Woodbury, NJ · Member since 2017 · 38 posts · 8 votes
How do you handle a contractor who was suppose to finish a job in 3 months which is now a YEAR and he is basically saying he messed up the rest of your budget money? I want to cut him off my job and file a lawsuit what steps should I follow in New Jersey also any referrals of the kind of lawyer I need please list thanks.
Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
7y
I do not know anything about NJ, but some states require that licensed contractors are bonded. IF NJ has a bond requirement you can go after his bond. No attorney needed, in the states I have worked with, you file through the state licensing board. Going for a contractor's bond does get their attention.
Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes
7y
Catch 22 with getting contractors.
The reality is, there is currently a shortage of skilled labor and the economy is humming. That means the good guys are booked, charging accordingly, and getting their price. That also means there is room for scammers to capitalize on the desperation.
You were desperate to flip a house without having experience or connections with tradesmen. I wish your story was rare, but it really isn't. Sorry if you find that harsh, so I'll attempt to be helpful.
#1 - Never pay for anything up front.
#2 - Never do a "cash" deal.
#3 - Never commence without a written contract.
#4 - Learn when to break rule #1, never break rules #2 & #3, understand the risk of breaking rule #1.
Go consult a lawyer my friend. If nothing else, they can educate you on where you stand and what your options are, which will be worth every penny you might pay for the consult. Good luck.
Or, go gangster and chop the guys fingers off one by one each day they don't make good. I'll guess a single knuckle on one finger will do the trick. Take the thumb if they don't come round. I'M KIDDING!!! But it can feel good to fantasize about it! Reminds me when I was a sandwich delivery driver and I dreamed about providing some secret sauce for the repeat-offender bad tippers. I mean really, I'm in my car driving your food to you, I'm alone with your food, and you think it's ok to stiff me???
Real Estate Investor · Washington, DC · Member since 2014 · 236 posts · 328 votes
7y
I don't know what you can do about getting your money back, but you need to fire him yesterday and get someone else to finish the work. It's hard to admit you made a mistake but If he can't get it done in a year, he's not getting it done no matter what stories he's telling you. It's costing you money everyday it's sitting there and he's already proved by his actions that he can't get the work done and will lie to you to get you to keep paying him. If you were advising a friend on this situation, what would you tell him? Now do that!
Specialist · Cleveland, OH · Member since 2018 · 1k+ posts · 666 votes
7y
@Tycee Tyler welcome to the world of RE investing. I tell everyone , the most important thing in RE is not location or price its your contractors. NEVER pay them in full. Always hold back money. File a lawsuit, good luck with that , it will take years and years, . Not sure why you waited this long to get it done,
Everybody who has couple people for cheap labor call themselves “general contractor”. If someone knows how to use screwdriver, that would be a carpenter and double the price.
In this market, it’s better to stick with your old crew, people you know long time rather than take chances on something lousy.
As for money, I guess it's better to write of as stolen - that small GC will disappear and will be working under new LLC.
These are dime a dozen.
For the future, until you complete 5-7 projects with that GC, control process at least once a week: budget, %% etc. DO NOT pay upfront anything, only 50-60% of what’s done. If you pay materials by yourself and they just deliver, it will insentify them to get paid sooner. Always write up 20-30% of the job only on final inspection.
Developer · Oakland · Member since 2019 · 12 posts · 22 votes
7y
That really sucks and unfortunately there are a lot of contractors like this in the mix. One suggestion for next time is to have a 3rd party provide draws to the contractor based solely on work completed and images of that work. It can add a day or two to your schedule for each draw but it helps to keep the contractor in-line on budget. This would be for smaller jobs. Go off the contractors initial estimate to schedule draws.
Also, you can tack on a per diem fee if the contractor goes passed schedule. The per diem is set upfront before anything begins.
Investor · Scottsdale, AZ · Member since 2014 · 52 posts · 23 votes
7y
Tough and expensive education. You probably have slim odds of getting that contractor back to your job to finish work you might want to consider cutting ties and getting a new contractor in there to keep your job moving.
Working on clearly defined draw schedules will help avoid this in the future. I worked for a GC and we would usually work on a 1/3 schedule. So 1/3 paid upon completion of a defined amount of the scope of work, 1/3 when 50% complete, and then 1/3 when completed. I would also recommend to hold back the final 5-10% until the final punch list of work is completed. If you pay in full when the contractor says he is done, but then find more issues after inspecting it will be tougher to get them to come back without financial incentive.
That really sucks and unfortunately there are a lot of contractors like this in the mix. One suggestion for next time is to have a 3rd party provide draws to the contractor based solely on work completed and images of that work. It can add a day or two to your schedule for each draw but it helps to keep the contractor in-line on budget. This would be for smaller jobs. Go off the contractors initial estimate to schedule draws.
Also, you can tack on a per diem fee if the contractor goes passed schedule. The per diem is set upfront before anything begins.
I don’t agree with using a third party for draw schedules on a job like this. As the owner, you or a trusted team member should be at the jobsite every week and at least twice per week minimum to check up n progress and inspect quality of workmanship. Without that, you run into problems like what has occurred here. Secondly, a contractor should never be paid in full before the job is completed IN FULL, NEVER.
Lastly, you can’t tack on a per diem penalty unless you had such verbiage already in your contract and based on this story, I highly doubt that was done.
Let this be a learning lesson to you on a number of levels and Shane on this contractor. Shame on you if it happens to you again.
@David Stumpf 100% agree. I am kicking myself in the behind for over paying based on percentage of work complete. I think doing your own material take offs and keeping track of material usage is key to avoid this. If they underbid, then only paying for percentage done will allow more money in the budget to get it finished with another contractor, etc...
That really sucks and unfortunately there are a lot of contractors like this in the mix. One suggestion for next time is to have a 3rd party provide draws to the contractor based solely on work completed and images of that work. It can add a day or two to your schedule for each draw but it helps to keep the contractor in-line on budget. This would be for smaller jobs. Go off the contractors initial estimate to schedule draws.
Also, you can tack on a per diem fee if the contractor goes passed schedule. The per diem is set upfront before anything begins.
I don’t agree with using a third party for draw schedules on a job like this. As the owner, you or a trusted team member should be at the jobsite every week and at least twice per week minimum to check up n progress and inspect quality of workmanship. Without that, you run into problems like what has occurred here. Secondly, a contractor should never be paid in full before the job is completed IN FULL, NEVER.
Lastly, you can’t tack on a per diem penalty unless you had such verbiage already in your contract and based on this story, I highly doubt that was done.
Let this be a learning lesson to you on a number of levels and Shane on this contractor. Shame on you if it happens to you again.
@Will Barnard I totally agree with you. Thank you for pointing out that my post was unclear. My statement was not to use a 3rd party to RUN the project, I am simply suggesting to use a 3rd party to APPROVE allocation of the draw. This 3rd party would be contacted by the owner/investor at the appropriate time to come out and approve a draw. In the same way a lender sends a third party to photograph and approve draws. Of course, the investor must be as you said "at the jobsite every week and at least twice per week minimum to check up n progress and inspect quality of workmanship." Furthermore I strongly believe in using CM software to manage the job progress, material specs, schedule and budget. This is all with the owner/investor at the helm.
Rental Property Investor · Jefferson City, MO · Member since 2019 · 17 posts · 9 votes
7y
I’ve been in a similar situation.. I ended up taking the contractor to small claims court and the judge ruled in my favor. I still haven’t seen the money and probably never will. Like some of the investors mentioned above, these situations are an expensive lesson on how to deal with contractors.
If the amount is above $5,000, I’d definitely hire an attorney. He needs to be held responsible for the crime he’s committed along with being prevented from doing this to other investors.
Now I have all of my contractors tell me what materials they need and I’ll buy them myself so there’s no way my money can be blown. My contractors even outline the sku’s at the hardware stores along with quantities on the quote sheet so I know exactly what they need. This should eliminate the need for “up front money”. If the contractor seems pushy for up front money, he probably isn’t reliable and you should hire someone else.
Lender · Granite Bay, CA · Member since 2014 · 456 posts · 454 votes
7y
@Tycee Tyler. This is exactly why I am always my own contractor on all my flips. I do use generals at times, but only for really serious stuff and I only pay them for that one job.
I run a big REI group in the Sacramento area and I get this " my contractor took my money and never finished" all the time! I'm sure there are some great contractors, but there are a lot who I do not trust.
Chances are this battle sadly is not worth your time. You may win after a long court battle and he will probably file BK. Either that or he has no money anyway. Get the work done salvage the deal the best you can and move on. Just never let it happen again!
Leclaire, IA · Member since 2016 · 161 posts · 130 votes
7y
@Tycee Tyler
In the future, always pay in progress payments. First, it keeps the contractor hungry for his next check so he prioritizes your job. Additionally you can see his progress and have tangible evidence that you are getting your money’s worth out of him.
Don’t beat yourself over this. Just learn from it. Take your licks, fire him and get someone else to finish this thing.
Developer · Kenosha, WI · Member since 2017 · 141 posts · 91 votes
7y
I learned a similar lesson but it wasn't an intentional theft by a contractor, but just blatant incompetence. He cost me a lot of money and time.
Now I have a very specific contractor agreement complete with budgets and scopes etc. I also do not pay in advance. On a typical flip I will drop a dumpster for them and then after demo is complete they will get the labor portion of the demo line item. This is what they should be using to front the materials, lumber, drywall, etc for the next portion. I pay based on line item percent completion on Friday afternoons.
If it is a large material drop that is many thousands I will meet them at the store and pay for it. I try not to use broke contractors so that mitigates that issue.