Hiya,
Just finished a 5 month renovation on a multi-family investment property for a “friend”. This was my first BIG job. There’s a basic signed contract but the scope of work changed immensely due to hidden problems and cost/time doubled.
Agreements for additional repairs and labor were agreed upon with a handshake. I paid out of pocket for additional labor with the understanding the Customer would reimburse me at the end of the job.
The job STILL took longer than my second estimated completion date (chalk that up to my lack of estimating experience). I sucked it up and finished the job, paying for my crew an additional few weeks, and not expecting anything for myself.
Now, they’re refusing to pay the final contract payment and additional labor costs, to the tune of 9k. Not to mention the 5k I lost paying for my crew past the second completion date.
Now I know I’m probably just riding on principles here, and I bet I’m forked. I’ve never had a project this large or had a customer refuse to pay. The whole time they never gave me any indication they wouldn’t do the right thing and pay for the work that was done.
Am I totally screwed?
Replies
Sorry to hear about your mess -- I guess that's why God made lawyers.
A similar thing happened to a couple of carpenters living in a house near us. The house was a bank REO, and they were renting it from the new "owner" with the understanding that he would pay them $#### for fixing the place up while they lived there. Long story short, they did a bunch of work, meanwhile the owner didn't bother to make the mortgage payments. The bank's lawyer came by one day and said they needed to move out ASAP because the house was in foreclosure (again). Needless to say, the owner skipped town and never paid them a red cent.
Get it in writing.
Am I totally screwed? >>>>>>>>>>>>>>>>>>
Depends on the state.
I'm in Mass
scraper,
Here ya go...start reading...
http://www.mass.gov/legis/laws/mgl/gl-254-toc.htm
For the right price, I will get mike from fla. and I to come make a colection call for you.
We are both over 6'6 tall and I go around 300 pounds these days.
Might make an impression on him!>G<
Frammer,
Heck maybe you and I should go into Construction Bill Collecting? Its might be more profitable than building stuff?!
I'm 6'8" 285 so I think we could get a pretty good return rate? We keep 10% and all is right with the world! :)
Mike
10%+ expenses!
Yeah I forgot about the expenses part. Travel costs aren't cheap and I eat ALOT!!!! My wife says if she puts me on a diet, all our budget worries are over!
Are our wifes related?>G<
Well, if yours thinks:
- you spend too much on tools
- you are too nice when dealing with people that owe you money
- you eat more than you should
and you spend too much time here on BT than doing things like the dishes, the laundry, finishing home projects or rubbing her feet...
then yes, they are related! :)
close!
My wife must be their sister!DonDon Reinhard
The Glass Masterworks
"If it scratches, I etch it!"
Just spent 30 minutes talking to the other partner. Still not paying. Claims I cancelled contract when job extended and I asked to be paid weekly for additional labor. "Do what you gotta do" he said.
I didn't say anything about a lien or legal action. His position is if I bid X for a job, then I should only be paid X, regardless of unforseen problems that arise. I tried explaining, again, about the risks involved with buying distressed properties for renovations, and that I have an expectation to be paid for labor performed. I pointed out that the contract had a clause about unforseen conditions, but he still thinks he's in the clear.
Makes me really regret the effort I put into the job to do it right and not just "done".
So, I'm getting the ball rolling on the lein process. Regardless of how that might work out, I had a lot of overdue bills riding on that final payment. 14k is a lot of money to not have going into the slow season........
You had better to hustle more work. Keep up the work on getting the lein, but you had better find some more work, it will take a while to get this worked out.
I'd definitely file the lien, and I'd probably stop by the other job and tell whoever's working there that you're having trouble getting paid. Might also tell the building department that there's an unpermitted job going on.
Your lien might have some effect if they're looking to mortgage the property, but in most cases you would have to file a lawsuit to perfect the lien and get a judgement. At $14K owed you're on the edge of where it's worth it. I'd go ahead and lawyer up on this, at least for an hour or two to learn where you stand.
Scraper -
I posted some thoughts to Dino above. If you want to shoot me an e-mail, you can do it on the board, or privately. I handled a bunch of legal stuff involving construction in NY for some years. Don't know Mass. law but I'll give you the benefit of what I know.
FWIW, you might contact a local builder's group and ask if they have counsel available and who it is. That person would hopefully have a good working knowledge of the local law on written contracts and agreements.
Also, if the contract requires mediation, start looking to get a mediation started. You might try the American Arbitration Assocaition, they have mediators available and are reputable. (It will cost some $, definitely not free.)
Don K.
Who are these guys? I am in Boston and would want to get the word out to my buddies about these yahoo's.
Maybe you could post something about them here.http://www.complaintsboard.com/
We keep 10% and all is right with the world!
Make like a lawyer, keep 40% + costs.
All will be right with your world.
Joe H
Joe, I like your idea!
I don't think you are totally screwed...depends on their intent to pay and more importantly, your state's lien law. Research it NOW and get the paperwork started before its too late.
Calling an atty would be the easiest but more costly than doing it yourself. Either way, find out your state's lien laws no matter what for future reference.
Repeat after me "A lien is your friend". It sounds drastic but thats what it is there for to assure you have a legal recourse to your money. You may have dropped the ball by not having stuff in writing but that doesn't mean they get a completely free job! You may not get ALL the money you want but you should at least get what was originally agreed upon and might have to negotiate the changes.
What type of lawyer would I be looking for?
There's two partners involved here. The first one (liason to me) pretty much said nothing more will be paid and to take it up the the second partner (decision maker, money holder).
I have yet to call the 2nd partner. I'm not too good at arguments and when I do call him I want to make sure I know WTF I'm talking about.
I also happen to know they have another renovation going on with no permits being pulled. Any leverage there?
Well, read thru that link to the Mass gov site first. If you don't have ANYTHING in writing, you might be in trouble...but I didn't read it all so you should just to make sure.
Then you might at least call a smaller shop atty that handles small business matters. Someone like the guy I use in my area would charge like $200 to talk to you about it and explain what your options are and you can decide from there.
Reporting more unlicensed work while it is legal and noble to do will just make matters worse in my opinion and then put you more at odds with these guys for getting paid. Get paid THEN report them!
A lawyer once told me, about 30 years ago, that his best advice was to avoid lawyers.
I learned last year that I'll never again make a verbal contract. I'd done so with an electrician "friend," to build him an entertainment center. He paid, but in the end he disputed and refused to pay the balance for the total we'd originally agreed upon. It amounted to only $350, but it was enough to teach me a lesson that, like good fences, a good proposal/contract makes for more friendly neighbors and business relationships.
I drew up my own contract almost 20 years ago, without a lawyer, and I continue to update it as small problems occur.
Gary W
gwwoodworking.com
Gary,
I know what you mean as I have had that happen before too. Its amazing how just a little bit of money can ruin a friendship or business relationship.
In scrapr's situation, a lawyer might be his best bet if all he has is a verbal contract, maybe a letter from an atty to the guys not wanting to pay might scare them into paying at least something? They may not know the law that well and figure they are just dealing with some construction guy who has no recourse?
Not saying it will work but I would exhaust alot of efforts for $9k! Hell, I badger people for $90 these days!
I'm with you, Mike, about badgering the customer, but the lawyer could cost scraper a good portion of his payment. I'd first take the slug to small claims court, and hope such a venue is available in Mass. Here in California, if I win in small claims court, where lawyers aren't allowed, the slug could appeal with his lawyer.
I swear, laws are written for lawyers, not guys like you and me.Gary W
gwwoodworking.com
Gary,
Yes, you are right...he needs to call the atty but be specific on the time limits he wants to spend with him. Don't give him an open ticket to get his money back or it might cost him more than its worth.
I would ask what kind of letter or service I can get for say $250-500? and see if he can help for that.
The small claims is a good idea. I just wonder if he would be at a disadvantage with no written contract?
In our local county we have mediation services that are used before small claims and they work well. Its all handled by a county employee outside of the court setting and usually at least brings folks to the table to discuss the matter civilly.
Mike
The original contract stated both parties shall try to mediate before going to the state board. As far as I can tell from reading the laws so far, I can file for the lien still while waiting for mediation. looks like I have 90 days from completion of work.
Then file the lien. You may not have to even go to mediation once they get word you are filing a lien. Its not a guarantee but it will at least show them you are serious about getting your money.
I don't pretend to believe that everyone caves once they see that piece of paper but we as contractors cannot let folks just say, "I'm not paying" and us be expected to just walk away.
I've had guys threaten me with liens. Most of the time I laugh and offer to help them fill them out. The last guy that threatened me went to the homeowner (who was a lawyer) and threatened the lien on her too. I had a pretty good reason for not paying (he didn't finish the job) and I had no intention of writing that check unless a judge ordered it. With that said, I would advise all young contractors to learn how to file and file them regularly. Don't wait. Don't be intimidated and don't cheat your family out of their inheritance. I'd also suggest that all young contractors go spend a day or two down in small claims court and get a feel for how it all works.
Well, the good thing about this one Blue is its a residential job. If all works as its supposed to, they will have a hold up flipping that house and scraper may just get his money that way.
I don't guarantee it will work but right now it seems about his best and most cost effective method of getting his money.....next to Frammer and I showing up! :)
To avoid this happening again you could use the MA version of Construction Contract Writer software. I've seen it advertised on the Web. I've heard it's written by a lawyer.
At least you'll be able to create a legal contract for the specifics of each job and the laws in your state.
Small claims has a limit of 2K which makes amounts over that to say 20K hard to collect because it isn't worth a lawyer unless you can sue for triple damages.http://www.consumeraffairs.com/consumerism/small_ma.html
Sorry 'bout that. I believe it's a larger, more realistic amount in Santa Clara County, CA. I disdain the use of most blood sucking lawyers and give mine to those who need it.Gary W
gwwoodworking.com
Sounds like it has all the earmarks of a pair of experienced chiselers. Two partners, one says talk to the other, multiple projects running on credit. Yuck. Only thing missing is that one of these creeps turns out to be a lawyer himself. You gotta exercise more care in yer choice of 'friends', pal.
In the meantime, and before you do anything else, get the lien filed.
Theoretically, a contract should not need to be written, but individual jurisdictions can implement statutes to the contrary in specific situations and construction tends to be one of them.
If I undertstand correctly, you did start with a contract, but there were substantial change orders added later and these were done verbally. If Mass construction law requires a written contract but is mute on the subject of change orders, that could be your way out of a sticky patch.
Here is a link to a law book on construction change order law. It's a Google Book preview so there are a few pages missing here and there, but you might be able to learn something useful. http://books.google.ca/books?id=2ZriEjLKSY4C&pg=PA105&lpg=PA105&dq=contra+proferentum&source=
bl&ots=9T7Ae96NAx&sig=smV1-bdioprYPYygsMnK_jgsd1Y&hl=en&ei=f6f8SuzLD43bnAe0ptCHBw&sa=X&oi=
book_result&ct=result&resnum=10&ved=0CCQQ6AEwCQ
Read over the laws on the Mass. books at the link Mike gave you and see if you can figure it out. You might also look at your business or homeowner's insurance policy (or credit card contract) to see if you're entitled to free consultation with an attorney as one of the 'perks'.
You can try to find an attorney who will give you the first meeting; there are still a few out there. If all else fails, you're gonna have to pony up so ask people you know and respect (your banker, your doctor) who is the best and most honest lawyer they know. Then go ask him.
Dinosaur
How now, Mighty Sauron, that thou art not brought
low by this? For thine evil pales before that which
foolish men call Justice....
Hi Dino-
Went through the sad tale, mostly anyway.
I'm not licensed as a contractor or a lawyer in Mass. and I don't know what their specific rules are. Mostly, states require contractors to have licenses especially for residential work. I'm assuming the license is in order. More and more states are requiring written contracts too.
The written contract at the start is a good thing and would likely allow collection of the original contract price - likely paid already. What does it say about extra work? What does it say about change orders? If the contract doesn't address these things, I think he would have a chance in front of a judge or a jury. Unless there's some black letter law prohibiting him from working on an oral agreement, I would pursue it.
As far as the method of going forward, I universally found that lawyer letters were a waste of time. Anyone in business for more than a month knows what they mean - nothing. Want to get their attention? Go to court.
OP might be able to do this himself but as Dieselpig once said - Just cause you can, doesn't mean you should. There are lots of potential wrong turns at the courthouse and it sounds like he's taken a couple already. I would go to a local lawyer. If he's worried about the expense, then speak to several and find out who can best handle his situation for the money that is available. Some collection lawyers will take a case like this on contingency, if he pays the expenses. He needs to be careful because there's often a kicker clause about trials cost extra. Some attorneys might be willing to work with him, but most of the bigger firms charge their hourly rate, period. They could make this a bad proposition. (Also curious about whether attorney fees are addressed in the contract.)
I doubt this one is going to small claims. Limit for small claims is usually way under the # he's talking and you are usually barred from bringing multiple suits for the same damages.
As far as the lien, I would file that immediately. There are often serious time restrictions on these and it's not worth taking any chances. I've also seen small issues blow a lien out of the water, so it's crucial to prepare it perfectly and do it right. If it says that it needs to be sent certified mail, don't send it registered because it's cheaper or overnight because it's faster. Do what the rules say. You can also (sometimes) move to foreclose the lien - that is ask for a judgment that can be taken to the sheriff. This is a state by state thing so he needs to find out locally.
Either way, in order to get a judgment, he needs to do something. Asking the folks at BT isn't going to get $ in his pocket. He also needs to keep every bit of evidence that's available including e-mails. As far as taping conversations, be careful. In NY you couldn't use taped phone calls unless both sides knew they were taped. IIRC, this was tied to some federal rule. Tapes of verbal calls - not phone - were allowed with proper evidentiary foundation. so, if he met one of the defendants at a diner for coffee to talk to them and they said they were happy with the work, he could use that (tape) against them later if they said something different.
Sounds like this one's not going to be easy.
Don K.
Hey Don--
Can you shed some light on this guys problem?
Dinosaur
How now, Mighty Sauron, that thou art not brought
low by this? For thine evil pales before that which
foolish men call Justice....
A. File a lien. This tells them you are running a serious business and your pricing means something.
B. You had an original Agreement, in writing. You did lots more work - make a list. You received additional payment beyond the Original Agreement. (They paid by check, right?) This is proof that additional work was done and met with their approval. You both established a precedent.
C. Do not tip your hand regarding what steps you are going to take. Let them be surprised/ impressed.
D. To a private homeowner, a lien can have little effect - unless they want to sell or take out a loan (especially if the house is used for security). It will cost you some money,but not much. It will hang over their heads though. You can also keep renewing the lien once it expires. Sooner or later it will affect their lives.
Lock and Load,
Frankie
Flay your Suffolk bought-this-morning sole with organic hand-cracked pepper and blasted salt.
Thrill each side for four minutes at torchmark haut. Interrogate a lemon.
Embarrass any tough roots from the samphire. Then bamboozle till it's al dente with that certain je ne sais quoi.
Arabella Weir as Minty Marchmont - Posh Nosh
They paid cash mostly, with written receipts.
They plan to mortgage the house to get their cash out for another flip. So a lien will hold them up right?
It should....if anyone does due diligence when processing the paperwork to refinance, or sell the house the lien should pop up as a red flag.
File it soon though so it doesn't slip through the cracks as some areas have a 3 day processing turnaround.
And its only around $35 in my area to file so not all that much to file.
Edited 11/18/2009 3:03 pm ET by Oak River Mike
Written receipts - cool.They can't flip with a lien. Get it established ASAP. Also, DO NOT sign a Release of Lien until you have payment in cash in hand. Certified check is cool too.F
Flay your Suffolk bought-this-morning sole with organic hand-cracked pepper and blasted salt.
Thrill each side for four minutes at torchmark haut. Interrogate a lemon.
Embarrass any tough roots from the samphire. Then bamboozle till it's al dente with that certain je ne sais quoi.
Arabella Weir as Minty Marchmont - Posh Nosh
Had some AH stop payment on a cashiers check once, ask your bank before you accept that as an unstoppable payment.
Joe H
What you need is an attorney experienced in contract disputes.
I'll tell you what you should think about doing right now: 1) Send the property owners a direct but polite letter asking for a signed change order for the extra work items. Document them well. State that they were not part of the original agreement but that they insisted that it be done. State that you performed this work with the understanding that they would pay for it.
Even with no written change order, I hear that many judges take a dim view of owners who take advantage of these situations. The question is what is "equitable."
That should be good for a start. Your attorney can take it from there...
Do you have any witnesses (on your side) to the change order discussions, prices and agreement as well as the handshake?
Quantum materiae materietur marmota monax si marmota monax materiam possit materiari?
Couple of crew members heard negotiations. Also might be able to pull up old text messages of weekly labor/mat bills I sent them.
BTW, thanks everyone for chiming in, I'm feeling a little hopefull
Look at this as you learning or stepping up your business.
In order to do business and prosper you will need to know this stuff.
Sooner or later this was probably going to happen.
It time to learn.
Will Rogers
A lawyer I knew years ago said " Oral contracts are not worth the paper they're written on" sorry, wish you luck.
Even if you are NOT considering a lawyer, you should write down on paper everything that you can remember of your oral agreements. With dates, if possible--EVERYTHING that you can remember.
At some later date, lawyers may be necessary, and they are going to want to know all that you know.
Just be more prepared than your adversary in any legal matter.
Remember that the best lawyer is one that can argue your side of the case and win, and also argue your opponent's side of the case and win.
scaper
In the future bill and get paid every week or at the minimum every 2 weeks.
If you don't get paid then don't continue to do the work.
Every problem I have had with people over money was when I ignored this rule and they did not realize how much they were spending on their project.
I'm sorry that you are having this problem.
Carpentry would be the best job in the world if money wasn't a part of it. But it is.
Rich
I'm going to suggest a different course of action.
Write the loss off as 'tuition.' That's the first part.
The next part is to join a trade association, take courses, talk to CPA and other professionals .... just to learn how to set up and operate a business. A good place to start is your local doctor, dentist, or vetrinarian. Ask them who they use ... what professionals, what software, what forms, etc.
The final part has to do with friends (and family). You start out just helping them a bit, and before you know it, you're rebuilding the World Trade Center. You're probably best off encouraging them to hire someone; they will act completely differently with a stranger. Otherwise, have a plan. A detailed plan. Call out every step of the process.
Based on my experience (bad) with "verbal contracts" I would suggest the following:1. If you go the lien route, follow all your state lien notification rules to the letter and document everything. If you don't you're done for if they fight back. Most of the time, notices must be given within certain deadlines. The clock is ticking on those deadlines even as you read this, so don't delay getting the facts and making a decision. 2. depending on what they are disputing, if the dispute is not simply "we didn't have a written contract", then if you do go to court, don't let the judge give you some song and dance about "verbal contracts not being worth the paper they were printed on". In our case, we and the other side didn't have a written agreement, but neither of us thought that was a problem. We were billing them, and they were back-billing us; but the judge was all about "not using a 50 cent pen" over and over, and finally threw the whole thing out. If it comes down to that, point out to the judge (or have your attorney do it) that both sides agreed to the work and the payment, there are OTHER issues involved here, please rule on THOSE. I'm still kicking myself that I let the judge get away easy on that.3. If there is any way to avoid court, avoid it. Judges are unpredictable, and lawyers are expensive. Look up a local dispute resolution service and see if they are willing to at least talk to them with you. There's no obligation to "make up" but if you can, it's in everyone's best interest.
You shouldn't be, but it may be VERY difficult to assert your position. No contract, but you have work that you did and I assume it has value to your client (barring any glaring defficiencies). In court, that work has real value. You will need to document the real value ... and I'm not just talking either what you value it to be, what it may have cost your, or what amount of work you put into it.
If the work has value to your client, then you have significant grounds to sue him ... depending on state laws, you may get your attorney's fees, too.
But look into the lien laws, too ... and NOW! If not already too late, it may give you the leverage you need to collect. Some states may require you to provide lien notice in advance (e.g. when you started the project), but you still may have some lien rights ... go see a competent attorney about this. If nothing else, the fees you pay will go to your education about what to think about in the future and how the system works. After all, business isn't just about pounding nails like we'd all like to think.