The laws vary from state to state but the damage is the same. You could lose your newly built or remodeled property because your contractor did not pay.
Good contracts include the name, phone number, physical address, and State or City license number of your builder. You should have the builder provide in the contract the name of the major subcontractors and their addresses and phone numbers. This will enable you to check the builders payment history. Talk to the subcontractors about how long they have been doing work for your builder.
The builder may be jumping from sub to sub every other project to avoid paying his bills. Many times the financing institutions advance far too much money on the contractors first draw leaving a slim margin to pay the rest of the project suppliers.
Good contracts will include a process for determining the extent of money due your contractor on monthly progress draws. Do not allow the contractor to make this determination. You can hire an appraiser on an hourly basis, if the financing institution does not have a method to determine the funds that are due.
Include in your contract a phrase that allows you to make joint checks to the major suppliers and subcontractors. This will protect you from having to pay some of your bills twice.
Good contracts should include a full list of specifications, including colors, model numbers, brand names etc. of all the materials and appliances to be furnished by the contractor. They also should include allowances for lighting fixtures, site work, landscaping and floor coverings and any other item you may have questions about.
The architectual and engineering drawings should become part of the contract and are usually required for a building permit. Make sure the contractor provides you a copy of the building permit when it has been approved. The project should not start until you know the permit has been approved.
Make sure you have a clause in your contract to withhold at least 10% of the contract until the bulding department has issued a final certificate of occupancy and you have a copy.
Permit Place does not give legal advice. You should consult a real estate attorney if you have any questions regarding your contract.