Flip gone bad - Contractor scam

[Dan Jones]

I am having problems with a flip. Basically, I did everything wrong. I entered into a JV with a guy who was going to act as project manager.

He started the project before I signed an agreement with him and before I had agreed (I asked many times to refine and finalize it with specific feedback) to an SOW. I am not sure if he ever showed an official SOW to the GC and I suspect that there is no written contract with the GC.

The GC made fast progress on the paint so I wired 4K to my JV partner in good faith. I kept asking to get the signed agreements and SOW, but kept getting excuses, etc.

Fast forward a bit and things went south fast, still no contracts (as far as I know), I wired another 4K, and now all work stops.

The GC said that he never agreed to the things in the SOW my JV partner shared with me. He said he is 90% done with the project and needs a payment, that my JV partner requested 3K of additional items (what was the original agreement? and the additional items? was all this verbal?), etc, etc. and he is now threatening to file a lien.

The project is no where near 90% done. Maybe 30-40% done.  

He (his office assistant) said the agreement was for 10K.  I am not even sure if he wants 90% of 10K, 90% of 13K, or some other number he will make up if/when I hear from him again.  

It sounds like the GC is pulling numbers out of the air. He will not return my calls. I got all this info from my JV partner and one conversation with his office assistant.

Also, I am pretty sure he is not licensed which is a major problem since I can't pass inspection from the city unless he is licensed and pulls permits.

I feel like I am getting scammed from all ends here and would love to hear some advice on how to protect myself at this point.

IMO he has received more money than work completed (at inflated pricing).  

I would like to get a different contractor to finish the job, but I am concerned this guy will file some huge lien against me saying I owe him a ton of money.  

I took a ton of pictures to document the "lack of" work.  Is this enough?  Should I get another contractor to write some kind of affidavit.  Do I need to get an attorney at this point?

This is in the Chicago Illinois suburbs if that helps at all.

Thanks

[Prashanth Mahakali]

Dan,

Sorry to hear about your experience. Its never good when partners dont return calls. Its very frustrating and I can related to this from my first rehab project. 

Moving forward, it looks like you have all the information you need to pursue legal options. While you do that, I urge you to spend 80% of your time in focusing on how to move the project forward and 20% on pursuing legal options to get money back. While choosing your next contractor, visit their job sites and talk to them and their references. I look for clean job sites as a good sign for a general contractor.

Contact the village and place an alert on what happened so they know to watch out for him in case he tries to do business with the village. File a complaint at bbb.org. 

The fundamental mistake that most investors make is falling for the bottomline by hiring unlicensed people for low costs. Get educated by visiting the local big box building material store and create a commercial account. All materials are purchased through your account so you know exactly how much is spent on materials. 

 Get a licensed Architect and contractor as part of your team. Verify licenses at www.idfpr.com. Ask them to show copies of licenses and check status of the license with the city. All of this takes a few minutes and phone calls. 

Lastly, try to get even by completing the project. Its all the more critical now that you finish the project than getting even with the GC. Good luck and share your experience with others! 

[Mindy Jensen]

Hi @Dan Jones.

Problems with contractors are the pits. What suburb are you flipping in? There may be other exit options available if the flip gets too expensive.

I would not wire another dime to anyone until they talk to you. Leave a message on both the JV and the GC phones, telling them this. Have you documented all this? If not, take the time to write everything down, as best as you can remember.

Don't continue to throw good money after bad. Figure out what has been done, ask the contractor for invoices that show what he has done to warrant that money. Consider firing the JV guy. Consider changing the locks on the house so you are the only one who has access.

Do you have an attorney? With no contracts, it's difficult to sue for breach of contract, and equally difficult to hold the GC accountable for a Scope of Work that was not clearly defined. 

On what grounds is he threatening to file a lien? Ask him for a copy of the contract he signed with the JV guy. He says he is 90% done, what is he 90% done with?

Where did you meet up with the JV guy?

[George P.]

I don't think he can file a lien if he is not licensed.  can he? 

the lines are files with the city, but he has to be registered with the city to do work and pull permits. 

[Rob M.]

Please share the name of the contractor and project manager so that no one on this site uses this guy? 

[Mags S.]

I agree with @Rob M.. Also thank you for sharing your experience and hope it resolves to your benefit. Hope you make a huge profit - couldn't think of a better payback. 

[Nino Alfano]

As a fellow contractor hearing this makes me cringe! If he has a signed contract he can put a mechanics lien on the property.

Cut ties with the partner and Contractor. Hire a reliable verifiable contractor finish the project than take legal action against him.

[Diana Rdzanek]

Hi Dan, sorry to hear about your predicament. I do not practice in this area of law, however I can offer some tips below that apply to dealing with various contract disputes:

- Create a record: review emails, paperwork, and call log, making notes if you remember the conversations from those dates. It goes without saying, do not fabricate anything.

- Ask for proof: the GC should be able to provide you with a breakdown of the work they have done, receipts from materials purchased, and time spent on the project. Make it clear that you aren't trying to get out of paying for work and materials, but you need verification for the costs and services provided.

- Write everything down: when you are in any dispute make sure that you put everything in writing. If you speak to the GC or JV partner on the phone, send them a quick email summarizing the content of the conversation and the outcome.

- Verify, verify, verify: Do you know for sure that the GC has received more money than work completed, at inflated pricing? Get quotes from other contractors. Look up prices for materials. Come up with an estimate and see how far apart you are on figures. The more information you are armed with, the easier it will be to negotiate with the GC and JV partner.

Good luck! If you determine that you need an attorney to resolve this dispute, feel free to reach out and I can connect you with someone who can assist.

[Dan Jones]

Everyone, thank you so much for your advice.

@Prashanth Mahakali

Your guideance has been very help. I will stay focused on the goal of getting this flip finished and deal with the bad contactor after.

@Mindy Jensen

I have documented dates and taken pictures every time I have inspected the property. I also have my phone records that show how many time I have tried to get in touch with them. I have made some progress with my JV and I am looking into options to finish this project on my own. I do not have an attorney yet. I don't know when its time to bring one in and how much it will cost relative to the potential lien.

I don't feel comfortable posting names right now since I am still trying to work something out with all parties. That said, if things do not work out I would be happy to share those details.

@Diana Rdzanek

Thank you for the advice. I take decent notes on a daily basis. It paints a decent picture of the timeline and issues.

I am getting no response at all from the GC. I am pretty sure they do not intend to contact me directly.

I plan to ask other contractors their opinion of how much the completed work is worth.

I may take you up on your offer to connect me to an attorney if it comes to that. Many thanks for your advice and guidance.

[Brandon Ingegneri]

If he is registered, have your attorney send him a punch list of items to be completed both construction and documentation wise. If he doesn't comply by such and such a date, you'll file a formal complaint with the governing agency and attorney general. In RI there is a Contractor Registration Board. There may be a similar agency providing oversight in your state. The more documentation that you can produce, the better. Definitely choose partners wisely moving forward.

[Manolo D.]

Dan Jones Here you go. http://www.cslb.ca.gov/Consumers/Legal_Issues_For_Consumers/Mechanics_Lien/If_A_Mechanics_Lien_Is_Filed_Against_You.aspx
This might not fully fit on your state but it is a similar guide. Chances are, the lien is invalid or will be invalid, only a handful of contractor know how to file lien, it is a painful process, but an attorney might be able to work on contingency basis. We have successfully filed a lien and got full price on it, attorneys fees were also paid. If he is smart, he will hire a lien company to do it for him, if that, then the lien is serious.