Flipper/Rehabber · Golden, CO · Member since 2013 · 590 posts · 319 votes
I have some work needing done that requires permits and the contractors aren't licensed in the city where the permit is needed. They want me to pay their license fee and a fee for pulling the permits and putting their name on the job. I pay them by the job after the job is completed and their work has been good so far. Is it standard for the contractor to ask to pay their licensing fee and a separate fee to pull the permits?
Milwaukee, WI · Member since 2014 · 180 posts · 114 votes
11y
I don't think you should have to pay their license fee - it's their cost of doing business. At the end of the day, they have the benefit that they will continue to have a license in that municipality until a renewal is required.
I do think it's fair to charge a reasonable fee to pull a permit. Pulling a permit takes time depending on the complexity of the project.
Milwaukee, WI · Member since 2014 · 180 posts · 114 votes
11y
I don't think you should have to pay their license fee - it's their cost of doing business. At the end of the day, they have the benefit that they will continue to have a license in that municipality until a renewal is required.
I do think it's fair to charge a reasonable fee to pull a permit. Pulling a permit takes time depending on the complexity of the project.
Flipper/Rehabber · Golden, CO · Member since 2013 · 590 posts · 319 votes
11y
They want $500 to do this. $125 of it is the city's licensing fee. To me that seems very steep. They said that they get permits as each city requires and that there are too many cities to keep current with every city in the Denver suburbs every year. I did pay them to do it since they've done the majority of the work so far and are finishing the job up and have done everything at reasonable rates.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
11y
Agreed with Rob...they cover their license fee (no reason you should be paying for their cost of doing business), but asking a reasonable fee for pulling the permit isn't uncommon.
As to the fee for pulling the permit, it would depend on the complexity of the job and the amount of time likely to spend with the building department getting the permit. If all they need to do is walk in, fill out a form and walk out 10 minutes later with a permit in hand, then I wouldn't pay much more than the cost of the actual permit; if it's a process where they need to spend several hours waiting at the permit department, negotiating with inspectors, etc., then that's more time investment that you should be helping cover.
Investor · Leominster, MA · Member since 2011 · 1k+ posts · 589 votes
11y
Keep one thing in mind @Kyle Doneyif this is a contractor you have a good relationship with you may want to come to some compromise if you are asking them to do business in a city where they don't normally work. Throw them a couple hundred bucks then beat them up on price during the job. Find someplace to save a couple hundred. Put it on them to come up with an idea. Another thing to keep in mind, nothing is standard in real estate or construction.
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
11y
Costs of doing business are charged to the customer in one form or another . Some states , each county requires a separate license , that can add up to thousands to the contractor yearly , and they may only do one job in that area , so billing to the customer is understandable . Permits can take time and different trips , so billing time and costs to the customer is normal business . We give the customer 3 options on permits , pay us our hourly rate , get the permit themselves , or pay a permit service . Depending on the job some permits take months .
There is no standard fee. If each of my contractors charged me $500 every time they pulled a permit, I'd have spent probably close to a quarter million dollars for contractor pulling permits over the past 8 years.
Considering a typical permit costs about $50 and takes about 20 minutes of time (let's call it 60 minutes if you add in the extra driving time), that's means I should be paying no more than $100 to have a permit pulled -- the $50 for the permit and then up to about $50 for the contractor's time. Paying $100 per permit (probably closer to what I've paid, on average) has saved me $200K over the "standard fee."
So, instead of thinking in terms of "standard fee," think in terms of actually time and costs. Certainly, if a permit costs $250 in your area and your contractor is spending 5-10 hours dealing with having to pull it, then $500 could be the right amount. But, I'd guess it's typically way too much.
Contractor · Round Rock, TX · Member since 2013 · 767 posts · 389 votes
11y
They aren't very intelligent contractors. Just build it into the job and don't make a big deal out of it. Otherwise, like you just did, somebody questions it and makes your life harder. I'm into simplicity. I don't have to pay much to register in the towns around Austin, some of them nothing. I do work in all the cities, usually once you're registered, that is it.
Investor · Neptune Beach, FL · Member since 2015 · 21 posts · 1 vote
11y
Wow. Yes I was told in our local real estate investment group that most contractors will charge $500 if any permits need to be pulled. The $500 is for any permits that would be pulled on that one job. I have not done any further research on this so I may want to look into this further. Thank for the info.
There is no standard fee. If each of my contractors charged me $500 every time they pulled a permit, I'd have spent probably close to a quarter million dollars for contractor pulling permits over the past 8 years.
Considering a typical permit costs about $50 and takes about 20 minutes of time (let's call it 60 minutes if you add in the extra driving time), that's means I should be paying no more than $100 to have a permit pulled -- the $50 for the permit and then up to about $50 for the contractor's time. Paying $100 per permit (probably closer to what I've paid, on average) has saved me $200K over the "standard fee."
So, instead of thinking in terms of "standard fee," think in terms of actually time and costs. Certainly, if a permit costs $250 in your area and your contractor is spending 5-10 hours dealing with having to pull it, then $500 could be the right amount. But, I'd guess it's typically way too much.
In what rural place is a permit $50? The cheapest permit I can think of that we've gotten in the last 4 years was $140 or so... in bigger cities (like Atlanta), you won't be getting a permit for less than ~$500 and hours of dealing with the bureaucracy.
IMO, a contractor charging $500 to pull a permit is more than reasonable. In a very complicated situation, charging a couple of thousand is also reasonable.... he may be acting as an expeditor, or using the service of an expeditor.
Also, consider that he may be rolling the cost of licensing, continuing education, and other associated costs into the permitting fee.
In some situations, municipalities require specialty bonds or licensing fees. If a contractor is stepping outside his normal geographic area for a good customer, I think it's fair for the contractor to ask the customer to pay for at least some part of the bond/licensing fee... he may not realistically use it again before it expires.
Contractor · Fort Worth, TX · Member since 2015 · 379 posts · 740 votes
11y
General contractor here.
$500 seems high, but depends on the locality. You can easily call the city and find out cost of permit, or ask them to show you the receipt for permit costs. But realize that there's time involved to prepare plans for city submittal - that can be anywhere from an hour to a couple of days, depending on the complexity of the project.
I usually eat the cost of contractor licensing for retail clients, but I might pass it on to an investor client. From a contractor's point of view, investors are the lowest-margin clients, and often the highest-maintenance ones. I am both an investor and a GC, so I can see both sides, but really, the only reason mosts GCs work with investors is the possibilty of an ongoing stream of business. Even an experiened investor typically requires more time from the GC than the average retail client, and a newbie investor can eat up dozens of hours of contractor time just educating them. As an investor myself, I usually enjoy helping a new investor get started, but I sure don't do it for the huge profits.
Meanwhile, in my service area, there's something like 127 different municipalities, and every damn one of them wants $100-150/year just to register as a contractor, before we even get to permit fees. If I registered with every one of them, I'd spend $12-15K/year just in contractor registration fees.
So, you take a low-margin client wanting me to pull permits in a municipality I may not work in for the rest of the year, and I may well pass on that cost to them. I'd just probably figure out how to wrap it into other costs so it doesn't cause the client heartburn.
Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes
11y
strictly read, the city of Austin requires a permit to spray foam insulate around an outdoor water hose bib...because it improves or repairs a structure. Loosely read, or common-sense read, replacing windows in no way alters the "structure" so why permit?
Could the water supply be adversely affected, a fire started, or a building be rendered unsafe? That is what permits protect against. And for good reason.
Wholesaler · Holiday, FL · Member since 2013 · 571 posts · 221 votes
11y
This is a sometimes a difficult concept for non-contactor to grasp but: The Customer Always Pays For Everything
Contractors do not have some secret source of funds - every dime they have or spend or make is obtained from the customer. And from no where else - as there is no where else.
So one way or another - you will also be paying the permit fees.
I have some work needing done that requires permits and the contractors aren't licensed in the city where the permit is needed. They want me to pay their license fee and a fee for pulling the permits and putting their name on the job. I pay them by the job after the job is completed and their work has been good so far. Is it standard for the contractor to ask to pay their licensing fee and a separate fee to pull the permits?
It is the contractors responsibility to to keep up with his side of running his business. It is his business and his license to maintain. As for the fee of pulling permits, here is a permit valuation table for LA for reference.
Investor · Baltimore, MD · Member since 2013 · 205 posts · 44 votes
11y
You should only pay for the permit and something for the contractors time for pulling a permit. You can go to the permit and get a list of permit fees and how they are calculated. A renovation in Baltimore City which is a permit scam city. Permits for a total renovation on a row house just fees are approx. $1000 or less. Contractors that dont have licensces usually pay a licensed contractor a fee to pull permits for them. You should be getting a good deal if you go the latter route.
strictly read, the city of Austin requires a permit to spray foam insulate around an outdoor water hose bib...because it improves or repairs a structure. Loosely read, or common-sense read, replacing windows in no way alters the "structure" so why permit?
Could the water supply be adversely affected, a fire started, or a building be rendered unsafe? That is what permits protect against. And for good reason.
Not sure about insulating around a bib. But for health and safety reasons . If the windows were installed incorrectly (which we all know happens) then you could get water creating mold in the building or they could fall out on somebody if not properly affixed. Not so much the falling out, but the water issue is a concern.
Columbia, SC · Member since 2009 · 21 posts · 6 votes
11y
As an investor and builder/GC this has always been a confusing view on doing business with a contractor. No one goes to WalMart and asks for a breakout of their supply chain costs. A "legitimate" GC will always pull permits, be fully licensed and insured. This, the same as any other business, comes directly from revenue which ultimately comes from you the client.
No one goes to WalMart and asks for a breakout of their supply chain costs.
You don't need to...markups in retail are pretty uniform throughout the supply chain, and for public companies like Walmart, you can look at their quarterly filings to determine exactly what their margins are.
With contractors, you don't have this same level of transparency, so if you want to ensure that you're getting reasonable prices, you need to do some additional investigation...
Columbia, SC · Member since 2009 · 21 posts · 6 votes
11y
@J Scott: It's understood that large publics have a higher level of transparency but that rarely sways a customers purchasing decisions. Competition does a better job of regulating pricing than company transparency in my opinion. Great points though J.
In regards to the OP, it seems the contractor may be already squeezed to the hilt if he's standing firm on that pricing. As an example, we were doing a charity project for a home owner that costs us $30 in materials but $210 in licensing and permits. If this was a retail project the costs would be $345 (with labor and before mark ups). The client may deem a $500 bill to replace 3 pieces of wood siding excessive but it's legitimate. If it were a $10k residing job the client would never see the licensing and permit fees. We tend to have 15 to 18 different municipality licenses by the end of every year. If this wasn't built into the costs it would be very expensive.
It's a common complaint with investors that a contractor does great work but then "disappears" after a time. It's usually after he's done a couple of projects with that client and realized he could've made more money going fishing!!