Being a real estate investor means working with contractors. As I said in my previous post, many of the properties we purchase need large amounts of work. That work is often where the value for us investors is found. Working with contractors however exposes us to risk. You need to protect yourself with an independent contractor agreement from that risk.
Where does that risk come from? The risk comes from the fact that repairing and rehabbing properties is somewhat dangerous. People can get hurt, seriously hurt. Just think of what is often involved. There are roofs dozens of feet above the ground. Ladders are used to get the workers up to them. Electric cords and wiring are run or strung everywhere. Natural gas lines are opened and exposed. Floors that keep us upright are ripped apart. Debris is often scattered about. Nail guns shoot nails right next to toes. Sharp objects are both used and found all over any job site. All of this and more obviously increases the risk of injury and harm.
You, as the investor and property owner, have to take steps to protect yourself from this risk. Those steps begin with hiring qualified people to do the job, but of much more importance in my opinion is the contract you sign with your contractors before any job begins.
You are using a contract on every repair job with every contractor right? I hope so.
If not, you are exposing yourself to unnecessary risk.
It’s All About The Contract
Contracts are important documents because they spell out who is responsible for what, including the people that are coming to and working on your property. These contracts spell out that these folks are not your employees. You are not telling them what time to show up. You are not telling them when to leave, nor are you supervising every move they make. Instead they are independent contractors who (in many cases) are responsible for their own missteps and for their own insurance. You as the property owner are just telling them to “make it so” and then letting them get it done.
By using an independent contractor agreement, you place much of the burden of responsibility on your contractor instead of you. This is how you reduce your exposure to risk.
If you do not use such a contract and an accident, or worse a death occurs, then you might be held responsible. Further, when these accidents and deaths do occur, people start looking for the deep pockets and who do you think they are going to assume has the deepest pockets? They are going to look at and assume that you, the property owner are to blame and have deep pockets to pay.
It can all happen very quickly. All someone has to do is slip on a roof and be paralyzed or killed in the fall. Even experienced contractors can make mistakes or take a wrong step and if you are not protected, you and everything you own may be liable and open to damages. People often want to blame someone after an accident happens and it is easy to look at and blame the property owner.
The Phrase To Use
It is such a simple thing to get a contract signed with your contractor before work starts. It does not have to be long winded and full of legalese to be effective either. Short and sweet often can and does work. Here is a clause that I use in my independent contractor agreement. Feel free to use it, or some form of it, in yours.
Contractor and Client intend this Agreement to be one of independent contractor and client. Contractor therefore retains the sole right to control or direct the manner in which the services prescribed herein are to be performed. Client retains the right to inspect, to stop work, to prescribe alterations, and generally to supervise the work to insure its quality and conformity with that specified in this Agreement. Contractor warrants that upon signing of this agreement that Contractor has obtained all stated and necessary insurance, including worker’s compensation coverage, and that it will be kept in full force and effect until the completion of the work contracted for herein. As such, contractor herewith agrees to sole and complete liability for any injury to self or contractor’s workers.
Whatever you do, just make sure you use a contract and make sure you use one that will protect you. Beware that the contract your contractor wants you to sign usually protects their interests, not yours. You need your own independent contractor agreement (reviewed by your own attorney too) that protects all you have worked and are working for.
