I’ve been asked what is the most important lesson I’ve learned so far. Here it is: Ask for their license and proof of insurance. Generally speaking, anyone who works on your house needs to have a contractor’s license of some sort. For state, county, or city licensing authority likely operates a website that talks about license requirements. (In most of the country, the State issues a contractor’s license. However, in Pennsylvania, licenses are issued by the cities themselves). A quick review of the licensing website will show that there are dozens of different types licenses – general contractor, electrical, plumbing, roofing, but also landscaping, concrete, swimming pools, etc. They all have different license requirements. The licensing body makes sure someone is minimally familiar with their trade before they can do work for you.
A Small Horror Story
When I started my first rehab in Pittsburgh, I hired a licensed general contractor to put a roof on the building and paint the exterior. In conversations with him, I decided I’d like to expand a dormer on the third floor. He recommended an architect, “Fred” (not his real name), so I called Fred and had him come out to take a look. There were a variety of “warning bells” going off in my head as I interacted with Fred. He didn’t seem as knowledgeable about the building code as I’d expect him to be, and he seemed to take forever to turn around simple revisions to the draft plans. We soldiered on, though, and eventually I got a stamped drawing to submit to the City for approval. It was promptly rejected.
We’d already started demolition, and now we had to spend more than $5,000 to put it all back the way it was.
The City requested revisions, including a lot of detail about load paths, etc.. I could understand what they wanted- it wasn’t rocket science- but Fred was still looking for ways to avoid providing the exact details they’d requested. Eventually I figured it out- “Fred” doesn’t have an architect’s license. The architect’s seal on the plans I submitted was in someone else’s name. “Fred” would draw up the plans, then pay “Joe” to review it and stamp the plan. I’d invested two months into this process, but I called it to a halt.
I phoned a licensed structural engineer I was using on another job. He spent about 2 hours on site and an hour in the office doing research- and then informed me that I couldn’t really do what I wanted to do. ARGHHH!!!!! I’d wasted two months trying to do something that just wasn’t possible to do. A licensed architect would have spotted those issues up front and called a halt to the discussion, and I wouldn’t have lost all that time. Worse- we’d already started demolition based on his assurance that we’d get the plans, so now I had to spend ~$5,000 putting the room back the way it was.
In reality, this could have been much worse. If you use an unlicensed professional to do work, you’re assuming all of the risk. If they do shoddy work, it’s likely to fail inspection, requiring rework or worse. (The inspector could completely halt your project.) If a flaw from an unlicensed professional causes an injury, you may also be personally liable. Think about that- you remodel a house, and someone trips on substandard steps. They sue *you* and collect $000’s for that injury, and it may come out of YOUR pocket.
Insurance also helps if the contractor disappears, literally or even figuratively. One of my neighbors had a licensed GC do bad work on their house. When they sued the GC, he just bankrupted the GC business- but the insurance the GC carried still paid out to make the homeowner whole again. These protections don’t exist only for the contractor- they exist for you, the customer.
What do I do differently now?
In theory, there shouldn’t have been an issue with my architect. Fred was referred to me by someone who had a GC license, and I was stunned to figure out that Fred did not have an architect’s license. The GC was apologetic about the whole thing, but I was still out a lot of time and money.
What do I do now? When I receive a proposal for work, I always ask for their license and insurance information., no matter how they were referred to me. (This includes someone who actually went to high school with my cousin!) If they hem and haw, or the name on the insurance doesn’t match the business name, then RUN, don’t walk to get away from that contractor. Before I sign a work agreement, I check the licensing website for my jurisdiction to ensure the license is valid, and I call the insurance agent to confirm the coverage is in effect. At first it felt funny to ask someone for their license- like I was calling them a liar. However, since that first experience, I’ve never had anyone balk at this request. If they’re already licensed, they don’t mind you verifying that. They spend a lot of money on their insurance, so maybe it feels good to know that helped them secure this gig. To a real professional, this is the simplest request you’re going to make, and they’re happy to comply.
As a side note, if you’re getting into this as a business, you should get your own license and insurance. When I started this big adventure, I set it up as a business- created an LLC, then got a GC license and took out the appropriate insurance policies. That protects people who buy houses I work on, and it also protects my own assets from claims.
Licensing isn’t free, and it may not be cheap- but it is important to any professional. Verifying the contractor’s license is a simple thing, and it is literally the most important thing you can do to protect yourself.
Entropy Properties LLC 