My contractor has blown throw the allocated budget

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My contractor has blown throw the allocated budget

Nwakaego O.
Member since 2020 · 11 posts · 5 votes

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.

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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.

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  • Amy D.
    Investor · Clinton, MI · Member since 2018 · 17 posts · 7 votes
    5y

    @Nwakaego O. that's all I meant, the contractors insurance. Seems he would be liable for such a failure. 


    0Reply
  • Nwakaego O.
    OP
    Member since 2020 · 11 posts · 5 votes
    5y

    Morning community and to a better New Year, I have another question/concern. 

    I decided to fire my contractor at the end of this past year. Before asking my question, I want to say he's definitely getting paid for work completed per the budget he established for the SOW. I want to know, however, how one should/can negotiate a compromise for certain work done (uncompleted and without a Change Order) in exchange of re-establishing pre-exiting structures that got destroyed during the rehab. For example, his electrician installed 5 duplex plugs, 2 wall switches and carved out 4 boxes for recessed lights which would have fallen into a Change Order that was never submitted or approved by the NACA program I use. However, when my wall fell, a gas pipe (for my heat) that ran along two connecting walls of my basement (40 ft X 12 ft) broke. Right now, a rubber tube was used to temporarily connect the pipes but that needs to be restored to its original condition. 2- When replacing the old sewer line of my old home, the storm drain pipe from the roof was disconnected from the sewer. That would need to be reconnected (although Newark doesn't allow that anymore so I may have to find another solution). And 3- There is debris he would be leaving behind that the next contractor will have to cart away.

    Is it a good compromise to say that I won't pay him for the electrical work as it stands uncompleted, because I will have to pay extra to get the broken pipes fixed, maybe reconnect the storm pipe to the sewer pipe, and collect the debris he's leaving behind? If not how would you handle that? I want to be able to complete my basement within the budget that was originally established for this SOW.

    Also how much does it cost to replace a gas pipe that ran along 2 connecting walls that is 40ft by 12ft long in Newark? And how much does it cost for a licensed electrician to install 5 duplex plugs, 2 wall switches and carve out 4 boxes for recessed lights in Newark?

    Thank you

    0Reply
  • Ola Dantis
    Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
    5y

    @Nwakaego O. First, sorry to hear that you are going through all this. 

    Most CONtractors (notice the first 3 letters in the word) are very interesting people!!!

    I'd suggest you fire the guy and I agree with @Mike Dymski to get an attorney to send a letter if you haven't already done so. 

    Look, you both are going to have to walk away with some sort of loss at this point. Consequently, you need to explain that fact to him and his electrician swiftly so there is no ambiguity. 

    Your goal now is to simply find a contractor with a lot of good reviews online and get him/her to finish the job quickly to reduce your overall cost. 

    1Reply
  • Joe Edwards
    Investor · Northern New Jersey · Member since 2020 · 94 posts · 96 votes
    5y

    @Nwakaego Onike

    Ok, thank goodness you are in the state of New Jersey. As a very experienced GC in the state I will let you know as the consumer in this state you are in the driving seat because I'm almost certain nothing about this transaction is "consumer fraud compliant"

    NJ has very strick (to be honest barbaric) laws on the books for contractors in the state. I would say probably the worse in the country. This state has the CFPA ( Consumer Fraud Protection Agency) with determines how all contractors are suppose to do business in the state. These rules are very specific in there nature. Specific to Contract must have language, font size, right of refusal, insurance/ works comp, registration, fee schedule, start and completion date, rescheck, warranty etc etc etc..... The average NJ GC contract should be 16-18 pages minimum not including project scope of work.

    If your contract with him isn't this long minimum then his contract is consider non CFPA compliant and he is on the hook for "TRIPPLE DAMAGES" That would mean 3 times the damage of the total contract prices no matter how much of the project he already completed. So you 80k contract is a easy 240k award from a judge or a substantial settlement from the GC to you to make it go away.

    So if you need guidance on what you need to say to convince him that he has stepped on a huge land mine all walk you through it. Just shoot me a PM.

    As a GC what I'm telling you doesn't make me feel good because I personally hate the law because there are many shady people that take advantage of the law to do harm to hard working people for the benefit of there own self greed. However, in your case it is pretty clear your in Newark and you signed up for the whole bate and switch. Give you a contract you can stomach so you sign. Start the project by not providing the right construction methods, create issue that you know are going to happen and then hand you a massive bill. Its completely disgusting but unfortunately it happens all the time in this state but definitely in areas like Newark.

    On closing I notice someone mentioning in the other comments about him leaning your property. NO A CHANCE IN HELL. He would be the stupidest GC on earth. The only concern you need to have is i hope you are not so far ahead of him with payments because he may just try to ghost you. If he does that he probably doesn't have a real foot print in the state and that means you may be out some funds.

    Like I mentioned feel free to reach out and Best Luck on this one!

    1Reply
  • Joe Edwards
    Investor · Northern New Jersey · Member since 2020 · 94 posts · 96 votes
    5y

    @Nwakaego Onike do not pay this person another penny! You are being fleeced

    0Reply
  • Natalie Schanne
    Real Estate Agent · Princeton, NJ · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    @Nwakaego Onike - I’m sorry this happened to you. so the worst case scenario is you’ve paid out tremendous amounts of money and the job is partially done. And then it sits idle and doesn’t get completed and you don’t rent your duplex like you expected. You may not know this yet, but often getting the last 20% finished might cost you 50%. Or the last 10% costs you 30%.

    I would call my naca program and try to get bids from new approved contractors before agreeing to any separation / settlement.

    I would call the consumer fraud division and stop offering the contractor money and stop signing things that probably include things you don’t agree with. I thought construction businesses had insurance for things like your wall collapse. He shouldn’t have been doing any work he was not competent at doing. (Ie excavation without supports).

    I am in NJ as well and had a rehab loan where the approved contractor gave us expensive change orders (but nothing like yours) after the fact when I said that anything off the scope that cost extra had to be in writing. We knew in the beginning that if we changed contractors we would have a miserable experience so we stuck with our guy even though his 8 week project took 9 months. My husband caved and paid the guy the extra anyway. Like we paid $1000 extra to skim coat a 10x15 prescraped popcorn ceiling in the kitchen where they replaced some sheet rock when fixing a plumbing leak. We spent $3500 on new baseboard trim that looks exactly like the old trim. Not sure why they said they couldn’t reuse it. They gave us Hvac system below my specs (14 seer vs 16 seer) and didn’t give us paperwork to file for up to $750 in free Nj clean energy rebates. When the hardwood floor started gapping and the tile grout started breaking and the floor was squeaking, the contractor didn’t honor his 1 year warranty. But without his help and this rehab loan we wouldn’t have made some good sweat equity on our house.

    0Reply
  • Victor S.
    WorldWide · Member since 2016 · 1k+ posts · 1k+ votes
    5y
    Originally posted by @Nwakaego O.:

    Morning community and to a better New Year, I have another question/concern. 

    I decided to fire my contractor at the end of this past year. Before asking my question, I want to say he's definitely getting paid for work completed per the budget he established for the SOW. I want to know, however, how one should/can negotiate a compromise for certain work done (uncompleted and without a Change Order) in exchange of re-establishing pre-exiting structures that got destroyed during the rehab. For example, his electrician installed 5 duplex plugs, 2 wall switches and carved out 4 boxes for recessed lights which would have fallen into a Change Order that was never submitted or approved by the NACA program I use. However, when my wall fell, a gas pipe (for my heat) that ran along two connecting walls of my basement (40 ft X 12 ft) broke. Right now, a rubber tube was used to temporarily connect the pipes but that needs to be restored to its original condition. 2- When replacing the old sewer line of my old home, the storm drain pipe from the roof was disconnected from the sewer. That would need to be reconnected (although Newark doesn't allow that anymore so I may have to find another solution). And 3- There is debris he would be leaving behind that the next contractor will have to cart away.

    Is it a good compromise to say that I won't pay him for the electrical work as it stands uncompleted, because I will have to pay extra to get the broken pipes fixed, maybe reconnect the storm pipe to the sewer pipe, and collect the debris he's leaving behind? If not how would you handle that? I want to be able to complete my basement within the budget that was originally established for this SOW.

    Also how much does it cost to replace a gas pipe that ran along 2 connecting walls that is 40ft by 12ft long in Newark? And how much does it cost for a licensed electrician to install 5 duplex plugs, 2 wall switches and carve out 4 boxes for recessed lights in Newark?

    Thank you

    a rubber hose for gas??? i'm no plumber but this sounds like something very, very bad could happen. i'd get that addressed asap. i did see some hoses for gas applications, but still sounds sketchy inside an occupied unit. 

    as far as those electrical items, probably two hours tops. i would go with led recessed lights that don't need cans and can be in contact with insulation. i scored some last year from amazon for $100 (12-pack, i think). you can have a hole drilled out with a special tool that attaches to a drill in like 30 seconds. 

    0Reply
  • Nwakaego O.
    OP
    Member since 2020 · 11 posts · 5 votes
    5y

    @Joe Edwards No I only paid him $21K+ but he has completed work and I owe him for that. I want to settle him on those completed items. It's just on the items that no Change Orders were submitted that I'm trying to figure out how we can come to a compromise. Thanks for the offer to help. If I run into any unanticipated difficulties, I will shoot you a PM. 

    @Natalie Schanne I also thought I would have to work with him till the end. I'm so glad for other people's experiences and for reaching out. I wouldn't have fired him otherwise. Right now, I'm just trying to avoid being more "fleeced" than I currently am.

    0Reply
  • Joe Edwards
    Investor · Northern New Jersey · Member since 2020 · 94 posts · 96 votes
    5y
    Originally posted by @Nwakaego O.:

    @Joe Edwards No I only paid him $21K+ but he has completed work and I owe him for that. I want to settle him on those completed items. It's just on the items that no Change Orders were submitted that I'm trying to figure out how we can come to a compromise. Thanks for the offer to help. If I run into any unanticipated difficulties, I will shoot you a PM. 

    @Natalie Schanne I also thought I would have to work with him till the end. I'm so glad for other people's experiences and for reaching out. I wouldn't have fired him otherwise. Right now, I'm just trying to avoid being more "fleeced" than I currently am.

    No problem! I would just recommend before you pay him what you think he completed you might want to hire a new GC first to confirm all the work is done correctly and up to code and they wont be charging you extra to make changes. If what he did need to be changed they you need to subtract that cost from what you think you owe him. 

    Hope things work out for the best

    0Reply
  • Nwakaego O.
    OP
    Member since 2020 · 11 posts · 5 votes
    5y

    Sooo... This is going to arbitration. :/ And I will be giving some updates. 

    0Reply
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