I am 3 month into my first flip. I encounter many issues.
Now, another issue. one of my independent contractor claimed that his workers get robbed at the property during rehab, and asked me paying back their lost which is about $700 cash. Also he claimed he has done much more than the contract state and spent much more time. He is demanding extra $1000 for it or he will fill a lien against the property.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
14y
My suggestions:
1. Learn your lesson -- have a strong contract, get proof of license and insurance, get references, don't pay ahead of work, get lien waivers if you don't trust the contractor, etc.
2. Have the contractor who was robbed file a police report immediately. If he refuses, it's probably safe to say that you aren't on the hook to reimburse him for any losses. If he does file a report, call your insurance company and see if they'll cover it. If not, call an attorney to determine your rights/responsibilities.
3. Offer to pay the contractor for the work that has been completed. If he's finished 50% of the work, offer to pay 50%. If 75%, offer to pay 75%. Try to get him to agree to accept reasonable compensation for work completed and then part ways. Find another contractor and see #1 above.
Lexington, KY · Member since 2009 · 2k+ posts · 1k+ votes
14y
Originally posted by Chelsy C:
I am 3 month into my first flip. I encounter many issues.
Now, another issue. one of my independent contractor claimed that his workers get robbed at the property during rehab, and asked me paying back their lost which is about $700 cash. Also he claimed he has done much more than the contract state and spent much more time. He is demanding extra $1000 for it or he will fill a lien against the property.
I hope you can offer some help on this situation?
I am going to have to think this all the way through, but I can tell you the first thing I would do...ask for a copy of the police report he filed when his workers were robbed.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
14y
Chelsey,
Do you have a written contract with this contractor? I certainly hope so, if not, you may be screwed here. Do you have an insurance policy? Does it cover theft? Was a police report filed by the contractor or the workers?
I do have a written contract. But the contractor claimed I asked his worker to do more. In regard to the robbery, they didn't file a police report since I was thinking it might affect the property value,and I was not at the property, and I have no idea whether it is true or the contractor just blackmail me.
It's very frustrated, I have all my written contract saying delay fee is $80 per day. and they have deleyed the completion of the project for 3 weeks.
I am thinking if there's any waiver form I can have all of their workers sign before I pay. I expect to just pay a little more to get this settle due to I am very tired of it.
Investor · Diamond Bar, CA · Member since 2009 · 446 posts · 233 votes
14y
What is specified in your contract with regard to extra work - etc?
Is this individual a licensed contractor?
Did you actually ask the worker to do things extra? Maybe you thought they were included but still you directed someone to do it? I have found a lot of investors do not fully appreciate all of the "extras" that they feel are included in a rock bottom bid. Maybe this does not apply to you, but make certain you are "in the right".
I was only asked for some small stuffs which didn't detail on the contract. and I verbally agree to pay a little more already. but the contractor is asking even more than we agreed on verbally.
He is lisenced for plumbing only, but he is doing my cabintes and painting.
Real Estate Investor · Chicago, IL · Member since 2011 · 54 posts · 14 votes
14y
I would say to ask the contractor for a detailed invoice of the additional work. Also, if you pay him as the work goes along, make sure you get signed lien waivers before you give anyone a payment. The lien waiver basically says that the contractor is accepting payment for the portion of the work done. Once the entire job is completed, you get a final lien waiver. These should all be notarized and that way, he can't file a lien on your property.
I am planing to have all of his workers sign lien waiver before I make the final check. the issue is he's asking much more than on the contract now plus the loss he claim on theft.
Investor · Diamond Bar, CA · Member since 2009 · 446 posts · 233 votes
14y
Originally posted by Chelsy C:
I was only asked for some small stuffs which didn't detail on the contract. and I verbally agree to pay a little more already. but the contractor is asking even more than we agreed on verbally.
He is lisenced for plumbing only, but he is doing my cabintes and painting.
Ah the hazards of starting out. Do not worry we all had to learn these things. Now you know why flipping is so lucrative, it takes skill, knowledge, applied expertise, experience, and a lot of things that many people are not aware of -- The profit in a fix/flip is paying you for all of that.
Anyhow - sounds like you hold all of the cards if he is ding work that he is not licensed to do. But be warned, even you chose to not pay and expect every person/contractor to play by honest rules you may be in for a surprise. Maybe he walks away - maybe something happens to your house.... who knows?
Put together a firm, fair, friendly settlement and chock this up to education.
Real Estate Investor · Chicago, IL · Member since 2011 · 54 posts · 14 votes
14y
All of his workers don't need to sign a lien waiver, unless you are paying them individually. If you are paying just him, then he is the only one that needs to sign the l.w. The contract that you have should also detail how additional work is to be covered. It sounds like the theft is going to be a "he said / she said" situation. Again, ask him for a breakdown of the additional work and the cost that he incurred.
Didn't we have to have all his workers to sign lien waiver? his workers can file lien against my property as well. It has been a life experience for me dealing with this contractor.
Real Estate Investor · Chicago, IL · Member since 2011 · 54 posts · 14 votes
14y
Again, only if you are paying his workers directly and separately. The contractor will need to list all of his sub-contractors on the lien waiver. At least that's how we do it in Illinois. You may want to double check with your attorney, but I have never had individual workers sign l.w.'s
Real Estate Investor · Chicago, IL · Member since 2011 · 54 posts · 14 votes
14y
Then if you pay him directly, there should be no need to get signatures from the workers. Have you paid him anything yet? Partial payments or construction draws? If so, then you should try to get a lien waiver for those payments. If not, then you can wait until the end of the job.
Google search for a lien waiver template for your state. You should be able to get one for free or very little money.
"Anyhow - sounds like you hold all of the cards if he is ding work that he is not licensed to do. But be warned, even you chose to not pay and expect every person/contractor to play by honest rules you may be in for a surprise"
what cards I can play? I feel I am so poor being blackmail by them.
Investor · Diamond Bar, CA · Member since 2009 · 446 posts · 233 votes
14y
Originally posted by Chelsy C:
what cards I can play? I feel I am so poor being blackmail by them.
Here we go, getting into specifics, you need to talk to a lawyer about this. But if a contractor is contracting for work that they are not licensed to do then you do not need to pay them and you have a claim against their bond for liabilities they have left you with. Now there is probably more to this on what you can and cannot pay - but yu do hold some cards.
Plus a complaint to the State Contractor Board can wipe him out. With this said - I am not advocating this - I am just saying he is illegally contracting if he only is licensed as a plumber.
Once again, it is better to pay, make certain all liens and potential claims (workers & suppliers) are covered and walk away.
Making compliants, as I mentioned earlier, can be risky. A contractor that is at the end of his rope may take his anger out on your home (after hours - who knows what happened?) - just saying - better to be amicable and chose your contractor more carefully next time.
Thanks Jason, the contractor claimed he has license but I never showed me. I just would like to have more leverage, due to he's threaten to stop working and file a lien if I don't pay in full. Also I got penalties due to he delaying the completion date.
For the not licensed work, I have paid 70% due to he repeated requesting for payment.
how can I find out if he's license or not? I have only the business name and address.
also how to deal with if he filled a lien against my property?
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
14y
My suggestions:
1. Learn your lesson -- have a strong contract, get proof of license and insurance, get references, don't pay ahead of work, get lien waivers if you don't trust the contractor, etc.
2. Have the contractor who was robbed file a police report immediately. If he refuses, it's probably safe to say that you aren't on the hook to reimburse him for any losses. If he does file a report, call your insurance company and see if they'll cover it. If not, call an attorney to determine your rights/responsibilities.
3. Offer to pay the contractor for the work that has been completed. If he's finished 50% of the work, offer to pay 50%. If 75%, offer to pay 75%. Try to get him to agree to accept reasonable compensation for work completed and then part ways. Find another contractor and see #1 above.
Real Estate Consultant · Bloomfield, NJ · Member since 2010 · 2k+ posts · 1k+ votes
14y
J Scott - your point about "getting references" is very accurate. In this recession, everyone appears to be a rip off artist. It's getting so bad that I find myself increasingly advising friends and family to go with someone connected with their network to hire for services. And even that isn't fool proof but hiring someone who has no references is just too risky these days.
Investor · Diamond Bar, CA · Member since 2009 · 446 posts · 233 votes
14y
The problem is that too many contractor's are dying for work and do not have even enough cash to float a single job. Even when you pay them on time - its tough for many of them because they are too far behind in the rest of their life. This is exacerbated when investors whittle them down to practically no profit, just because they can, knowing it is a bad economy. It's a vicious circle - so buyer beware.
Real Estate Investor · Chicago, IL · Member since 2011 · 54 posts · 14 votes
14y
Chelsy - now you need to check to see if permits were pulled for any work that he did. You need to probably contact the Attorney General's office, and get the ball rolling with them. What about his insurance? If he is unlicensed, he may not be carrying the proper insurance.
Follow all of J Scott's suggestions above, with one additional regarding point 3 - get lien waivers for whatever amount of payment you make!!
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
14y
You are not reponsible for the tools, etc. of subs or workers. If they aren't using them, they should put them in their locked trucks (it's called being adults), if items were in their vehicles, their auto insurance may cover it. As for change orders, they should always be in writing, signed by both parties, showing full amount of upgrades etc. so there can never be a discrepency. If you pay more than the contract stated, make sure you get a receipt, and something stating that it is PAYMENT IN FULL, and releases you from any liability, so that contractor can't come back and lien you, demanding more. Plumber doing cabinets, etc.? Not sure what state you're in and what is allowed; however if you let him do the work, and there's no problems with the installation, no harm no foul. Contractors license issue, you should have verified he was a licensed contractor, had bond, and insurance, BEFORE you hired him. Remember, you have an obligation to be responsible when hiring people, nobody can take advantage of you if you don't let them.