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Tips to Homeowners

September 29, 1985|Armand L. Fontaine

Question: When I recently signed a contract with my home improvement contractor, I asked him for a bond, and he told me that he was bonded with the state of California. When I checked with the state, they told me that the bond was for $5,000. Is this enough protection?

Answer: All contractors in the state are required to post a $5,000 bond to be legally licensed. Basically, this bond covers material delivered to the job site, wages and fringe benefits and fraud. It does not give you the protection you need as a homeowner handling a home improvement contract.

This contractor obviously has misled you. Very often I see business cards that read " . . . licensed, bonded and insured." This merely means that the individual has a bond filed with the state.

If you want full protection, you should secure a completion bond from your contractor. The prices usually run from 1 1/2% to 3% of the cost of the job. However, many small contractors are unable to provide bonds because their financial statements do not justify the financial guarantees of such a completion bond.

If this is the case, I would suggest you go to a fund control or joint control, which is a type of escrow company that handles the funds during construction to protect the homeowner. The company secures the necessary release of liens, and manages payment on a progress system as the work is done.

The cost of a good fund control is usually about the same as a bond, and while the control firms do not guarantee the completion for the price set, they will do a good job of monitoring the project under the contractual obligation. These control companies are bonded with respects to fiduciary matters, and most are quite reliable. They protect you by monitoring your funds.

Regarding swimming pool contractors, the license bond is $10,000 rather than $5,000. However, this is also not a performance bond.

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