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As we near the end of this mini-series, today we shall look at tradespeople. We are likely to encounter at least the following categories of tradesperson as investors or developers: builder, bricklayer, carpenter, joiner, plasterer, plumber, heating engineer, electrician, painter/decorator, flooring fitter, door/window fitter, roofer, gardener/landscaper and general labourer…phew, that’s a lot! So, what could possibly go wrong when trying to herd thirteen or more different trades on our projects then?
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Resources mentioned
Check trade registrations here: electricians or here for gas
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Transcription of the show
Hello, and welcome to another episode of The Property Voice podcast. My name is Richard Brown and as always, it’s a pleasure to have you join me on the show again today.
As we near the end of this mini-series, today we shall look at tradespeople. We are likely to encounter at least the following categories of tradesperson as investors or developers: builder, bricklayer, carpenter, joiner, plasterer, plumber, heating engineer, electrician, painter/decorator, flooring fitter, door/window fitter, roofer, gardener/landscaper and general labourer…phew, that’s a lot! So, what could possibly go wrong when trying to herd thirteen or more different trades on our projects then?
Well, let’s find out…
Property Chatter
Distrust a Trader.com…?
Let’s begin with a couple of stories courtesy of Ian, a fellow investor and friend of mine, who shared the first two stories with me…using his own words…
Falsified invoices
My property manager was a rather large lady who also occupied the ground floor flat in the block. It was above and beyond the call of duty to ask that she stress test the floor joists, but she inadvertently did so. Unfortunately, the woodworm had been busy over the preceding fifty years, and the floor was unable to withstand this final onslaught.
Luckily, she didn’t sue me, however, my sympathy was limited because I had discovered that she was making extra cash from tradesmen at my expense. She would regularly find problems, which various tradesmen would quote for, and would arrange a “profit share” deal where the inflated price would be split between them. This even extended to the window cleaner, which is how I found out. He told the neighbours that the mad woman at No 14 would ask for inflated receipts for cleaning the windows every fortnight, even though he only came once a month and charged half the price. The window cleaner couldn’t understand why she would go to all this trouble and risk losing her job for literally a couple of extra quid a week. It’s no wonder she didn’t sue: I was much more valuable to her as an extra income source!
Lesson learned: keep tight control of the cash, get a minimum 3 quotes for larger jobs and pay the tradesmen directly in certain cases. An extra one from me…does it sound right…how often do you need to clean the windows really?
Incompetent person scheme…
Then there was the electrician who was a member of the Blackpool Council Recommended Trader Scheme. He quoted for fitting card prepayment meters in each of the flats and to certify the electrics and fire alarm. Again, the cost increased when he ‘suddenly discovered’ that most of the ground floor needed re-wiring. “Oh well, at least the electrics will be safe”, I thought. I rapidly changed my opinion when one of the occupants noticed smoke coming from the meter cupboard. Fortunately, it didn’t turn into a full-blown blaze, but another electrician was urgently deployed to fix the first electrician’s work, at my expense. Electrician No 1, let’s call him Sparky McScorch-Face, was recommended by my accountant and is still on the Council recommended contractor list. However, I can find nothing on his invoices at the time showing he was a member of a competent person scheme.
Lessons learned: Always check a tradesman is registered, for electricians use http://www.electricalcompetentperson.co.uk for gas its https://www.gassaferegister.co.uk/. Trust your gut, not just council websites or recommendations, this guy could talk for England, and was in the property for hours but there was something not quite right about him… I can’t quite put my finger on it but maybe he didn’t ask all the relevant questions, seemed just a bit too keen for the work, and didn’t seem busy enough to leave promptly. Get a fixed quote and a signed contract for any work, especially if it’s over a couple of thousand pounds. For any major works, always keep a snagging retention too. It’s amazing how a signed contract and retention can concentrate the mind of any tradesperson, and there’s total clarity over the scope of the works too.
Tampa Bay Rowdies?
This one comes from my USA developer pal, Eugene…
During a refurbishment of a property in Tampa, Florida we hired a contractor to fit the house with a Heating, Ventilation, and Air Conditioning (HVAC) system, complete with external unit and internal ductwork.
We agreed on 30-day payment terms upon receipt of invoice, although on reflection that may have been our first indicator of potential problems, given the arduous nature of arranging such payment terms. Whilst we usually part pay some money up front and then clear the balance on delivery or completion for our flipping projects, we were pressed to ask for terms on this occasion, due to a delay in the closing (completion) of another property.
As with all our other projects, we gave the HVAC installation company the combination code to the lock box that contained the keys to the property, so that we didn’t have to be on site constantly.
The installation was nearing completion when we hired another contractor to frame and drywall the internal ductwork. Given this overlap, the HVAC installation owner was under the mistaken impression that they were paid upfront and so felt slighted.
She made a call on a Saturday evening requesting full and immediate payment, threatening that she would get her team to remove the work that was done. Although we did have the funds available by that time it made no difference. On inspection the following day, we were met with a gutted house and the HVAC unit outside had been removed.
Although we had a written contract you cannot legislate for such behaviour. We are currently in the process of assessing our legal alternatives and the cost/benefit ratio of taking legal action.
Lesson learned: cash is king…or rather payment to tradespeople is…if they balk at payment terms its best to not push them too hard or they might just snap! Be personable and keep tradespeople in the loop…it can help to avoid a misunderstanding.
When Bodgeit & Scarper were replaced by De Tainee
Damien was managing an out-of-area project when the general contractor, let’s call them Bodgeit & Scarper, left site abruptly never to return. We managed to find a replacement, who we shall call De Tainee, who began completing what Bodgeit had started, only to go extremely quite suddenly. We later discovered he was a guest at Her Majesty’s Pleasure and so, was unable to finish the job for around 28 days, apparently. He then relayed a message to say that he could come and complete the job, provided someone could drive him, and his electronic tag would allow him!
Lesson learned: a new area represents a higher risk of tradesperson let down; try to build contacts and relationships in advance, then stick with an area and team if you can to reduce the risk of being let down.
A Jekyll & Hyde Tale
Equally, Rod manages some of our projects. He told me how one Jekyll and Hyde character would be as nice as pie during the day, but would abruptly turn into a ranting, abusive lunatic at night. He would frequently send a flurry of abusive, insulting and offensive text messages, including threats to burn down our property if we did not release the retention for the work that he had botched and had not completed. The next day he would apologise and blame ‘the sauce’ he had been on the night before!
Lesson learned: switch the phone onto ‘do not disturb’ mode before the watershed!
Steps to take to help protect ourselves
- Tradespeople are often good at their trade but often not so good at managing people, processes and business systems – so, if you want professionalism, either go with experience or size…both of which cost more and less available than we might ideally want.
- Attention wanes as the job nears completion – so try and hold back some of the payment as a carrot or possibly to pay someone else to complete the job.
- Personal recommendation and referral trump trader listing sites, Yellow Pages and Google.
- Check for qualifications, industry/trade membership and public liability insurance.
- Ask introducers or agents if they take any form of direct/indirect payment from tradespeople. Some disclose it, some don’t, whereas some have a handling charge.
- Have a written agreement – you can set out the basics of the agreement in a few key bullet points in an email exchange. List dates, progress payments and conditions, scope/specification of works, labour & materials, pay rates, exclusions, and finally any retention.
- Remember, tradespeople often need to buy materials and pay staff, so do not stretch them on their payment terms. Finally, avoid cash in hand if you want any form of guarantee or recourse.
If you are not present, or not confident, get proof of completion of work where possible, such as signed delivery, certificates, pictures or video.
As I reflect on my own experience and those of my buddies here, one consistent theme emerges. Tradespeople, in a surprisingly large number of cases, seem to be unreliable and let you down somehow. I think this goes back to the point earlier, that trades are usually good at their trade but often not so good at managing the business of their trade company. You do also get what you pay for and if a tradesperson is freely available, in these days of skills shortages, you have to wonder why. My golden rules are to find good people, pay them on time and then stick with them!
OK, that’s another horror story shared again this week. As ever, the show notes can be found over at www.thepropertyvoice.net. Or, if you want to talk about anything from today’s show, or just talk property investing more generally, email me at podcast@thepropertyvoice.net, I would be happy to hear from you!
Once again, all I want to say is thank you very much for listening once again this week and until next time on The Property Voice Podcast…it’s ciao-ciao.