
Payment Bond - Wikipedia, the free encyclopedia
en.wikipedia.org/wiki/Payment_Bond
Performance bond - Wikipedia, the free encyclopedia
en.wikipedia.org/wiki/Performance_bond
Mechanic's lien - Wikipedia, the free encyclopedia
en.wikipedia.org/wiki/Mechanic%27s_lien
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