Joint venture- issue with contractor(Partner), not finishing, not supporting

[Raj G.]

Hi All,

I am an investor, I came across a contractor. He advised me of a property for flipping in NJ. he told me if I take care of all the finance(purchase+repair). He will take care of as a contractor and will share profits equally. I said ok, I asked him to prepare LLC and JV documents for terms and conditions. But he kept postponing, to be on the safer side I emailed him for terms and conditions I could remember.

Property was close to his house and like 100 miles from my home.

Since there was no LLC setup. I bought the property on my name. But he collected the keys.

Project started. It was not possible for me to go there to see progress. So I called him to ask about progress. Everytime I asked him he used to say “no worry we will make lots of money” I told him that’s ok but tell me progress, but he keeps avoiding,so finally I got the number of the contractor who he had hired(I was paying directly to the contractor). So I started calling contractor to get updates. He had told me that it will take 2-3 months to finish the project. After 4 months he asked me to list the property on MLS. so I went to the property but it was not finished , not in condition that it could be listed on MLS. so I tried to talk with him. His reply was very very rude, instead of having logical questions/answers, he was non-stop yelling and said he is very experienced, he knows what he is doing etc. so I waited, after 1 month I again went on property so I noticed there was no lock box and lock was changed. But when I called him he told me where the new key was hidden. When I asked him why the lock was changed and the lockbox was removed. He again started yelling at me and told me that I can't ask any questions, my job is just to finance and sell the property.

Whatever he is doing is a lose-lose situation for both of us, not sure why he is behaving this way, because if he could finish the project on time, we could flip the property sooner and also could start a new project. Now not only is the project delayed, but he will never get any financing frome me. Again I

Some other points

1. had put 100% investment, he didn’t put a single penny.
2. Property is on my name, so I am feeling safer here(comparitively).

3. In my knowledge it was around 2 months work, but he said he will finish in 3 months, but it's now more than 6 months . almost 75% work was done in first 2 months. 10% work in 3rd month and minimal few hours work in last 3 months, still unfinsished I guess couple of days work remaning, if I take over I can finish even by myself,but I am hesitant of doing this.

3. I have stopped any further payments, so some work cancelled. because cost already went much higher than what we agreed on the repair .

4. He has keys and is closer to property? Not sure how much of a disadvantage I have of that.

5. He devoted very minimal time on renovation, he just hired a subcontractor. That subcontractor also hired two subcontractors(his friends) that I believe were very costly and when I talked to my partner, he didn’t know how much we are paying, until I told him and what exactly new subcontractors will be doing.

What should I do? My money is blocked, I see almost no progress in the last 4 months.

Should I change the lock and put on MLS in "AS is"

Thanks

[Peter Mckernan]

You are in a great position since his name is not on the property, and your name is on the property. That is a huge save for you right now. I would first change the locks, hire a new contractor and move forward without him. Sounds like it is not the business partner for you and gives you a good lesson on getting things in an operating agreement and writing that is signed. Since he did minimal work and sounds like you are good with what you paid him (or should be good with what you paid him) that is really all that I would be worried about, and make sure he does not come back and try to put a lien on the place prior to selling stating he was hired to a job and was not paid. That would entail doing a judgement and a lot of stuff that this person does not seem to be wanting to do but you never know. He seems unreadable so not sure he will sign anything stating the partnership is canceled. I would document everything with photos and all if he tries to come back after you for payment/ownership. If he does I would have the documentation and photos and consult an attorney. In the meantime, change the locks, hire a new contractor from a referral that is solid and pay them when they hit milestones on the job.