8 Mistakes Companies Make When Buying Modular Building Products in California
Albeit newer to the construction industry, modular construction has been around for over two decades and is no different than traditional construction when it comes to licensing requirements, contractor responsibility, safety, durability, and installation. For those reasons alone always protect yourself when hiring a modular company / contractor by asking the right questions, and do your research.
1. Are they a contractor?
The first thing to do before hiring a contractor is to check if the person / company you are considering is licensed to build in California. Search the Department of Consumer Affairs State License Board website by their company name, or a person’s name. If they are not listed, then run. By NOT being licensed your business will be solely responsible if something goes wrong.
Special Note: Do not let a contractor just tell you that the person doing the work is licensed or “I am using someone else’s license.” Do your research and get proof. You can’t borrow or use someone else’s driver’s license or contractor’s license in California.
2. Is the person doing the work a contractor?
There are countless stories of people losing their careers and companies getting sued because they did not check for the proper insurances and licenses. Don’t let this happen to you. Many times, sub-contractors are hired by contractors to do the work on site. Unfortunately, there are instances where untrained workers, unfamiliar with the install of modular products, are hired. Just as in traditional construction, check to make sure subcontractors are familiar with the modular product they are hired to install, and that they are insured or, on the payroll of the person you bought the product from. If this person operates their own company, make sure they have the proper contractor’s licenses, insurance and bonds necessary. That way you are covered if anything goes wrong.
3. Do they have General Liability Insurance?
More often than we’d like to think, many companies operate without any insurance at all. If they have it, the policy should clearly state the producers’ name, insured person’s name, a policy number and the effective and end dates. In addition, it will show the limits of coverage. There will also be a place on the bottom that identifies the certificate holder which is where your company name and address should be listed. View an example by clicking this link.
4. Are they Bonded?
A contractor license bond is a very important type of security that actually serves a purpose among the different parties involved in a contractor project. A contractor’s license bond not only helps you as the contractor, but helps others who could be involved and affected by unethical or costly business decisions.
Contractor’s license bonds legally protect the following three parties: you, the contractor; the company who hired you; and the state bond issuing agency. By getting the contractor license bond, you are ensuring that you will always provide ethical and professional services. It also protects the public in that you, and the company that hired you, are indicating that you will provide professional services that will do no harm to them. Should someone be negatively affected by an unethical decision made, then they can file against the bond for financial recompense.
5. Are they a manufacturer or a reseller?
Laws in California are very strict for Contractors. Unless they are a manufacturer you should only be asked to provide 10% or $1000.00, whichever is less, when starting a job. You should never pay for more than the performance of the work that is being completed. Remember, they are not a manufacturer you are only buying materials and labor to install. Read more about the laws in California including, what should be included in the contract.
6. Do you know who you are doing business with?
With technology today, you have the ability to find out who you are doing business with at the touch of a button. If they are operating from a house or a PO Box, you should be very cautious. Often times these businesses shut down quickly and disappear instantaneously. If you want to research more via the web, click here. If you don’t have the time, assign the research to an intern or junior employee. But never skip this step.
7. What are 20-day lien notices?
A 20-Day Preliminary Notice, also known simply as a Preliminary Notice, is filed with the County Clerk-Recorder Department by a contractor, subcontractor or material supplier to inform a property owner, direct contractor, project lender or other interested party that they are working on a project and have a right to file a Mechanic’s Lien in the event they are not paid. Preliminary Notices must be filed 20 days from first furnishing labor or materials.
This means that you should not pay the person you have a contract with until you have received confirmation that the bill has been paid. If you do pay them and they don’t pay the contractor or material provider, they can put a lien on the property and in extreme cases, seize the property, auction it off and provide the proceeds back to the land or building owner. In short, you will be paying the bill twice. Even if the person filed for bankruptcy protection, you are still on the hook.
8. Who are you buying from?
One of the easiest ways to check to see if the person or company you’re dealing with is new, or has been in business for a while is to check California’s Secretary of State website. California does a great job in making sure you can check the status of a company, partnership, LLC or corporation. The secretary of state website is a great place to start. You can also check to see if they are an entity and when they were formed.
Special Note: In California, there is no sales tax charged on construction projects that include installation. If the company is charging you sales tax, they should not be. It’s better to have these conversations up front, but if it’s too late, don’t pay the sales tax.
When you are ready to start your modular project, follow these suggestions and ask all of the right questions. You’ll be sure to save yourself a lot of trouble and money. If you’re ready to start your modular construction project today, contact Allied Modular Building Systems or visit our website for more information on modular construction, modular products, and helpful resources. You can also call (888) 836-7850 and one of our knowledgeable staff members will be able to help you.
Allied Modular has been prefabricating modular buildings and offices in California for over 27 years and knows exactly what it takes to make your project a success from start to completion!
California Contractors License # 730592 B