Did I make a mistake?

13 Replies

Hi everyone and Happy New Year to you all! I wish you all great business success, prosperity and few headaches.

Speaking of headaches, let me share with you my current debacle in hopes of getting some reassurance that I haven't made a big mistake and if so getting some ideas for softening the impact.

So here it goes...

For one reason or another and against some of our core principles, we engaged the services of a GC for our latest rehab. I signed a flaky agreement that I will pay a 50% deposit and the rest in 2 installments of 25%.

I have been trying to finalize a commercial loan with a line of credit and was relying on that line to pay for a large portion of this rehab. I still haven't closed on that loan so I told him that don't have it and need to stop the work. I asked him to provide me with an account of what he has spent to date. The amount he gave me is about 1/2 of what I am estimating is left over. Besides, part of the money was to be used to purchase doors and windows from MY supplier (I know exactly what they cost). I confronted the contractor that he is overcharging me and since he has been ignoring me completely. I don't have the doors and windows either and he is not responding to anything. 

Total for the job was $12,000.

I paid him $6,000 as a deposit.

He offered me $800 and didn't say what will happen to the windows. 

I told him I should be getting my windows and doors + $1,600. 

In my calculations I am accounting for a profit of 20% which he told me himself is the margin he operates under. I am also accounting for his time in quoting the job and meeting with me a few time (although I consider this the cost of doing business for him.)

His contract has no early termination clauses or any references to termination at will. Contract states that in case of a dispute, both parties will cooperate to resolve it informally. I have been trying to do that but he is blowing me off.

What course of action do I have? I am in almost $4,000. 

He is a GC. I find it hard to believe that he can pull the "I've lost thousands because I tied up my people to do your job." This was not a long-term project. We are talking - window/door installation, attic blown in insulation, garage siding, house gutters and trim.

What is he trying to accomplish by not responding to me or attempting to resolve the conflict among ourselves? Is he hoping I will engage a lawyer and he can then counter-sue for breach of contract (early termination)?

Thank you in advance for your invaluable advice.

@Vicki K.  Sorry for your situation.  In spite of the long post, this  is not at all clear.  You need an exact breakdown.

Total for material and labor was $12K?

You paid him $6K.

He has put in how much material and labor?  You say, "The amount he gave me is about 1/2 of what I am estimating is left over."  I have no idea what that means.  Can you put a number on it?

You are "in almost $4,000."  Huh?

You certainly have done him a disservice by abruptly cancelling work that he has scheduled.  I don't know what that is worth.

@Vicki K.  

  Small claims issue to small of money to involve any kind of lawyer other than a few sabre rattling letters.

.. and your the one who is not performing.

I have been on the other side of this back in my Timber days were I would secure a cutting contract only to have the land owner change their mind.

We spent a lot of time and resources procuring our timber contracts. So on this one I took the guy to small claims and I won..  7500.00 was the judgment.. and the guy was none to happy he cut me a check on the spot... But the judge saw it our way.

However for the guy to go dark on you that's not professional as well.. if his position is you reneged on the contract and I don't owe you anything back the amount of money you paid me is liquidated damages because it would be to hard to establish exact damages. etc the guy should just tell you that straight up. 

@Vicki K.  I think you already know the answer to your question. Yes, you made several mistakes. You did not seem to have a very clear contract or scope of work with your contractor. 50% upfront was probably too much but as others have said, you appear to be the one in breach of contract here.

Is there a way, that you can borrow money from a credit card or family so that you can finish the project? Apply for a new credit card?

Good Luck

@Vicki K.  I wish I could offer you the reassurances you seek but...

I don't understand how you could hire someone to do a project when you knew you didn't have the money.  What kind of "core principles" is that?  You seem to want to blame him but it's entirely a situation of your making. 

Hi Vicki. There's at least 3 lessons here that you probably have picked up on by now. First one is to use your own contractor agreement, wherever possible (I believe there's a good example in the BP FilePlace). Secondly, secure your funding before you start work. Stopping/suspending a project due to a lack of funds is hard to recover from, for both you and the contractor (especially from a scheduling perspective). Third, estimates for labor, time and materials are always best guesses, which can change for a multitude of reasons. Accusing a contractor of overcharging, without firm facts and figures, is tantamount to accusing him of stealing and that never goes over well. If it were me, I'd send him a letter with whatever data you have to support your claim and ask him for whatever you think is a fair settlement. This would at a minimum, document your attempts to resolve the dispute, should you ultimately decide to go to small claims court. The best outcome from my perspective is to secure the funding you need and have him complete the job within the original contract price. Good Luck. - Marion

Sorry @Larry T.  I wrote the post quickly and didn't proofread. My apologies. I agree, I didn't explain well.

Total job was $12K for labor and materials to do the following:

- tuck pointing throughout the house

- install 6 basement windows and replace 2 window sills

- install windows and 3 exterior doors

- install blown-in insulation in attic + baffles

- install siding on garage

- install gutters on garage and house

- install gutters and trim on house

I paid $6K as a deposit to get started.

What he did before I pulled the plug on the project was:

- tuck pointing

- basement windows

He said he has ordered and paid for the windows and doors but he never delivered them to me or made arrangements for me to pick them up. So even though he says he has incurred expenses for them, I don't have the product. Windows are about $2,400.

I told him that I am stopping the remaining work and want to get the unused portion of my deposit back. 

He sent me the following:

Windows and Doors: $3,454

7 Replace glass blocks windows, all vented - $700

Install two new basement window sills (200), glass block the milk shoot (100): $300

Tuck Pointing, along with the agreed extra for the back slab - $707

Total toward agreed contract: $5,161

Credit back to you: $839.00

I responded to this by saying that I only have 6 basement windows and that since I gave him the window/door supplier I know the windows are no more than $2,400. Tuck  pointing is grossly overestimated (we have done this many times). 

I expected his cost breakdown to look more like this:

  • Doors & Windows - $2,500
  • Basement Windows - $450
  • Milk shoot -$50
  • Window sills - $200
  • Tuck Pointing - $275
  • Baffles - $50 (I am adding those + the time of your guy, etc.)

Total Cost to him so far: $3,525

  • 20% mark up

Total  toward agreed contract: $4,230

$1,770 remains from the $6,000. I told him that since he came few times to meet with me and quote the work, he can keep another $100 for his time. I asked him to send me a check for $1,600 and tell me how I can get my windows and doors. I never heard back.

I hope this is more clear. My apologies again for the long but confusing post above.

That's a bit more clear.  I wouldn't quibble over $800 if you get the windows and doors.

Not to sound like an a hole, but the time spent arguing over $931 (1770 you say he owes -  $839 he says he owes) seems to be a moot point (if I understand correctly). It is 931 bux..... but its 931 bux. Small claims  wouldn't be worth it in IMHO. I would write to him as someone else suggested saying what you said here, you feel you are owed 1770 and ask him if your numbers look correct. I would bet that asking him what you missed, vs telling him he is to low on his refund amount may get a more favorable response from him.

Is this something that may go in a few weeks? May be best to ask him to hold off for a couple or three weeks instead of fighting to get your money back.

Art Allen - Art, the relationship didn't really start off on the right foot from the beginning - he was nickeling and diming me any chance he got. He did only two things for me and somehow there were $600 extra charges. I got this bad feeling that I will be in a lot of money before all this was done. I wanted to get out of a bad situation before it got worse and used my pending line of credit as the reason to terminate the contract before we both invest more money and time in this transaction. I wanted to be fair and cover the expenses he has incurred for labor and materials so far + his 20% markup as a GC. 

I do realize what I did is not ideal and yes, there are many lessons to be learned here.

@Vicki K.

chalk it up to a life lesson...a one time mistake that you won't repeat.  I pay for all my materials so there's no upfront money to the contractor until he's reached the 25% completion point. A lesson I learned the hard way.

@Cole Walker  - At this point, I also don't have $2,500 worth of materials (windows and doors) he paid for with my deposit. He is ignoring my communications completely, so since I don't have the $1,600 I estimate is left over + $2,500 in undelivered material, I am in $4,000. In the grand scheme of things, not a huge amount but the whole situation and his non-responsiveness bugs me a lot. It's unprofessional to say the least.

@Guy Gimenez  - Guy, that's one of the principles we have been sticking by since we got started in this business. We always buy our materials, we GC our projects, we don't pay up front for labor... Art Allen , those were some of the principles (rather practices) we have been sticking to up until this project.

@Vicki K.

And now you see why those are wise principles to stand by.  Trust me, this will be nothing more than a nuisance to you and you will come out the other side much wiser AND you will listen to you gut (aka  instinct) in the future. 

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here