Construction contract, New Sub-Contractor Packet and all necessary documents for your contractor
Anytime you start working with a contractor for the 1st time, you need to have all of these items completed, just one time so that your relationship with the contractor is started properly. Once you have these documents, you are good to go moving forward, and all you have to do to have this contractor work on your jobs is to create a purchase order. This keeps it simple and keeps you safe.
Letter to contractor: This letter is a basic letter that explains to the contractor what and why you need the documents in the checklist along with some other basic information, including the very important task of getting your company listed as a named insured on the sub-contractors insurance policy. Many builders and rehabbers do not realize that unless your sub-contractors get your company listed as a named insured, then if there is an insurance claim, it may not be covered. It is extremely important that you read your own insurance policy.
Checklist for Contractor to fill out and give back to you: Have your contractor fill out the information in the blanks, get it back to you, and save this document for future use when needed.
Indefinite Quantity Contract: This is the road map of your agreement with your sub-contractors. This protects you from many potential problems and is an absolute necessity.
Purchase order: We give you a few examples (excavation, supplier, contract labor), but this is what you send to your contractor to sign before they start work on any job, but after they have signed the Indefinite quantity contract and filled out the new sub-contractor checklist. This keeps paperwork to a minimum on every job moving forward by just having to send the contractor a purchase order. Make sure to have the job specifics in the purchase order, and reference any attachments (like building plans). Make sure to include a sample copy of these purchase orders with the indefinite quantity contract that your sub-contractor signs.
Lien release: This is an extremely important document, and stops a contractor from being able to bill more than the agreed amount of the job and get away with it. Also, many title companies or closing attorneys will require these to give you early issue title insurance. These lien releases are just an all-around “must do” in your business. Because you are just delivering a purchase order to a contractor to do work that is described in the said purchase order, when the contractor's invoice comes in, all you do is match the invoice to the purchase order, and confirm the amount on your line item sheet budget. Once you do that, all you have to do is send the lien release to your contractor to sign, which is contingent on them receiving the check. Once you receive the signed lien release back from the contractor, you are now safe to release their check. Make sure to include a sample copy of this lien release with the indefinite quantity contract that your sub-contractor signs.
W-9: This allows you to send the appropriate 1099 at years end. The IRS will appreciate this one!