203K Loan - Contractor Pain

[Edward Barnes]

So I'm knee deep in a 203k loan, mid-rehab. My contractor pretty much did the juicy/profitable items of the rehab and quit, namely some foundation work and roof.

The HUD consultant did an exit inspection and I signed off on an exit draw. Here's the question though, the bank wants to pay the quitting contractor the 10% hold back for the items he completed. I was under the impression the hold back was to get the contractor to complete the entire job, not just cherry pick. Does anybody know the answer to this? Thanks in advance.

[Wayne Brooks]

No the contractor is Not entitled to the retainage. Actually, he's not entitled to payment for the work completed, if your synopsis is correct and if he's breaching the contract. You would have the right to hold back money, pay others to do the remaining work, and if it costs more than what he had in for it.....deduct that from his balance. My suggestion is to put him on notice of this, and get him to finish. If not, keep the retainage. I don't say this because I like to clip contractors, but because I am a licensed GC, did contracting for 20 years.