5 Reasons Why Hiring “Fair Trade” Contractors Reduce Your Risk
We are used to hearing the term “fair trade” associated with goods like coffee, chocolate and bananas but have you ever considered the term “fair trade” as it relates to your contractor? When you think about what the term means, it’s easy to draw the parallels. Fair trade products are certified, made in accordance with stringent ethical and economic standards, promote safe working conditions, provide transparency and help good business thrive. See it now? Working with licensed, insured and bonded contractors is the “fair trade” way to do business with the home improvement industry. Not only does it protect the contractor and their employees, but most importantly, it protects you and your property. Have you ever been in a situation where you’re collecting estimates from different contractors and one project estimate is much less than the others? Your wallet may be screaming “yes” but your intuition should be knocking you over the head with a hammer. There is no free lunch, friends, and there is a solid reason why that contractor’s bid is so much less. They are likely unlicensed (not playing by the “fair trade” rules) thereby increasing risk to you and your property. Read on for 5 reasons why hiring “fair trade” contractors can reduce a homeowner’s risk.
- Protect what you can’t afford to lose. All legally practicing contractors should be bonded, have liability and workers’ compensation insurance. A bond is essentially a guarantee. It’s a secured amount of money that would be offered to the homeowner in the event the contractor did not perform the work as he/she should. Liability insurance protects you in case the contractor causes damage to your home. Workers’ compensation covers a claim put forth by the contractor or by his/her employee if they are injured on your property. As you can imagine, it’s costly to pay for insurance which is why licensed contractors, in order to minimize their overhead, charge a bit more. Since most unlicensed contractors are neither bonded nor carry insurance, they can afford to charge homeowners much less. But, buyer beware. What you may be saving up front could be costing you tens of thousands in the end.
- Property Permits. Many home improvement projects require a permit to legally complete the work. Unlicensed contractors may not always apply for or be able to obtain a permit. Why is this important? If you ever want to sell your home, unpermitted work (especially if it’s not code compliant) can negatively impact property values. If a homeowner doesn’t disclose such work to the new buyers and the work is not up to code, the homeowners could be liable for the cost to re-do the work properly. Here’s another tough pill to swallow. Your insurance company has the right to void your policy should you try to make a claim to cover any work done by an unlicensed contractor. Yikes.
- Credibility, Accountability and Skill. A licensed contractor is one that has had to demonstrate their ability and skill to prove their competence in the field. I’m not suggesting that there aren’t some talented unlicensed contractors, but I prefer someone who is specifically trained for the job than someone who picked up tips and tricks from watching HGTV. If there was ever an issue with the work, a licensed contractor must be accountable and may be asked to participate in arbitration should the need arise. Unlicensed contractors won’t be held to that same standard. This means that homeowners will have no recourse if shoddy work is performed.
- Workers’ Compensation. If you hire an unlicensed contractor, you need to understand that they probably do not have workers’ compensation insurance for their employees. In fact, their employees become YOUR employees which means if they are injured on the job, you are responsible for accidents/injuries that occur on the property. That is a frightening but realistic possibility that could easily result in many thousands of dollars in medical bills and wage replacement.
- There goes the neighborhood. When working with an unlicensed contractor, homeowners are fully financially responsible for damage to a neighboring property. Any negligence on the part of the contractor is the liability of the homeowner. It’s enough that you are putting yourself at risk, but consider what could happen if a nearby property was damaged by someone you hired. Once again, the onus falls upon the homeowner.
As you can see, homeowners put themselves in jeopardy when taking a gamble by hiring an unlicensed contractor. It’s a dangerous game where the risk is likely not worth the reward of a lower cost estimate. Look up your contractor with the local licensing authority (check out the Home Improvement Contractor Registration on www.mass.gov). Don’t be shy about asking for a copy of your contractor’s license and proof of insurance. When you hire someone who isn’t legally and ethically compliant (licensed, insured and bonded) you must consider what other shortcuts they may be taking with your home. For your next home improvement project, only work with a “fair trade” contractor. You’ll sleep well at night knowing your bank account, your neighbors and your property are safe and secure.
For more reading on this subject and your rights as a homeowner, click here.