Take Contractor to Small Claims Court?

[Micah Haworth]

Hey BP,

Recently had a contractor that I've been working with for 3 months just totally ghost me. We have a signed contract with what work needs to be done and when. After he finishes work he gets paid. But we had a handful of additions, some that he had already done and some that hadn't. We signed an amendment to the contract adding the additions and I paid him it all at once and he dipped out a couple weeks later. Very frustrating, at this point he has left with $2500 of work not done. Given that we have the contract I'm curious about pursuing small claims court to get the $2500 back. Anyone have any experience with this? Would love to get some pointers. Im Based in Minnesota.

[Nathan Grabau]

I would consider yourself lucky if $2500 was the cost of the "don't pay the contractor until they are done" lesson. Most investors pay much more to learn this lesson. I am not a lawyer and this is not legal advice, but... You can take them to small claims court, but the burden of serving them along with your legal fees will likely fall on you. If you have a loser pays provision in your contract, the story is different, but most construction contracts lack this. If you do have loser pays, I would kindly remind the contractor of this in a demand letter, with the demand being to either execute their contractual obligations or to refund x dollars for incomplete work. Some states say that if you threaten to sue someone you are blackmailing them, so I would be careful not to say something like "or I will sue you". Once again this risk adds to the "cons" side of the pros/ cons of suing. 

In future deals, I would say that it is okay to hold a retainage. This is where you only pay 90% of the invoice amount and hold that last 10% of every invoice until the end to keep them motivated to get across he finish line. I would be upfront about this and if you have a contractor that cannot accept this, consider it a red flag.