Hiring Contractors: What Landlords Need to Know

Landlords and tenants alike all understand the importance of quality repairs and routine maintenance of their rental property, and contractors often play an important role in providing these services. It is in the landlord’s best interest to make sure they are hiring professional, reliable, and reputable contractors to handle any repairs or maintenance, and knowing what questions to ask and what should be considered before beginning any hiring process can help ensure that quality services are provided.

What Types of Contracts Are Most Common?

It’s important to ask potential contractors what types of contracts they recommend for the work to be done. There are generally two types of contracts landlords should consider: fixed-price and time and materials.

Fixed-price contract:

A fixed-price contract provides a guaranteed cost based on the project scope. In most cases, the scope will be determined in advance and the contractor must agree to abide by it.

Time and materials contract:

A time and materials contract is based on the agreement that the contractor will be paid for the time it takes to complete the work plus any materials used (often at an hourly rate). This type of contract is typically more costly than fixed-price contracts due to potential cost overruns, but in some cases, it can be beneficial as it allows for modifications and additional work as needed.

What to Ask Contractors?

When shopping for a contractor, landlords should ask questions to get a better understanding of who they are hiring and to make sure the contractor is qualified and insured to handle the specific type of work. Here are some questions to consider:

• What type of repairs and maintenance do you specialize in?
• How long have you been in business?
• What licenses or certifications do you have?
• Are all of your employees properly trained and qualified to do this type of work?
• Are you insured and bonded for this type of work?
• Do you provide any warranties or guarantees on the work you do?
• Do you comply with all state and local laws, regulations, and codes?
• Can you provide references from past clients?

Check References

Before hiring a contractor, it’s important to perform due diligence and check references. A good place to start is with past clients who can provide first-hand information about their experience and the quality of work provided. If the references are favorable, landlords should check the contractor’s licensing and insurance to make sure it’s in good standing.

What Should Be Included in the Contract?

Once a contractor is chosen, landlords should put together a written contract that outlines the scope of work and any other important details, such as payment terms, required permits, materials and supplies to be provided, expected deadline, and any warranties or guarantees. It’s also important to include a provision for liquidated damages in the event the contractor fails to complete the work or deliver work on time.

Payment Considerations

When it comes to paying contractors, landlords should consider setting up payment milestones based on completion of certain tasks. For example, the contractor could receive a payment for completing a specific portion of the project, such as the installation of a new roof. This allows landlords to pay only for the work that is actually completed, and it also serves as an incentive for the contractor to stay on task and finish the job in a timely manner.

Conclusion

The hiring process for contractors is an important step in ensuring quality repairs and maintenance of rental property. Knowing what questions to ask and what considerations to make before signing a contract can help landlords make informed decisions that protect them and their tenants. From establishing a written contract to covering all of the necessary bases when it comes to licensing and insurance, landlords have the right and responsibility to hire contractors who provide quality services.

What is the difference between hiring a contractor and hiring an employee?

A contractor is an independent worker who is typically engaged to do a specific job or provide a specific service on behalf of a company, often for a flat fee, and is not employed by the company. An employee is someone hired by a company to perform specific services that are controlled by the employer. Employees are typically provided with benefits such as health insurance, vacation time, sick days, etc., and are usually paid an hourly or salary rate.

What are the benefits of hiring a contractor instead of an employee?

1. Cost Savings: Private contractors are typically paid on a project or hourly basis instead of receiving a salary or benefits package. This can help to reduce cost for employers as they can pay for services as they are needed.

2. Flexibility: Hiring contractors can provide flexibility for employers as they can use a contractor to fill a short-term need, enabling organizations to scale up or down quickly and efficiently.

3. Specialist Expertise: Private contractors can bring specialist expertise that an organization may not have in-house, ensuring the job is completed accurately and on time.

4. Reduced Administrative Burden: Hiring a contractor eliminates the need to conduct background checks or provide benefits such as Workers’ Compensation insurance, vacation days, or sick pay. This reduces the administrative burden on employers.

5. Reduced Risk: As contractors are not considered employees, there is typically no long-term commitment or risk. Should the contractor not meet expectations, employers are not obligated to keep them on staff.

What are the differences between hiring an employee and a contractor?

1. Tax requirements: An employee is typically required to make regular payroll tax payments for Social Security, Medicare, state, and federal taxes; contractors are typically responsible for filing and remitting their own taxes from any wages earned.

2. Employment status: An employee is typically classified as such under the law, eligible for workplace benefits, wages and protections set up by law; a contractor is typically classified as an independent contactor, not an employee and not necessarily eligible for the same wages and benefits as an employee.

3. Working hours: An employee has a set number of hours and days for which they are paid; a contractor is typically paid on a project basis or by the hour and may have more flexible working hours.

4. Agreement type: An employer-employee relationship is typically based on an employment agreement; contractors typically sign contract agreements with the companies they work with.

5. Benefits: Employees are typically provided with some type of benefits, such as health insurance, vacation, or retirement; contractors typically do not receive any benefits from the company they are contracted with.