My contractor has blown throw the allocated budget

Nwakaego O. · 2020-12-26T06:55:43-08:00

Hey everyone, I'm new to this home ownership deal and am currently doing some rehab to my basement. I have had to stop all repairs being done to my house because the contractor sent me a bill of an additional $38K on a project that was already budgeted to cost about $80K. No Change orders were submitted prior to this so-called work he considers additional, as specified in the agreement we signed. I keep going back and forth with him and it's exhausting. This new invoice he sent to me is broken down in Materials / Labor,Overhead & Profit but they aren't verifiable. I have asked on several occasions for him to provide the invoices directly from the subcontractors that he's used and he hasn't done them still. I am very frustrated with him and this whole rehab process. I would like to know:1. What those in this situation have done to resolve this and stay within the budget.2. How can one verify the real cost of a project to ensure that you are not being overcharged. I have the two architectural drawings of the work to be done to my house.Thank you.

Joe VilleneuvePro Member

Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes

5y

What was the budget based on? What was the list of rehab items in that budget?

1 Reply

Bill Kramer

Contractor · Evansville, IN · Member since 2019 · 142 posts · 208 votes

5y

@Nwakaego Onike

As a contractor, As soon as he recognized additional work outside the original contract was needed he should have stopped all work and communicate with you. Then at least given you a ballpark price.

Dont pay him. At least not until he can prove he did the work. This happens alot in construction, projects go over budget. But you have to communicate that, or risk not getting paid.

The ball is in his court. Prove it or its free.

17 Reply

Nwakaego O.

OP

Member since 2020 · 11 posts · 5 votes

5y

@Joe Villeneuve:

I bought a 2-family house in Newark, NJ. The budget was based on a new deck ($20K), 2 new heat boilers ($10K), new steel liner and chimney cap ($4.5K), excavation to obtain an additional 10in in height, 4in concrete floor and reframing ($28.5K), renovation of the half bathroom which includes new sanitary plumbing waste line and the fixtures ($6K), basement wiring per architectural drawing ($6.5K), Permits ($1.5K), and Clean up of all debris (3.2K).

The part of the basement where the excavation occurred is 40ft X 12ft.

During and after the complete excavation (from Oct to Nov 3rd), no temporary support was placed to maintain the walls in place. After a neighbor complained that our common wall was shifting, reinforcement started (Nov. 10th). Nov. 21st, the new plumbing was installed. On Nov 23rd, the portion of the wall, still not temporary secured and where the new plumbing was installed, collapsed. The wall is about 21ft long and 6ft high. That's where the bulk of his addtl charge comes - from the excavation and the new plumbing (both specified in the SOW with the budget quoted by him) and the fallen wall.

*Btw, is it standard to charge separately for the removal of an old pipe, the installment of the new installed sewer pipe and the attachment of the new installed sewer pipe to the existing main sewer line? I got 3 separate charges*

I gave him the architectural drawing for the basement (which includes the boiler room and the "storage room". He's now differentiating the basement as two separate entities and is charging me addtl for framing and sheetrock 2 corner walls (a 7.1ftX6.3ft and a 6.3ftX6.3ft) in the boiler room.

0 Reply

Nwakaego O.

OP

Member since 2020 · 11 posts · 5 votes

5y

I think he's arguing that the excavation does not include the reinforcement of the foundation or any damage that occurred because of this excavation, regardless of whether he was negligent or not.

My argument is that it cannot be additional because the SOW states that you will be excavating. In addition, if he felt there would be an addtl cost to the excavation, he never mentioned it, never suggested to update the budget or never submitted a Change order before starting said excavation, as agreed in the contract we signed. Yet, he was fully aware of everything relating to the excavation since July. He still hasn't submitted a Change order.

On a separate note: I also want to know, what programs out there are great, for beginners, in estimating the cost of rehab based on architectural drawings I have.

0 Reply

Tevis Verrett

Lender · Woodland Hills, CA · Member since 2013 · 364 posts · 115 votes

5y

@Nwakaego Onike lawyer up. He can slap a mechanics lien on your property.

3 Reply

Bill Kramer

Contractor · Evansville, IN · Member since 2019 · 142 posts · 208 votes

5y

@Nwakaego Onike

The wall caved in due to HIS negligence. As a professional he should have understood what work was needed to be done (including bracing walls)

So that's a freebie on him. He cant charge for his stupidity.

Be prepared to fight a lien, but definitely dont pay either.

Now, if he did everything to code and industry standards, that would be a completely different scenario.

I have had to eat the cost of many of my mistakes, it happens. Soon as that wall collapsed, i would have made a claim on my insurance to help recoup my losses. Especially a $38k oopsie.

Im about to install a 24 foot beam on a project, and theres a good chance that if not done properly, the property will cave in. If it does, well looks like i just bought a house lol. If it works, its gonna be a pretty decent wide open concept building. But i understand the risks, and have prepped all i can to minimize them.

11 Reply

Michael Plante

Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes

5y

so sorry to hear you are going through all of this

I would run, not walk to 2 attys asking for a first free consultation

email them the contract and what you have posted here

I would choose the one who had the best plan of action

7 Reply

Nat C.

Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes

5y

This is one of the most common tricks in the book of contractors. This guy is just trying it on. He will probably next move to threatening and intimidating you. I just read another post on here "Female Property Inves./Landlord on the verge of leaving the busn". It's a similar story of a contractor taking advantage of a female property investor because they think a woman is naïve.

I disagree with those who are telling you to run to an attorney. That's just another way to flush a heap of money away. At the most, have an attorney send the contractor a demand letter instructing him to finish the project as per the contract. That letter will cost you a few hundred bucks.

Only IF this contractor files a mechanics lien, should you respond to any of his requests for more money. Filing a mechanics lien and the ensuing lawsuit to enforce the lien within the required timeframe takes knowhow. If this happens, it might get to the stage where you need to hire an attorney.

Gather all your evidence, like photos and all communications now so you have that in a folder if needed.

10 Reply

Eric Teran

Architect · Alexandria, VA · Member since 2016 · 317 posts · 371 votes

5y

@Nwakaego Onike there are a few things going on.

1. Someone will be at fault. Maybe the contractor sues you and then you sue the architect and the architect the structural engineer and a fun game is played if whose fault it is. Let’s start at the beginning.

2. The permit set of drawings is this first item to be studied. How detailed are they? In DC and Northern Virginia where I have most of my clients whenever we excavate a basement and are doing underpinning we are required to have a special inspection. Was this part of your permit requirements? Your architect should know. Was a structural engineer used or only an architect? We’re you in a contract with these professionals or did the contractor provide this service to you.

3. Did the contractor follow the plans. There are certain items that have to be followed but the means and method are on the contractor. Did he get the required inspections and pass them prior to the wall collapsing?

4. We all know about change orders and those are done when time or costs are over the agreed contract. The owner has to approved them before they move forward. However, there is also a Construction Change Directive which is used in these circumstances. A wall collapses and it has to be fixed ASAP. Who pays for it will be decided later. This is usually signed by both parties as well but the cost is not determined. I have never seen these document used on residential projects. I’ve only seen it when I worked at a big architecture firm but it exists and is a good form to follow. He may be claiming that the wall had to be fixed or else more damage may have happened. You are in your right to ask for all that documentation and he needs to provide it. Don’t pay anything until they do. Then you can maybe come to a compromise. If you come to a compromise you have to make them sign a notice saying that they have been paid and will not file a lien. I forgot what the actual name of the form is called.

5. A mechanics lien has to be filed within 90 days of the last day they provided labor or supplied materials. It may be different in your state and a sub and contractor have different lien notice requirements. Usually they also have to file a notice of intent to file a lien by a certain date. Any if these dates are missed and a lien is no longer valid. The contractor may not pay the subs and they may put a lien on the property as well. Try to find out when each sub and contractor provided these services so you can keep an eye on the calendar. I’ve also gone around my contractor and paid the subs directly when I found out they were not being paid. Of course this may go against your contract with the contractor so make sure it doesn’t.

6. It may be cheaper to compromise a price with the contractor than going through with lawyers and liens and so on. Take it as a learning experience. I hope this doesn’t happen but if you want to sell the house and it sits in a court battle for liners it may cost more.

7. With all that did it sounds like it was his error with his means and methods of doing constructions. His insurance should be footing the bill. Does he have insurance?

8. You can also contact the state board and file a compliant.

Stay calm, don’t be bullied, and definitely don’t pay the entire fee he is asking. Good luck.

9 Reply

Eric Teran

Architect · Alexandria, VA · Member since 2016 · 317 posts · 371 votes

5y

@Nwakaego Onike to answer two more of your questions.

1. You can make the contractor remove something that they are billing you but don’t have proof it was done. If it wasn’t done then they have to pay to do it properly and fix any work that was damaged. If it was done then you have to pay the contractor to fix the area they removed to prove it was done correctly.

2. There are no real books or programs to help a beginner on pricing. Construction costs are very local. Here in DC in two neighborhoods separated by a river and five miles two clients received bids for areaway stairs within two weeks of each other. One was for $80k and the other for $35k. They were exactly the same thing. I drew up the plans. The only difference was the neighborhood. The best solution. Is to obtain at least three bids. Usually, at least two will be similar so it is better to choose one of them. If one is $50k lower than the other two then they are missing something. If one is $50k more than the other two then they are busy and don’t really need your work and don’t mind increasing a bid.

3. Staying within in your budget is accomplished before construction begins. I mean that everything should be picked out and specified in the plans for the contractor to provide an exact bid. Even doorstops. Everything. Of course surprises happen when doing a remodel like the electrical wires being chewed up by a rat and it all has to be replaced. However, items that can be seen should not have price increases.

3 Reply

Dennis Wayne

Member since 2020 · 339 posts · 356 votes

5y

Usually Happens in every rehab I ever had , one of the reasons I stopped doing major rehabs and why flipping makes no sense to me . But hey if you like sitting around for 4-6 months and a ginormous contractor bill then a ginormous tax bill then knock yourself out . It’s very very common to get hosed by contractors in this business

2 Reply

Mike Dymski

Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes

5y

All this talk about lawyers and fault is nonsense. Send an attorney's letter for a couple of hundred dollars? You don't get in the door at the law office for that amount. Every attorney will tell you the high price of litigating the matter along with the challenges of getting paid even with a successful outcome. These things end in two ways...you pay something or you both go your separate ways and you pay another contractor to finish the job. It's awful, financially and emotionally. Ask me how I know... Sorry that you are going through this ordeal.

5 Reply

Shadonna N.

Developer · . · Member since 2014 · 520 posts · 162 votes

5y

Originally posted by @Tevis Verrett:

@Nwakaego Onike lawyer up. He can slap a mechanics lien on your property.

agree, and your neighbor has complained about an issue that he caused. stop all work and get a lawyer. at best the contractor will agree to disagree and you both walk away. find someone else to finish the work. i am sorry you are going through this.

1 Reply

Amy D.

Investor · Clinton, MI · Member since 2018 · 17 posts · 7 votes

5y

I have more questions rather than more help. But at what point in time would HIS insurance become relevant? This is why we hire licensed and insured folks, doesn't this qualify?

2 Reply

Pride Davis

Rental Property Investor · Norfolk, Va. · Member since 2018 · 72 posts · 56 votes

5y

I was wondering the same thing as @Amy D.. Also, could the issues with the wall not being supported have been avoided by pulling permits and having city inspectors insect every step of the project?

0 Reply

Miguel Castro

Rental Property Investor · Miami, FL · Member since 2019 · 28 posts · 19 votes

5y

@Bill Kramer

“Im about to install a 24 foot beam on a project, and theres a good chance that if not done properly, the property will cave in. If it does, well looks like i just bought a house lol. If it works, its gonna be a pretty decent wide open concept building. But i understand the risks, and have prepped all i can to minimize them.”

Looks like the “risk” is more on the unfortunate person buying or renting the place. Have you consulted an Structural architecture? I don’t see how you’re going to be able to tell if the beam is going to hold up in just weeks, I believe only time will tell if you didn’t get it cleared by a professional, leading to my comment “the unfortunate person buying or renting the place”. Sorry if I sound like I’m attacking, I’m not, just seen ****** “rehab” after “rehab” done just to turn and profit and screw the buyer; adding to the distaste towards flippers.

@ Nwakaego

If the work was done without prior notice and agreed to by both, in my opinion you have a case not to be liable for the cost, especially if it’s easily proven that the colapse was from him not properly supporting the structure. The fact that he went ahead and corrected the problem without consulting you, can be assumed that he knew it was his liability and he was fixing correcting it and that’s why he didn’t consult or get your prior approval to continue (trying to have you eat his cost). Ultimately consult a RE lawyer, which no here is that I know of, couple $100’s will go a long way saving you $1,000’s.

1 Reply

Miguel Castro

Rental Property Investor · Miami, FL · Member since 2019 · 28 posts · 19 votes

5y

@Eric Teran

“It may be cheaper to compromise a price with the contractor than going through with lawyers and liens and so on. Take it as a learning experience. I hope this doesn’t happen but if you want to sell the house and it sits in a court battle for liners it may cost more.”

Good call out. If you take that route, even going half on it would relieve some of the hit, and you at least have a new wall at half the price (helping with a positive spin).

0 Reply

Bill Kramer

Contractor · Evansville, IN · Member since 2019 · 142 posts · 208 votes

5y

@Miguel Castro

Demo was partially done in advance, and more will happen this week so we can see what were working with. Yes, lots of consulting going on for sure. Im gonna be erring on the side of caution, and will probably go overkill in the prep. But there's always that chance things go wrong. Theres alot of bad "contractors" out there giving all of us good ones a bad name.

It kill me to hear thay phrase "eff it, its a rental"...that's no excuse for shoddy work.

Also of note: theres alot of garbage licensed contractors out there as well. So just because they're licensed doesn't mean you shouldn't properly vet them. Next time, ask for pictures of similar work to what you want done. Whether thats digging out a basement or converting a house to open concept.

2 Reply

Nwakaego O.

OP

Member since 2020 · 11 posts · 5 votes

5y

@Eric Teran I'm not sure if he's insured or not. However, the 1st home-ownership program I use (NACA) has to approve of the contractor before I can use him and he's one of their approved contractor. I am reaching out to them to see if I can get that insurance information. Another contractor told me about making a claim against his insurance. I didn't know it was an option. Unfortunately, NACA isn't very good at returning calls or emails in a timely fashion and with COVID, it's a whole other delay.

@Amy D. The wall fell on the Monday of Thanksgiving week. It was rebuilt within a week. The pipes that broke because of the wall however are still not fixed but his plumber inserted some rubber tubes to connect them. I'm not sure what you mean by when HIS insurance gets relevant. But I'll have to see if insurance covers it if and once I get his insurance info.

@Pride Davis The Contractor handled pulling the permits. He later gave me a Basement foundation and plumbing plan from an engineering company. After the wall fell, I wanted the structural engineer to confirm that the foundation was well done. He did. I do know that my contractor had to cancel the first scheduled plumbing inspection because the wall fell on the same day. The inspector that is supposed to check before you start sheetrocking has not shown up yet. I don't see the sticker for that.

@Nat C. I have started documenting email/text communications, pictures, getting my timeline right, re-reading the agreement we signed and essentially building my case if needed.

Regarding lawyers: I have reached out to a lawyer who has advised that trying to negotiate would be better and less costly, to your point @Mike Dymski, than going to court or arbitration. I tried the compromise route as advised by my lawyer, wrote up an addendum to hopefully agree on some new terms and threw in some addtl money to the established budget to complete the work amicably but he doesn't want to. My friend (who told me about Bigger Pockets) has linked me to a few experienced people in the field, here in Jersey, with whom I've spoken with to see what can be done and to even gauge how much things should really cost in the area.

I'm leaning towards firing him and having the work completed by another contractor and hoping for the best. The only silver lining I can see right now is that the bank has to approve of how much money they'll pay out to him based on the work that was done from the SOW established. Since I stopped the work, he can't take it all and run. I just know that agreeing on what the Change Order and/or Draw should be will be another fight. I imagine NACA would step in and decide if this turns into some crazy drama. I have alerted them about my situation so they are aware. Going to court, suing anyone or being sued is definitely not where I want to go with this.

And thank you all for the advice and for the various scenarios.

2 Reply

Miguel Castro

Rental Property Investor · Miami, FL · Member since 2019 · 28 posts · 19 votes

5y

Agree! 👍🏽

0 Reply

Miguel Castro

Rental Property Investor · Miami, FL · Member since 2019 · 28 posts · 19 votes

5y

@Bill Kramer

👍🏽. Glad to hear another investor with the Right for All mindset.

1 Reply

Brandon Abrego

Contractor · Mankato, MN · Member since 2020 · 17 posts · 5 votes

5y

@Tevis Verrett what is that?

0 Reply

Mark Eaves

Member since 2020 · 32 posts · 20 votes

5y

@Nwakaego Onike

Wiring, permits, debris numbers look high.

0 Reply

Mark Eaves

Member since 2020 · 32 posts · 20 votes

5y

@Nwakaego Onike

The responsibility falls upon the consulted engineer who would have visited the site prior to collapse. He’s the person to advise the contractor on safe procedure.

0 Reply

Victor S.

WorldWide · Member since 2016 · 1k+ posts · 1k+ votes

5y

Originally posted by @Mark Eaves:

@Nwakaego Onike

The responsibility falls upon the consulted engineer who would have visited the site prior to collapse. He’s the person to advise the contractor on safe procedure.

Either way, it was done under his supervision. I'd seriously consider firing the guy and really getting somebody out there who understands that messing with structures in old homes (or any homes) is a serious matter.

0 Reply

My contractor has blown throw the allocated budget

My contractor has blown throw the allocated budget

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