If you have ever hired a bad contractor to perform work on your home, the experience can be frustrating.
Homeowners who hire general contractors, often put themselves at risk. Some of these risks are obvious such as shoddy work. But what about work being done without permits? Others have liens being placed on their homes from sub contractors or suppliers who aren’t paid by the contractor.
When things go wrong between a homeowner and a building contractor, the homeowner is often left with an incomplete project, and out of money to hire someone else to complete the project. If this is you, you may be wondering what can I do about a bad contractor?
My contractor won’t return my calls
Several years ago I hired a contractor to rehab some of our houses. He would complete about a week’s worth of work, and then ask me for payment for the work done. I thought it was only fair that I pay him for the work done so far. However, my rehabs often still had another couple of weeks of work left before completion.
Once the contractor was paid… he would disappear for the next several weeks leaving me hanging with an unfinished house
The problem was that once the contractor was given a progress payment, he would disappear for several weeks. Meanwhile, I was left hanging with an unfinished project. To add to my frustration, my contractor wouldn’t return my calls! When he finally did show back up, he always had some excuse as to why he went AWOL. I began to realize that he would only show back up when he needed more money.
If you have hired a contractor who won’t return your calls or only shows up when they need more money, then this is for you.
Failure to perform
When a contractor doesn’t complete the work or it is not done correctly, it is considered a “failure to perform”.
Take this classic failure to perform scenario. A homeowner gives the contractor money up front or pays for the job in advance. Just like my experience above, the contractor only does a portion of the job and comes back to the homeowner looking for an advance of more money. If the homeowner doesn’t provide any more money, the contractor disappears for several weeks or no longer returns the homeowner’s phone calls.
The definition of what constitutes a “failure to perform” is dependent upon the written contract between the homeowner and the contractor. If your contract is a handshake or verbal agreement, there’s very little that the homeowner can do. Even if there is a written contract, if it doesn’t have remedies for the homeowner, the homeowner has little leverage to cure the problem.
A quality contract should have remedies for the homeowner including but not limited to the following:
Failure to obtain permits
In most states, licensed contractors are required to obtain the necessary permits for any work performed. When handymen or homeowners don’t obtain permits, it is a civil matter between the homeowner and the local jurisdiction. However, when a licensed contractor does not obtain a permit, it become a criminal matter between the state licensing board and the contractor. However, many contractors ask homeowners “Why do you want to get a permit? It’s just going to raise your property taxes.”
If you want permits pulled for work your contractor is performing, then you need to make sure your written contract states what items you want permits for. If you want permits for everything, then you need to be clear in the contract that you want permits for any work that requires permits.
Failure to pay subcontractors – mechanic liens on home
When a contractor or sub contractor does not get paid, they have a legal right to file a lien on your home for the monies they are owed. This gives the contractor a way to guarantee they are paid, even if the homeowner fails to keep up their end of the bargain.
However, it also gives the same right to your contractor’s sub contractors, laborers or vendors. In other words, if your contractor purchases the materials for your roof, but doesn’t pay the roofing supplier, the roofing supplier can place a lien on your house. Even a day laborer hired from Home Depot’s parking lot can place a lien on your home.
To file a lien, all a contractor has to do is to record the lien in the public records. No judge, no proof , no license or court order is required. The filer simply needs to pay the $25-$50 filing fee. Once a lien has been recorded against your house, the filer has the power to hold the lien over the owner’s head until they are paid. Often, when they refinance their home or sell it.
Mechanics liens are a one way street
Mechanics liens are a one way street. While they give the contractor the right to be repaid, there is no similar guarantee that their work is satisfactory or completed properly. If the contractor doesn’t perform or takes the money and runs, the homeowner has no leverage.
Release of mechanics liens
Most states have a standard Unconditional Waiver and Release of Lien that a homeowner can have their contractor sign. This document states the contractor has been paid in full and they release any right to file a lien on the homeowners property. If your contractor has performed a portion of the work, but still has an outstanding balance, your state may also have a partial release upon progress payment release of lien as well.
A well written contract will require a release of lien for any partial payments as well as the final payment.
Qualities of a good building contractor contract
It’s a good idea to hire an attorney who is familiar with construction contracts before signing any contract. Most state contractor license boards provide a boilerplate contract to contractors. Unfortunately, this contract does little to protect the homeowner and everything to protect the contractor. A good attorney can make sure you are protected from failure to perform.
Progress payments -Most professionally drawn contracts will have a provision for progress payments for your contractor, called “draws”.
Termination – Your contract may should also provide a provision for you terminate your contractor and hire another contractor.
Inferior work – What if the first contractor’s work is found to be sub par? Your contract should also state that any remaining funds owed to the first contractor will be used to pay for correcting the repairs, before paying the first contractor.
Final payment – A good building contractor contract will hold back the final 10% of the total project costs . Then after the work is completed and has passed all building department inspections, you will make the final payment. Without this condition, the homeowner is at the mercy of the contractor to complete the job.
For any of these or other situations, you will need to follow the procedures outlined in your contract.
What to do if your contractor fails to perform
As we have mentioned before, your options to remedy a failure to perform are dependent on your written contract. Check the contract between you and the contractor, for the procedure you must follow. If you just have a verbal agreement or a handshake deal, you may have to go to small claims court. If so, you will need to follow a procedure that would be considered reasonable to a judge.
Option 1 – Use a failure to perform letter
Your best option is always to try and work out the situation with your contractor. Going to court usually costs you more money than the project. However, you always want to make sure you use reasonable attempts to work things out, should you have to explain your reasons to a judge.
The following is a suggestion, but you may need consult with an attorney for your state.
- Start by sending an email AND letter to the contractor. This letter should remain professional and objectively state what the contractor has failed to do. Your letter should also set a specific and reasonable date by which the tasks need to be completed. If it’s unreasonable to fully complete the project in that time frame, what tasks are you looking for measurable progress on.You may be inclined to send a certified letter. This is up to you, but I find that certified letters don’t get accepted by the recipient and just escalate the tension.
- If the date passes without any performance, send a second email and letter again demanding performance, This letter should have a shorter performance time period. Inform the contractor that if substantial progress has not been observed by a specific date, that you may be obliged to terminate the contractor’s control over the work and hire a replacement contractor to do the work.
- If your contractor still doesn’t perform after the second letter, it is perhaps time to terminate the contractor. Then hire a replacement contractor.
Option 2 – File complaint with state contractor’s license board
If your contractor is licensed, you can file a complaint with your state contractor licensing board. The licensing board will send a letter to the contractor stating that a complaint has been filed and asking the contractor to work out the problem with the homeowner.
Unfortunately, the contractor’s license board has little power to refund your money or to fix the problem. However, they can threaten to revoke the contractor’s license if the contractor is found to be at fault. The may also have a minimal insurance policy that will cover some claims against the contractor.
However, I have found contractors will respond quickly if the state licensing agency contacts them about a complaint.
Be sure to take notes
No matter what steps you take, be sure to take plenty of notes. Write down the date, the time and who you spoke with and what you spoke about. Be as detailed as possible. You’re unlikely to be able to remember details clearly in the future, especially if you are forced to remember them in court. Having a written journal of conversations with your contractor from the very beginning can go a long way with the judge.
Final option when contractor fails to perform
If you have hired a contractor that didn’t work out and are looking for options, you might consider selling the home to a company that buy houses. These companies purchase homes where previous contractors have failed to perform. Whether it is failing to get permits, abandoned projects or poor workmanship, these companies buy homes in need of repair. Because these companies buy houses for cash, they don’t need to get bank approval to buy a house with incomplete contractor work.