How can I hire contractors for someone else's home?

Question

What's up guys! I am currently scaling a new business around property management but for homeowners in their own home. Do I need any special contract in order to find, hire, and pay a contractor that does maintenance on someone else's home? Think of me as like a broker for contractors and homeowners. I figure property managers do it all the time but I just need to know if there is a specific/necessary legal process to doing that for someone else.

Jeff Copeland · Answer

For property managers, this is part of the Property Management Agreement. The PM acts as an agent of the owner.

The second piece is what type of licensure is required by your state? Many states require a real estate license to practice property management, and almost all states require a contractor's license to be involved in any type of construction/renovation work.

Yet another piece of the puzzle is liability, and liability insurance. If you hire the contractor, and the contractor burns down the house or electrocutes someone due to poor workmanship or negligence, what is your liability? And how do you insure against that liability? Most professionals in many fields carry both liability insurance (aka General Liability or GL) and errors and omissions insurance (aka Professional Liability or PL).

John Mocker · Answer

Vincent,

You need to involve your attorney and Insurance Agent in the process of drafting any agreements with the Homeowners and also with the contractors.  The contract with the Homeowners may require Hold Harmless agreements.  The contracts with the Contractors will probably need to have requirements like:

1. Additional Insured status for you and for the homeowner

2. waiver of subrogation so the contractors insurance can not come back against you

3. Making the contractors insurance Primary and non-contributiory

4. Hold Harmless and indemnification clauses in your favor

5. 10 day notice of cancellation from the Contractors Insurance Carrier

Your Attorney and Insurance Agent can help with the Local & State laws, coordinating the two agreements (client & contractor) to work together in your favor.

Remember to get proof of Liability, Auto, & Workers Comp. coverage from all contractors before they go on site.  You may want proof of Employee Dishonesty/Commercial Crime coverage as well

Bruce Woodruff · Answer

Like @Jeff Copeland said, it's doable. Just make sure you have your paperwork right and are a legal agent. And of course, make sure you are insured to the hilt...once you interject yourself into this circle you have liability.....

Matthew Irish-Jones · Answer

Yes there are all kinds of legalities and liabilities.  You will need to figure all of them out BEFORE starting your business.  What you are talking about is acting as either a GC, Project Manager, or some sort of tech website that facilitates leads...  Thumbtack, Angie's list beat you to it.  They get paid by contractors being paid for the lead.  Sounds like you want to get paid by marking up a subs work, that makes you a GC and you will faint when you get the insurance bill.What value are you adding the end consumer?  That is the first question you need to answer before you go down this rabbit hole.

I am a property manager and have often thought I should branch out to residential home owners.  We have vendors in our system that give us balk discounts, we check their insurance, we are properly insured, we have phones lines, business, systems, we can take credit cards, we are fully set up to do this...  and I am still hesitating...

Our software does not work very well for one time customers, the admin work is way too much.  We are built for property management with incoming rent, not direct to consumer.  Now I need another software, after that I need to spend money marketing to get clients, then I need to add personnel to manage vendors going direct to consumers, then I need to be able to take one time payments efficiently...  all this to make a razor thin margin on a mark up of someone else's work?  What real value have I added?

We stick to investment property managers because our volume discount on services creates a margin for our company, and most of the services we provide are with in house maintenance staff. I think you need to specialize on one service.

Drew Sygit · Answer

You can try to operate as a Project Manager, but as others have pointed out, there are liability and perhaps state requirement issues.

How can I hire contractors for someone else's home?

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