Other Problems that Could Occur in Cash Situations
Incomplete or poor-quality work
Without a written contract or receipt for a cash payment, you will be out of luck if you make an advance payment and the work is done incorrectly, not according to building codes or to your specifications, or if the work is never completed or not even started.
Without a contract, it is your word against theirs. In most of these cases, homeowners lose their money and end up trying to figure out where to get the money to pay another contractor to complete the work properly.
If the contractor doesn’t complete the job or doesn’t do it correctly, your only option may be to take them to court to settle the dispute. (You might not even be able to find them to have them served to go to court, in which case you have already lost). But, if you make it to court and don’t have a written contract, the judge will decide who is telling the truth. You may or may not agree with the judge’s decision, but you will have to abide by it whether it recompenses you for your losses or not.
In some instances, you, as the homeowner, may even be required to pay fines or have legal actions taken against you if things are not done according to code and/or the proper permits are not secured for the project.
Even though having a contract in writing may not prevent every problem from occurring, it can minimize problems and make them less expensive to resolve. Potential misunderstandings are also minimized with a written contract. It also positions you to demand satisfactory work and resolution of problems if the contractor lets you down.
Doing an addition or renovation to your home requires a significant investment of your time and money; and, as such, you deserve to have a proper warranty on the work that is done. Cash only, fly-by-night workers do not provide you with the security of a warranty even if they say they will come back and fix things, while reputable contractors give you a warranty as part of their written contract. If something goes wrong while the work is being done or after it is supposedly completed, do you really think you can trust someone who lies to the government and cheats on their taxes to honor their obligations to you? For your safety, you should always get every aspect of your job in writing and have it signed by you and your contractor.
Depending upon your homeowner’s insurance coverage, your policy may or may not cover any accidents or injuries that occur on your property. However, most professional contractors are required by law to have Workers’ Compensation insurance for their workers in case they are injured on the job. In many places, self-employed tradespeople aren’t required to have Workers’ Compensation insurance, but they should take out their own disability insurance to protect them if they get injured. If you hire someone for cash who is not protected by either your homeowner’s policy or Workers’ Compensation, the courts may consider you as an employer, and you could potentially be held responsible for medical and/or rehabilitation costs if that person is injured on your property.
Damage to your property
Once again, depending upon your coverage through your homeowner’s insurance policy, you may or may not be covered if a contractor damages your personal property or your home. Licensed professional contractors, who operate a reputable business, have comprehensive business insurance to cover damages caused by them or by anyone who works for them. If a contractor is working for you “under-the-table,” they more than likely do not have insurance to cover your losses. You would have to depend on their willingness and, more importantly, their ability to pay for any damages that they cause.