Checklist · Real Estate

Hiring a Contractor and Resolving a Construction Dispute: A Practical Checklist

15 U.S.C. § 1635

Type: Checklist
Jurisdiction: National
Date: 2024-03-26
Topic: Real Estate

This checklist runs a residential construction project from contractor selection through dispute resolution. Phase 1 is verification, which happens before any contract is discussed, and Phase 2 is bidding on a single written scope so the numbers are comparable. Phase 3 is the contract review clause by clause, and Phase 4 is the payment structure that carries most of the available protection. Phases 5 and 6 cover running the job — change orders, inspections, lien waiver discipline — and the substantial completion walk-through. Phase 7 covers what to do when the job stops, and Phase 8 covers defects discovered later. Phase 9 ranks the remedies by collectibility rather than by instinct. Four model letters, a deadline table, and a ranked failure-mode list close the checklist.

Hiring a Contractor and Resolving a Construction Dispute: A Practical Checklist

Real Estate > Construction | Published 26 March 2024 - Updated 22 March 2026 | UpLaw - uplaw.us

Phases 1 through 4 happen before any work begins, and they contain nearly all of the protection available. Nothing in Phases 7 through 9 can substitute for them.

Keywords: verification, bids, contract, payments, running the job, punch list, abandonment, remedies

How to use this checklist

Nine phases with - [ ] items and a Why it matters, and the traps note under each.

Doctrine is in Residential Construction and Home Improvement: A Comprehensive Guide to Contracts, Change Orders, Liens, and Defects. The narrative is The Kitchen That Never Got Finished: Home Improvement Contracts and How They Go Wrong. The forms are in The Home Improvement and Construction Dispute Toolkit.

Phase 1 — Verification

[ ] Verify the license with the licensing board — current, correct classification, in the name of the entity that will sign.
[ ] Confirm a license held by an individual versus an entity matches the contracting party.
[ ] Verify the bond, and note its amount — it caps that remedy.
[ ] Obtain a general liability certificate from the insurer, not from the contractor.
[ ] Verify workers' compensation coverage with the carrier.
[ ] Check complaint and disciplinary history with the board.
[ ] Check litigation and lien filings in the county, both against and by the contractor.
[ ] Ask who will actually perform the work, and obtain the subcontractor list.
[ ] Call the three most recent completed jobs, not three chosen references.
[ ] Visit a current job site.
[ ] Ask about current workload and how many jobs are running.

Why it matters, and the traps. An unlicensed contractor frequently cannot enforce the contract — cannot sue for payment, and in some states must disgorge. That is a remedy against a business with no assets and no bond, which is why verification precedes hiring rather than following a problem.

The workers' compensation check is the one homeowners skip. A worker injured on the property, employed by an uninsured contractor, may look to the homeowner.

Phase 2 — Bids

[ ] Write one scope document and give the same one to every bidder.
[ ] Obtain three written bids on that scope.
[ ] Require each bid to state exclusions, not just inclusions.
[ ] Require allowances to be identified as allowances, with the amounts.
[ ] Compare what differs, not just the totals.
[ ] Where a bid is dramatically low, find out what it excludes.
[ ] Ask each bidder how change orders are handled.
[ ] Ask each bidder about the schedule and current commitments.
[ ] Note how each responds to the paperwork requirements in Phase 3.
[ ] Do not pay for a bid unless a design deliverable comes with it.

Why it matters, and the traps. Three bids on three different descriptions of the project are not comparable, and the cheapest number is usually the one that excluded the most.

And the diagnostic: a contractor who resists a written contract, milestone payments, retainage, lien waivers, or written change orders is describing how the project will go.

Phase 3 — The contract

[ ] Full legal entity name, license number, address, and phone for the contractor.
[ ] Detailed scope, with plans and specifications attached and incorporated.
[ ] An exclusions list.
[ ] Price, stated as fixed or cost-plus — and if cost-plus, a guaranteed maximum, defined markup, and audit right.
[ ] The payment schedule (Phase 4).
[ ] Start date, substantial completion date, and a remedy for delay.
[ ] A notice requirement for claimed delays.
[ ] Written change order clause — signed, before the work.
[ ] Permits pulled by the contractor, in the contractor's name.
[ ] Insurance and bond requirements, with certificates before work begins.
[ ] Lien waivers required with every payment, from the general and from every noticed subcontractor and supplier.
[ ] Warranty terms, cleanup and site protection, and subcontractor substitution consent.
[ ] Termination and default: notice and cure provisions — read them now.
[ ] Dispute resolution, chosen deliberately.
[ ] Strike any waiver of the right to withhold payment for defective work, and any waiver of lien rights or lien waiver requirements.

Why it matters, and the traps. A completion date with no consequence is an aspiration. So is a change order clause nobody intends to follow.

And read the notice and cure provisions before there is a problem — terminating without following them can make the homeowner the breaching party.

Phase 4 — The payment structure

[ ] Check the state's statutory cap on deposits, and do not exceed it.
[ ] Tie every payment to a verifiable milestone: demolition · rough-in complete and inspected · drywall · cabinets or fixtures installed · substantial completion · final after punch list.
[ ] Hold retainage from every payment until final completion.
[ ] Never pay ahead of the work.
[ ] For material deposits, require proof of the order and consider direct payment to the supplier or a joint check.
[ ] Condition every payment on signed lien waivers.
[ ] Use conditional partial waivers on progress payments.
[ ] Use an unconditional final waiver only at the end, after the punch list closes.
[ ] Pay by traceable means, never cash.
[ ] Keep a running ledger of payments, percentage complete, and retainage held.

Why it matters, and the traps. A contractor demanding a deposit above the statutory cap is violating the law in the first conversation, which is diagnostic of everything after.

Retainage is the homeowner's leverage at the punch list, which is exactly when leverage is scarcest — and it is the term contractors most often propose to omit.

And a contractor requesting an unconditional waiver before payment clears is asking the homeowner to give up rights for nothing.

Phase 5 — Running the job

[ ] Log every preliminary notice that arrives — who, when, for what.
[ ] Cross-check the notice log against the subcontractor list from Phase 1.
[ ] Require a written, signed change order before any change is performed.
[ ] Track allowance balances as selections are made — an allowance is not a price.
[ ] Make selections early and in writing, and keep a decision log with dates.
[ ] Attend the rough-in inspections — framing, electrical, plumbing, mechanical.
[ ] Photograph the work weekly, dated.
[ ] Keep every invoice, receipt, and communication in one place.
[ ] Confirm each milestone is complete before releasing the corresponding payment.
[ ] Collect lien waivers with each payment, without exception.
[ ] Note any claimed delay and the contractor's written notice of it.

Why it matters, and the traps. The decision log is the document that defeats or establishes an owner-caused-delay defense, which is the most common contractor response to a delay claim.

And the preliminary notices are the warning system. A homeowner who files them unread has no idea who can lien the property — which is exactly the situation that produces paying twice.

Phase 6 — Substantial completion and the punch list

[ ] Confirm the contract's definition of substantial completion, and document the date.
[ ] Note what the date triggers: warranty periods · the statute of repose · retainage release terms · risk of loss.
[ ] Walk the job twice — once alone, once with the contractor.
[ ] Bring the specifications and change orders, and compare what was installed to what was specified.
[ ] Operate everything — every switch, outlet, faucet, drain, door, drawer, window, appliance. Run water for several minutes.
[ ] Look inside cabinets, behind appliances, in the attic and crawl space, and at the exterior grading.
[ ] Photograph every punch item.
[ ] Put the punch list in writing, with a completion date for each item, signed by both parties.
[ ] Do not make final payment or sign an unconditional final waiver until the punch list is closed.
[ ] Obtain final lien waivers from the general and every noticed subcontractor and supplier.
[ ] Obtain warranty documentation, manuals, and the permit sign-offs.

Why it matters, and the traps. The final payment and the unconditional final waiver are the last leverage a homeowner has, and signing them at substantial completion — before the punch list is closed — surrenders it and may waive patent defects the walk-through would have caught.

Final payment follows punch list completion, not substantial completion. The contract should separate the two.

Phase 7 — When the job stops

[ ] Stop paying.
[ ] Document the site — dated photographs and video of every room and system.
[ ] Note the signals: crew absent · calls unanswered · materials removed · subcontractors reporting non-payment · a payment request with no progress.
[ ] Write, do not call — a notice describing the failure to perform, demanding a completion schedule, with a deadline and proof of delivery.
[ ] Re-read the contract's notice and cure provisions and follow them exactly.
[ ] Re-verify the license and bond — a lapse may have occurred since Phase 1.
[ ] Obtain an independent estimate to complete, from a licensed contractor who inspects the work in place.
[ ] File a licensing board complaint — free, and it produces leverage.
[ ] File a bond claim, on its own short deadline.
[ ] Notify insurers where there is property damage.
[ ] Terminate in writing only after the notice and cure period has run.
[ ] Hire a replacement, and run Phases 1 through 4 again.

Why it matters, and the traps. A homeowner who keeps paying a contractor who has stopped working is funding a different project.

And terminating without following the contract's own provisions can convert the homeowner into the breaching party — which turns a strong case into a defense.

Phase 8 — Defects discovered later

[ ] Distinguish patent from latent defects.
[ ] Document the defect: photographs, dates, and the conditions under which it appears.
[ ] Obtain an expert assessment of cause and cost to repair.
[ ] Check the written warranty, and the state's implied warranty of workmanlike construction and habitability.
[ ] Check code compliance and whether the work was permitted and inspected.
[ ] Determine whether a right-to-repair statute applies — notice, inspection, and an opportunity to cure, as a precondition to suit.
[ ] Give the required notice and allow the inspection, in writing.
[ ] Calculate the statute of limitations from breach or discovery.
[ ] Calculate the statute of repose from substantial completion — which runs regardless of discovery.
[ ] Assess whether it is a consequential damage claim (insured) or a defective work claim (usually not).
[ ] Consider the state consumer protection statute, with its statutory damages and fee shifting.

Why it matters, and the traps. The statute of repose is the harder deadline — it can bar a claim for a defect that had not yet appeared.

And the right-to-repair notice is a precondition, not a courtesy. Filing without it results in dismissal in states that require it.

Phase 9 — Remedies, in order

[ ] 1. The bond claim — fastest realistic recovery, short deadline, capped.
[ ] 2. The state recovery fund — after a judgment or administrative finding; capped; deadline applies; almost nobody knows it exists.
[ ] 3. The licensing board complaint — free; discipline, restitution orders in some states, and mediation.
[ ] 4. Insurance — for consequential damage, not for correcting defective work.
[ ] 5. The state consumer protection statute — statutory damages and fee shifting.
[ ] 6. Contest any lien — unlicensed claimant · no preliminary notice · untimely recording · overstated amount · already paid.
[ ] 7. Small claims court, within the jurisdictional limit.
[ ] 8. Civil suit for breach of contract and implied warranty, measured by cost to complete less the unpaid balance.
[ ] 9. Criminal referral, where taking a deposit with no intent to perform is an offense.
[ ] Before suing, assess collectibility — see Enforcing a Money Judgment: A Comprehensive Guide to Discovery, Liens, Levy, and Fraudulent Transfer.
[ ] Preserve the two documents that make the damages case: the independent completion estimate and the dated photographic record.

Why it matters, and the traps. A homeowner whose first instinct is to sue has chosen the slowest and least collectible remedy. Items 1 through 5 come first, and three of them are free.

Model letters

A. Demand for a completion schedule

"Re: [address] · Contract dated [___]. As of today, work has not progressed since [date]. The contract required substantial completion by [date]. No crew has been on site since [date], and [describe: my calls of ___ and ___ have not been returned / materials were removed on ___ / [subcontractor] has advised that it has not been paid].

Demand is made for a written schedule for completion, delivered by [date]. This letter is given pursuant to the notice provision at Section [___] of the contract. If a schedule is not provided and work does not resume by [date], the contract will be terminated for default and I will complete the work with a replacement contractor and hold you responsible for the cost to complete in excess of the unpaid balance."

B. Lien waiver demand with payment

"Re: [address] · Payment application []. Enclosed is payment of $[] for [milestone]. This payment is conditioned on delivery of executed conditional partial lien waivers, through [date], from you and from each of the following subcontractors and suppliers that have served preliminary notices: [list].

Please deliver the executed waivers within [___] days. Future payments will be withheld until waivers for prior payments have been received. I will not execute an unconditional final waiver, and final payment will not be made, until the punch list is completed."

C. Notice of termination for default

"Re: [address] · Contract dated []. **By letter dated [] you were notified of your failure to perform and given until [] to cure.** The cure period has expired without a schedule, without a resumption of work, and without [].

The contract is terminated for default effective [date], pursuant to Section []. You are directed not to return to the property. Any materials belonging to you may be retrieved by appointment within [] days.

An itemized accounting follows: payments made $[]; value of work in place $[]; cost to complete per the independent estimate of [contractor, date] $[]; unpaid contract balance $[]. Demand is made for $[___]."

D. Right-to-repair notice

"Re: [address] · Construction defect notice. This notice is given pursuant to [state statute] as a precondition to any action.

The defects are: [describe each, with location and observed condition, with photographs at Tab ]. They were discovered on or about [date] and manifest as [].

You are offered the opportunity to inspect the property on [dates], and to propose a remedy in writing within the statutory period. Please advise of an inspection date. This notice preserves my rights and does not waive any claim."

The deadline table

Deadline	Window	Consequence of missing it
Cooling-off cancellation (16 C.F.R. Part 429)	3 business days after a home-solicited sale	The right to cancel
Rescission of home-secured financing (15 U.S.C. § 1635)	3 business days, extended if disclosures were defective	The right to unwind the loan
Preliminary notice (sub/supplier)	Weeks after first furnishing	Their lien rights — watch for these arriving
Recording a lien	Set period after last furnishing	The lien
Foreclosing a lien	Short period after recording	The lien expires
Bond claim	Short, per the bond and statute	The fastest recovery
Recovery fund claim	After judgment; capped	The fund
Right-to-repair notice	Before suit, where required	Dismissal
Statute of limitations	From breach or discovery	The claim
Statute of repose	From substantial completion, regardless of discovery	The claim
Contract notice and cure	Per the contract	Terminating wrongly makes you the breaching party

The two cooling-off rows apply to how the job was sold and financed — a contract signed at the kitchen table and a loan secured by the house are the classic setting for both, and both windows are short and commonly missed. The lending framework sits at 15 U.S.C. § 1601, with remedies at 15 U.S.C. § 1640 and the regulation at 12 C.F.R. Part 1026.

Who does what

The homeowner. Phases 1 through 6, all of it. None requires a lawyer, and together they contain nearly every protection available.

A construction lawyer. Phase 3's contract review before signing — one hour, once — and Phases 7 through 9 if the job fails.

An independent contractor or inspector. The completion estimate in Phase 7 and the defect assessment in Phase 8. These are the two documents that make the damages case, and both are inexpensive.

The licensing board. Free, and the fastest source of leverage against a licensed contractor.

And where a lien is recorded, the mechanics are in Mechanic's Liens and the Right to Get Paid for Work Performed and Perfecting and Enforcing a Mechanic's Lien: A Practical Checklist.

Where the dispute goes to arbitration, see Drafting an Arbitration Clause: A Practical Checklist and Confirming or Vacating an Arbitration Award: A Practical Checklist — noting that under the Federal Arbitration Act, 9 U.S.C. § 10, an award is nearly unreviewable, and that Morgan v. Sundance, Inc., 596 U.S. 411 (2022) means litigating first can waive the right to arbitrate.

Failure modes, ranked

No license, bond, or insurance verification, discovered when a recovery is needed.
A deposit above the statutory cap, paid on a one-page proposal.
Payments running ahead of progress.
No retainage, and no leverage at the punch list.
Preliminary notices unread and lien waivers uncollected — the path to paying twice.
Verbal change orders.
Unmanaged allowances, and a surprise final bill.
The permit in the homeowner's name, or no permit at all.
Final payment and an unconditional final waiver signed before the punch list closes.
Continuing to pay after the work stopped.
Terminating without following the contract's notice and cure provisions.
Suing before the bond, the board, the recovery fund, and the consumer statute.
Missing the right-to-repair notice, and having the suit dismissed.
Obtaining the completion estimate and the photographs too late to matter.

Items 1 through 5 all occur before any work is performed, each takes minutes, and none can be repaired afterward.

The authorities behind the checklist

Most of residential construction law is state law — licensing, deposit caps, mechanics liens, implied warranties, the statute of repose, right-to-repair procedures, and recovery funds are all creatures of state statute, and every one of them must be looked up locally. These federal provisions supply the overlay.

How the job was sold. The cooling-off rule at 16 C.F.R. Part 429, for a contract signed at the home rather than at the contractor's place of business. And unfair or deceptive practices generally at 15 U.S.C. § 45, the federal analogue of the state consumer protection statute that supplies statutory damages and fee shifting.

How it was financed. The Truth in Lending framework at 15 U.S.C. § 1601, with rescission of home-secured credit at 15 U.S.C. § 1635 — extended where disclosures were defective — disclosure requirements at 15 U.S.C. § 1637, remedies at 15 U.S.C. § 1640, billing error resolution at 15 U.S.C. § 1666 where the work was charged to a credit card, and the implementing regulation at 12 C.F.R. Part 1026.

Where the dispute goes. The Federal Arbitration Act — 9 U.S.C. § 1, § 2 making written arbitration agreements enforceable, § 3 staying litigation, § 4 compelling arbitration, § 9 confirming an award, § 10 supplying the narrow grounds to vacate, and § 16 governing appeals.

And the case law that decides how an arbitration clause operates: AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) and Epic Systems Corp. v. Lewis, 584 U.S. 497 (2018) on enforceability; Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967) and Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) on severability — a challenge to the whole contract goes to the arbitrator; Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010) and Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. 63 (2019) on delegating arbitrability; Lamps Plus, Inc. v. Varela, 587 U.S. 176 (2019) on class consent; and Coinbase, Inc. v. Bielski, 599 U.S. 736 (2023) on the stay pending appeal.

On public projects, where property cannot be liened, the substitute is the payment bond — the federal model at 40 U.S.C. § 3131 and 40 U.S.C. § 3133, which most states mirror.

The practical instruction that follows from all of it: look up four state-law items before doing anything else — the deposit cap · the lien notice and recording deadlines · whether a right-to-repair statute applies · and whether the state maintains a recovery fund. Those four determine most of what this checklist can accomplish.

Hiring a Contractor and Resolving a Construction Dispute: A Practical Checklist

How to use this checklist

Phase 1 — Verification

Phase 2 — Bids

Phase 3 — The contract

Phase 4 — The payment structure

Phase 5 — Running the job

Phase 6 — Substantial completion and the punch list

Phase 7 — When the job stops

Phase 8 — Defects discovered later

Phase 9 — Remedies, in order

Model letters

A. Demand for a completion schedule

B. Lien waiver demand with payment

C. Notice of termination for default

D. Right-to-repair notice

The deadline table

Who does what

Failure modes, ranked

The authorities behind the checklist

Related Documents