Contracts . . . to protect your assets!
Disclaimer: The following tips, links and forms are not meant to take the place of sound legal advice. They are simply a starting point. Every contract situation is different and would benefit from legal advice because there are too many lawyers and scoundrels out there who would love to take a bite out of you!
First, let me give you a couple thoughts and tips about contracts and conractors:
In most large cities in the US and in any area experiencing a building boom, it is difficult and often very expensive to get a contractor to even come give a bid. It is even more difficult to make specific demands or ask for discount pricing. That doesn't mean you have to settle for a less-than-reputable individual. You simply have to look harder, make more calls, be willing to pay a little more and often be patient. A bad experience is far worse (and more expensive) than waiting or paying a little more for a good experience.
The above principle also applies to the hunt for good tenants. It is better to drop your price or wait a little longer for the right applicant than to put a shady tenant in your property.
Asking for references, insisting on written bids and writing up good contracts will help to weed out bad and dishonest people right from the start. When I call contractors and other service providers, I tell them that I have or will be getting other written bids. When I screen potential tenants on the phone I ask questions about jobs, references, pets and credit. If they are frightened away by a little probing, GOOD! They probably have a lot to hide and I don't want to waste my time. I actually have a designated website and voicemail message that does most of the screening for me. If they listen to my message and visit the website to view the property and then still leave a number for me to call, they have usually screened themselves!
When dealing with certain contractors and installers, it may be customary practice to give a deposit for materials. If I need an electrician or plumber, I offer to pay for the materials up front and I pay for their labor on completion. I usually have the provider call in the materials or pick them out and I pay directly to the supplier. When I need carpet or custom granite countertops, I usually have to pay half the total bid up front. Over the years, as my relationship with various service providers has strengthened, so has the trust. Sometimes they don't require an initial deposit of any kind and sometimes I will accept a verbal bid from someone I have worked with many times.
If you want to count a provider's labor as a business expense and you have paid them $600 or more in a calendar year, you will need to get their personal information including name, address and SSN. You will also have to file a 1099 form for each provider with your taxes. This is actually a simple process, especially for you accountant but it is much easier to get the information at the time of the service than to try to track it down on April 14th.
One final note is that I pay for services and materials with my favorite sky miles card whenever I can. This helps to keep track of expenses and builds some sweet benefits for travel. Cancun is only 30K miles per person with my double-points AM EX Delta card!!!
Now for some links to great info:
http://utahconstruction.blogspot.com This site includes information on construction law specific to the State of Utah but very helpful for a general understanding of construction law and litigation.
http://andreagoldmanlaw.blogspot.com This Attorney's blog is a great resource for contracts that protect you as a homeowner when dealing with contractors.
http://www.contractorsfromhell.com This site will scare your pants off with scary stories of bad contractors in California
. . . but it could be anywhere! The general info on various aspects of legal issues and homeowner rights are great.
Here are a couple basic forms that may help with rentals and contractors:
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