Protecting Yourself If You Did Your Own Rehabbing
This question came to me this morning. What if you did your rehabbing with a handy man who was not lisenced, and the property sells after rehab. How do you protect yourself from being sued by the new homeowner for some renovation problem? 
I would think that using the appropriate permits would be more important than if the workers are liscensed. There is nothing wrong with using unliscensed workers. There is something wrong with not getting the proper permits when required.
The seller disclosure statements I use ask if any unpermitted work was performed. I always answer truthfully that yes the work was performed by a professional but permit was not pulled. I also buy a home owners warrant from American Shield for about $350.
Brenda
A very good insurance policy because if something happens that was caused by faulty craftsmanship, you'll be responsible, period.
Roger
Quote: A very good insurance policy because if something happens that was caused by faulty craftsmanship, you'll be responsible, period.
What kind of insurance policy would you buy - an umbrella?
I have a personal umbrella and a commercial umbrella for my real estate properties. Just wondering - once I sell the property and they sued me, would my personal or commercial cover the cost of defending me in a lawsuit? I no longer own the property, so it will not be listed on my commercial policy, but it is part of my real estate business.
Brenda
You had better ask your insurance agent. Get it in writing. Read your policy. Even agents give wrong info. Thats why they have E&O
Your insurance agent is the best to ask what specific coverage that you need.
Just so everyone is clear on what we're talking about.
You add a new deck onto your investment property by hiring a handyman "under the table" and filing for all the necessary permits in your name. A few months after you sell the property, your buyer leans over the railing, which breaks and he falls breaking his leg.
IF he chooses to sue, the attorney will go to the records and find out who filed the permits to build the deck. That's who is responsible for the quality of the deck.
Now if you do the above and don't file the permits, you'll have more troubles as the county offices will get in on the penalties and charges against you.
Simple rule of thumb to rehabbing. If it needs a permit, it needs a licensed contractor.
That still leaves tons of smaller projects that the rehabber could do themselves to save money, if they so choose.
Roger
For many years I carried a General Contractors License and of course the Plumbers Lic. This I think was more vanity then anything else.
About 15 years ago I got really tired having to explain simple construction over and over to people who other then occasionaly producing a movie that you could sit thru without falling asleep or throwing up.were, rather challenged in any activity that required the ability to pick up a hammer and saw and not create a major hurt.
Of course I still go down and play owner builder and obtain the permits as usual. But where the change came in is that in any Plumbing or Electrical, I now lay it off on licensed contractors who are licensed and qualified in those two specialties.
It has worked well, no problems, but I spend a lot of time on site.
I carry full liability insurance on all my activities and I require my subs to do the same. If they cannot I will arrange a temporary coverage while they are working on one of my projects.
Now this is California and there may be differences in other states. I mean this is a litigus community. You can be sued for giving a passing motorist the finger. Something in the doctrine of Contributory Neglegence. Whatever.
I hope this has been helpfull Lucius
Recently came back home from looking at a few hud properties and was surprised to see the number of responses to this post. thanks for taking the time to answer my question you guys may have just save me thousand and alot of trouble.
thanks