Contractor misread zoning
So I hired a design build team to add a second story to my house (~1000 sq ft). We went through all the planning, I got a new loan, submitted the plans to the city, the city came back with some changes, submitted to the city again, then the city came back and said that the coastal permit wouldn't allow the addition and even if it did, the local code would only allow an addition of 400 sq ft.
I live in San Diego and this should have been picked up at the beginning when drawing up the plans (before I refinanced for the construction). My question is, what recourse do I have against the design-build contractor for missing the zoning requirements? Obviously any payments I made directly to them would be refunded but can I get the costs for the loan, including the higher interest rate? Anybody else go through something similar?
Appreciate any help.