Bolster

MANHATTAN With shoddy work, ballooning costs, contractors leaving behind half-completed jobs, renovation woes are common across the city and have become especially problematic in Sandy-affected neighborhoods where contractors swooped in, sometimes taking advantage of owners looking to rebuild.

Homeowners have had little recourse when jobs go awry until now. Starting Wednesday, a company called Bolster is set to make New York the first city with access to renovation insurance.

If theres a misuse of funds or poor quality worksmanship, our insurance pays out, Bolsters founder Fraser Patterson said. Basically, we guarantee the job is done on budget.

Patterson knows his way around construction sites. He started working as a carpenter in his native Scotland when he was 16 and later became a general contractor for high-end properties in London.

He also has a degree in mathematics.

He combined his construction background and accounting savvy to try to solve the hassles and financial of having renovation work done.

The web-based platform will let New Yorkers work with vetted and underwritten contractors for a fee of as high as 5 percent of the total renovation project, Patterson said.

Bolsters insurers will check contractors background and make sure theyve done similar types of jobs. For example, the company will check that contractors businesses havent gone bankrupt and returned to the industry under a new name.

New York Citys home renovation market is the countrys largest by nearly 25 percent, according to Patterson.

New York City residents spent $11 billion on contractors in 2012, and some 60 percent of Manhattan home buyers remodel in their first year after moving in, said Patterson.

New York also has a highly regulated remodeling market and a very old median age of housing stock at 52 years so renovations are a constant, added Patterson, whose company is partnering with the American Institute of Architects and real estate firms such as Douglas Elliman .

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Projects carry big financial risks for both homeowners and contractors, Patterson added.

A $20,000 renovation project that swells to a $40,000 project, for instance, can be devastating for owners, Patterson said, but contractors have legitimate concerns, too.

Contractors are concerned about not getting paid, he said, and theres a huge amount of money to be paid for materials.

To help clarify expectations, Bolsters mobile app will have a checklist, documenting each step of the project. It will also include a contract and Consumer Bill of Rights on Contracting for Home Improvements , modeled on a template from the citys Department of Consumer Affairs, which regulates contractors.

Patterson added: Were saying you can feel comfortable giving the money upfront because youre insured.

Pattersons top tips for homeowners before renovating:

1. Have a fixed-price contract from the get-go to reduce financial risks

Often youll have contracts with time and material and costs plus, he said. Stay away from them. Theyre absolutely toxic.

2. Be as specific as possible about what you want done

Ask your contractor exactly what he or she is installing and taking out, and tell the contractor what products you want and where to get them.

I cant emphasize the term specificity enough, he said. This significantly reduces the chance of disputes.

3. Have a task schedule for payment so you only pay for whats been completed

Have a task schedule that clearly outlines what youre paying for and when youre paying and only pay once a particular task is finished, Patterson advised.

He also suggested ignoring rules like you should never pay more than 10 percent up front, since that might be hard on a contractor if materials are costly.

4. Motivate the contractor by proving that he or she will be paid

Patterson suggests putting money into an escrow account, for example, to show youre dedicated and have the funds to complete the job.

If contractors know youre committed, he said, They wont get distracted by another project.

5. Know what change orders are

Change orders often result in a projects cost going up and can cause disputes. Know whether a contractor is making a change order because you changed your mind or because something had to be altered due to the contractors error or an unpredictable event.

6. Never ever pay in cash.

Youre putting youre home at risk, Patterson said. Theres no paper trail if something goes wrong.