I hired a contractor to rehab a rental home I purchased back in September. For no reason, the job took two weeks longer than expected. The tenant was scheduled to move in on November 1st and he told me that the job was going to be done no later than October 31st. Originally, it was supposed to be done on the 15th of October, but took two weeks longer. November 1st comes around and I show up to the house and it's not finished. They are working as fast as possible to finish at least the inside so that the tenants can move in.
The contractor assured me that everything would be done on by that day. I'm a teacher, so it is hard for me to get out to the home and check on it daily. Anyway, two days later he came to pick up a check telling me that everything was done. Me, being new to RE investing, being naive as well, gave him the check without checking first. Also, in hindsight, I should have also made him sign a contract stating the date which he would be done and also charging him for every day he took after that to complete the job.
It has been a month and a half now that he's been either avoiding my calls or telling me that he's doing it on a certain weekend and now he doesn't show up or answer his texts or calls on the day he is to show up. I'm fed up with it. What can I do? Do I have to hire a lawyer and spend days in and out of courts? The total estimated job left over should be under $1,000. I have to say between $500-$800.
Any help is greatly appreciated!
Chalk it up to a valuable learning lesson....it's not worth your time and energy to file a small claims action. If you can't leave work to check on your project, you won't likely have the time to deal with small claims court either. I have several friends who have lost more than $30K through similar type contractor issues, so count your blessings and move on.
As a contractor some tips I can give you:
1) Any good/reputable contractor will never sign a deal that charges us money for overages. There are just FAR too many unknowns, especially in bigger jobs. Nobody works for free. Also can't forget when the customer changes their mind about "small" things, they all add up. Even if its just changing from one type of trim to another, we will have to go return and purchase something different which takes away time. I always give expected finish dates (and they're usually very generous, time-wise). It is very rare that we go over, but if we do I always log down every decision and how it impacted the job during the course. This way I can inform my clients on the spot that this will add time--and 30 days later after a major rehab, I can remind them why certain tasks took longer. Don't be afraid to ask for certain things in writing. I never have a problem with it (unless it was like a monetary fine or something unrealistic).
2) Always get a good contract and pay attention to the pay tables. I normally set up "milestones" and amounts, and it has worked very well. You get to see progress (and pay for it), and I get to keep the machine going. You don't want to be lopsided in either direction. A contractor who is still owed $15k of a $22k job while having 95% of it completed will not be happy when you keep making small changes and delaying his payday, nor will a customer who has paid $15k of a $22k job with only 25% completed sleep well at night.
3) Look for guys that actually have registered LLCs (or businesses) with the state (aka paying taxes), have an actual insurance binder, and have licenses (if needed). The Craigslist guy might say $250 while a real contractor says $500, but only one of them cares about his reputation and business license. I'm not saying you should overpay (some contractor prices are just too high)--but you gotta choose and there is a reason one guy is half. He's either recycling old material, doesn't have any of the proper paperwork (good luck when he breaks something important), or isn't going to actually deliver quality work.
Also: I'd just hire someone else to finish it or do it yourself. There isn't a ton that can be done. You can take him to small claims, but it'll take forever and you'll be out a few hundred dollars anyways (a hell of a lot more once you count lost rental opportunity/vacancy). If you explain the situation, you can probably find a decent firm to give you a break. Hell, if you were in Denver I'd send a guy out for a day. I know we've done it for customers in the past--it usually ends up as a great deal for both sides. They take care of you and you sing their praises/toss them more work later. Win/win.
The answer is to go to your local district court, fill out the paper work, pay the small amount of money to file, show up for the court date.
@Eric Y. Great info, thank you for your feedback! The way payment worked was as follows:
Total: $17, 500 of which $6k was to start foundation, $6k when done with foundation, $5.5k at completion. Does that seem like a reasonable schedule? I've heard to only pay once a certain mile stone is completed, not BEFORE it is completed.
Also, he gave me a verbal of the job going to be completed in two weeks. It took five weeks and still didn't finish everything. You're saying I should get a certain completion date under contract right? If I don't change anything and there's no surprises, should I have a penalty for them on the contract if not finished on time?
Account Closed Thank you, I will look into that.
@Aroldo Villarreal I will disagree with others - I think it's worth a small claims action - or at least it would be here in Colorado. I have no idea how TX courts are, but here any action under $7500 can be brought in small claims court and the process is quick, cheap, and painless. I wouldn't delay the job based on that though - I don't think you want this guy in your house after you sue him.
That isn't unreasonable. My normal breakdown is a very small deposit (a few hundred tops) to schedule a job--this only changes if the job is starting in a day and has large material costs, but I almost always still break it (on paper) into multiple payments. I know a lot of contractors don't do it that way, but it helps keep everyone on the same page for timeline and progression/milestones. For instance a kitchen job we recently completed had 11 different payouts in the contract. Due to logistics, a lot of the payments were just lumped together (so the customer only actually wrote ~3-4 checks since things like granite and cabinets were completed at the same time). Verbals, unfortunately, don't mean anything. I stay away from verbals because people (this includes me) either don't remember or mishear things too often. I always put an estimated timeframe in my contracts, and we usually come in way under because they're very generous timeframes. I really hate having someone expect me to be done in 2 weeks and it takes 3.5 weeks--every day is painful showing up to work. As far as the penalty goes, you can try it--but as a contract I'd never agree to it. There are too many moving parts at play and it gets too fuzzy. I'm sure you're a stand-up guy, but a lot of people aren't. I would not want them doing things to interfere with the workplace just to put me over on my completion dates--the incentive structure is too far apart and I would never take the risk on that job. On the inverse, if he tells you 4 weeks you can offer a small bonus if they're done in 19 days or something. Again, as a contractor, I'd never count on it because I would just assume if we did bust *** and finish on day 18--I'd have to fix some BS tasks to put me over day 20, so no bonus for extra hours but work got done sooner. Yes, I'm a pessimist--but I've got to protect my company and employees as well. Your best bet is just find someone with a good track record. Sometimes jobs take longer--but there should be a very valid reason for that. If I am redoing your kitchen and we open the walls up to find a bunch of illegal junction boxes buried in there, that will add time to complete that nobody could foresee and it is a very valid reason to add time to the completion date.
@Adrian Tilley I agree that he should go after him (I know I've lost money going after people just to put the mark on their record and follow through on my promise) but sometimes it just doesn't make sense and really depends on Aroldo's situation. If the total job outstanding is <$500 to get completed, I'd personally say my time + court fees isn't worth it. Yes, it sucks. In the end this is about getting the job done, and for such a small amount outstanding I would be more focused on keeping my project on the rails vs letting some scumbag contractor derail the entire thing (including myself) completely. Someone has to finish the job, and my $ says the contractor won't even show up to small claims--or if he does, he will just agree to finish the work in 1-2 weeks (and then not) to get out of court & monetary fines.
@Eric Y. Thank you for the very detailed explanation. Since my last comment, I have scheduled another person to go finish the job and he is going tomorrow. I'm not going to make a claim because I don't have the time to go to court or wherever I need to go since I'm a teacher. I trust this other guy since he's done several small jobs for me. He is a handyman, not a big GC kind of guy, but the jobs are something he can handle.
Thanks again for your feedback!
Join the Largest Real Estate Investing Community
Basic membership is free, forever.