Before finalizing a contract for your finished basement project, make sure that your contractor:
- Is licensed to perform construction services in your jurisdiction
- Warrants that all permits and inspections will be obtained and all building codes strictly observed
- Is adequately insured for property damage and workmen’s compensation
If you plan on doing some or all of the work yourself, make sure that you comply with all building codes and obtain the required permits and inspections.
Licensing— who is licensed by whom?
In most states the only construction trades that are required to be licensed are electricians and plumbers. General contractors and all other subcontractors are not licensed by the state or federal government.
HOWEVER, most counties or cities and towns in Colorado do issue contractor’s and subcontractor’s licenses. To determine whether your contractor needs a license in your location and which entity is the proper licensing authority, you must contact your local city or county building department.
The types of contracting licenses and the requirements for licensure vary a great deal from city to city. Requirements may include an application and license fee, references, proof of experience, examination, bonding, or proof of liability insurance.
If the construction job is in an un-incorporated area of a county, you must call the county building department or the county clerk to determine if there are any requirements. The requirements may include building permits, local codes or building inspections.
Electricians and plumbers must obtain a state license to work in Colorado. In addition, many cities require electricians and plumbers to register on the local level also before doing work in those cities.
Hiring unlicensed contractors is risky business
Many handy men will do their best to talk you out of getting a permit. The reason for this is that they have to pass a written proficiency test and provide the building department with proof of insurance coverage of a minimum of $1,000,000 to protect the home owner and their property. The building department will not issue a contractor’s license to these people because they have not passed their test or paid for the insurance that is required by the building jurisdiction. If you hire unlicensed contractors to perform work, you may expose yourself to liability for injuries suffered by employees of the contractor or by third parties. Appellate courts in two states recently ruled against homeowners who hired unlicensed contractors to perform work. In both cases, the homeowners may have reasonably believed the contractors were licensed.
Whether you do work yourself or hire a contractor, make sure that you comply with all local building codes and permitting requirements.
Your home is an investment. If your construction project does not comply with the codes adopted by your community, the value of your investment could be reduced. Buyers often balk at paying full price if home inspections reveal modifications that were not permitted or do not comply with code.
Property insurers usually exclude claims that involve faulty workmanship at the affected site. And faulty workmanship is assumed by default when work has been done without permits and inspections.
If you decide to sell a home that has had modifications without a permit, you may be required to tear down the addition, leave it unoccupied or do costly repairs.
If you can show that code requirements were strictly and consistently met, as demonstrated by a code official’s carefully maintained records, you have a strong ally if something happens to trigger a potentially destructive lawsuit.
By following code guidelines, your completed project will meet minimum standards of safety and will be less likely to cause injury to you, your family, your friends or future owners.
If you skip permits or inspections on any interim aspects of your project, subsequent inspectors can make you tear up what was done and do it again, or cut through walls or other structures to access and inspect the underlying improvements. It is just not worth the risk to cheat.
TIP: While you should always comply with local building codes, don’t assume that doing so will satisfy your design and usability preferences. Lighting and light switches are good examples. What is required by code may not be enough to create the brightness, ambience and convenience you want for your new space. Yet many contractors use the “it’s code” argument when making or justifying design decisions.
The following advice is reproduced with permission from the Insurance Information Institute Web site at: www.iii.org/individuals/homei/tips/remodel/
If you plan to remodel your home, make sure that your home, the contractor and subcontractors have adequate insurance coverage.
Don’t make the mistake of waiting until an addition or extra room is completed to increase the insurance coverage on the structure of your home. If the new addition is destroyed or damaged before insurance coverage has been increased, you may be responsible for the cost of repairing or rebuilding the addition.
Contact your insurance agent or representative before or shortly after the construction begins to increase the insurance coverage on your house to reflect the increase in the cost to rebuild the structure.
When hiring a general contractor, find out if the contractor has workers compensation and ask to see a copy of the policy. Workers compensation pays for medical and rehabilitation expenses and covers lost wages if the workers sustain injuries on the job. Injured workers may sue you if the contractor does not have proper insurance.
In most home improvement projects, the contractor subcontracts the builders, electricians and plumbers. The workers hired may not be full-time employees of the contractor and therefore not covered under the contractor’s workers compensation policy. While some independent builders, electricians and plumbers may carry their own workers compensation coverage; others may not.
You should verify the insurance coverage of the contractor and the subcontractors. If the coverage is insufficient, you may need to fill in the gaps by extending the limits of the liability portion of your homeowner’s policy.
If you purchase additional items, such as furniture, exercise equipment or electronics, you may need to increase the amount of insurance you have on your personal possessions. Keep receipts and add them to your home inventory.
The supplementary liability coverage mentioned in the next-to-last paragraph above is a smart idea. It is very inexpensive and can protect you from legal loopholes in state Workers Compensation insurance regulations or other unforeseen risks.