Q-Last December, we signed a contract with a remodeling contractor to renovate our kitchen. He said he could begin work the last week of January. That was fine with us. But when the last week of January arrived, another contractor showed up. He said our contractor, who came highly recommended by a good friend, was too busy, so he sold our contract to this contractor, whom we had never met.
To put it mildly, I was quite upset. I refused to let him start work, because he looked like a slob. I finally contacted our original contractor and he apologized, but said he was just too busy to do our job as scheduled. But he refused to be responsible for the work of the second contractor, so I told him to forget it. Now the second contractor, who bought our contract, is threatening to sue us. What should we do?
A-Don’t worry. You signed what is called in contract law a personal service contract. That means you hired a specific contractor to do your kitchen remodeling because you were aware of his special skills. A personal service contract such as yours cannot be assigned to another contractor without your permission.
As a general rule, contracts can be assigned freely. The two major exceptions to this rule are (1) contracts whose terms prohibit assignment and (2) personal service contracts.
For example, if I promised to pay Rembrandt $1,000 to paint my portrait, but he assigned his assistant Joe Jones to do the painting, I wouldn’t have to pay because a personal service contract cannot be assigned without permission of the other party. For further details, please consult your attorney. You also may want to report the incident to your state contractor’s license board, which licenses the contractor you hired.
Canceling escrow accounts
Q-Recently, you explained to another reader the drawbacks of mortgage escrow impound accounts for property taxes and insurance premiums. After reading that article, my husband phoned our lender to find out how to cancel our impound account because we had constant battles with our lender about overcharges. To our surprise, the lender easily agreed to cancel the account and apply the balance to future mortgage payments. Now we can pay our property taxes and fire insurance premiums directly. Many thanks.
A-I’m glad to learn you had no difficulty canceling your escrow impound account. Some loan servicers are glad to get rid of those accounts, whereas others make it virtually impossible for borrowers to do so. However, I hasten to add that VA, FHA and PMI (private mortgage insurance) home loans require such accounts, which cannot be canceled by borrowers.
Title insurance discounts
Q-A friend of mine invests in real estate in California. She says it is possible to save about 20 percent on title insurance by asking for a discount rate. I am thinking about buying my first home. Can I get such a title insurance discount on a residence?
A-Not all states allow title insurance discounts, but many do. When you buy a home, ask the title insurance company if that home is eligible for a discount rate. You may discover it qualifies, if title was recently transferred within the last few years. The rules for title insurance discounts vary by state, but it won’t hurt to ask.
Lease-option
Q-We don’t have much cash for a down payment, but we saw a home advertised in the newspaper “Lease-Option, $4,500 Moves You In.” We checked out the house and like it very much. The rent is $1,000 per month with a $500 monthly rent credit toward the down payment. It sounds too good to be true. What’s the catch? Are lease-option houses a bad deal?
A-Lease-options can be good for both buyer and seller when properly structured. The option purchase price should be close to market value and you should get at least a 33 percent rent credit toward your down payment. But that 50 percent rent credit sounds even better.
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Please note: Real estate laws differ from place to place, and laws of your area should be checked before making decisions on real estate problems.
