Contractor gave a not to exceed then invoice exceeded it

[John Choe]

I'm in the process of a remodel on a 4-plex from about 4 hours away.  I contacted a contractor and asked for a not to exceed number for each unit.  After much back and forth the foreman for the job gave me a number for each unit.  I negotiated all of this via email so I have records on what the job will involve for each unit and a not to exceed number.  The wording on the estimate given by the foreman is "IF ANY UNFORSEEN HOLD UPS OR SET BACKS THAT CAUSE THE JOB COMPLETION TO TAKE LONGER THEN THE ABOVE ESTIMATED TIME FRAME A CHANGE WORK ORDER WILL BE USED AND MAY CAUSE AN ADDITIONAL CHARGE TO THE HOME OWNER LISTED ABOVE."

I had them begin on 2 of the units.  While the work was going on I came in to review the progress 5 times over the last several weeks.  They sent me daily work reports and weekly invoices.  After 4 weeks they were still not done but getting close.  They invoiced me through out the process and I paid the first 3 invoices totaling 70% of the total not to exceed.  I did add a little when they uncovered some unplanned repairs (approximately $500 additional).  I contacted the foreman to confirm that we would stay on budget.  I was ok with going over a little on time but I needed to stay on budget.  The original scope of work included installation of granite countertops but they told me that they would not be able to do that. Apparently the foreman didn't know that they didn't do granite fab.

Fast forward another week and I receive another invoice which took me up about 35% beyond the not to exceed number.  Still with more work remaining, I was shocked that we had gone over the not to exceed number.  I have yet to pay any more invoices and I agree that I owe the remaining 30% to get to the not to exceed number + the additional work that I approved, but where should I stand when it comes to the overages?  After saying I would not pay the 4th invoice or the pending 5th invoice fully, but only up to the not to exceed number the contractor has sent a notice of a pending mechanic's lien on the property.  

After another conversation today, the contractor said they would back it down to a total of 25% above the not to exceed and finish the remaining work.  I never received nor approved any written change order but they say that the daily work reports were covering the overages.  What would you do in this situation?