Contractor Glossary

Terms you should know when working with a contractor

It's important to understand these terms when working with a contractor.

• Assignment of savings

  If a contractor doesn't have a bond, they must have an assignment of savings. It's savings account (or CD or time deposit) containing the same amount of money as their required bond they can set up with their bank and assign to L&I as surety — an alternative to the bond requirement. They must keep this dedicated money in the account for at least four years, even if they've closed their business.

• Bonds

  If a contracting business is registered with L&I, it will be bonded. Currently, the law requires the bond to be $12,000 for general contractors and $6,000 for specialty contractors (contractors who specialize in a particular trade, such as drywall or painting).
  
  This bond is a three-party agreement between a surety (such as a bank), the contractor and the project/property owner. The agreement binds the contractor to the terms and conditions of a contract. If the contractor has not performed to the contract's specifications, the surety assumes the contractor's responsibilities and ensures that the project is completed up to the amount of the bond.
  
  If you are contracting a job for more than this $12,000/$6,000, however, you would benefit from a performance bond.

• Bond, performance

  A performance bond is a surety bond that covers the entire cost of a project, beyond the legal requirement of $12,000 or $6,000 to guarantee satisfactory completion of a project. It is issued by an insurance company.
  
  Payment from the performance bond is available only to the project/property owner. No one else can make claims against it. If the contractor fails to construct according to the specifications in the contract, the project/property owner is guaranteed compensation for any monetary loss. In order for a performance bond to be effective, the contract must be specific about the work to be done. A contractor cannot be held accountable for vague descriptions that are open to interpretation.

• Complaint

  This is the first legal action on the part of the consumer against the contractor. It is a statement of the consumer's issue with the contractor and a demand for a solution.

• Insurance, liability

  Damage caused to person or property due to negligence of the contractor may be covered by their liability policy. You will need to contact their insurer directly to make a claim. Your registered contractors insurance policy number and coverage amount are listed on the L&I Web site at Look Up: Contractors or Tradespeople.

• Lien

  Anyone hired by your contractor to work on your property, or to provide materials for your project, if they have not been paid by your contractor, they have the right to force you, the consumer, to pay. They force you to pay by making a claim against your property.
  
  This claim is known as a "lien"—specifically, a "construction lien." A lien is filed within 90 days of work stoppage or delivery of materials. Washington state law allows this, it is perfectly legal.  And it is an easy way to get yourself in financial trouble. Fortunately, there are ways to protect yourself.

• Permits

  Permits are for your safety. They ensure that vital functions of your building have been installed to Building Code Specifications. Do not allow them to be overlooked. They are very important part of any project.
  
  Building Permits
  Contact your local county or city building department for details.
  
  Electrical Permits
  L&I performs most inspections throughout the state, but some cities do their own electrical inspections. For more information, see: Permits, Fees and Inspections.
  
  Manufactured/Mobile Home Permits
  L&I has statewide responsibility for approving plans and inspecting both new and altered manufactured/mobile homes and recreational vehicles for safety. See the manufactured/mobile home permits page for more information.

• Summons

  A summons is a notice sent to the contractor that you are suing. The contractor must answer to the court by a date specified in the notice. Failure of the contractor to appear in court by that date can result in a ruling in your favor.

• Workers' compensation

  Employees who sustain injuries while working on your property are covered by the workers compensation and industrial insurance policy. You can verify if your contractor's workers are covered by checking Verify Workers' Comp Premium Status.

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