General Contractor refusing to fulfill contract

[Ross Pino]

Hello BP friends, I am a new investor in need of some advice. On my very first flip I found a Licensed and Bonded General contractor to rehab a house I had purchased. This guy came in and sold me from the beginning told me he could get the job done for $67,000.00. I went and obtained a HML to cover the cost for Reno keep in mind I purchased this house cash and owned free and clear. Before the contract was actually signed he ended up removing somethings saying that he miscalculated his cost and it would be more expensive than the $67,000.00 and we settled on a trade off of me and my father (an electrician) doing the electrical work if he did the rest for the $67,000.00 that I had already obtained the loan for. In our contract it states project would be completed in 60-75 days from date of the signed contract (6/26). Well from there it was excuse after excuse and he has barely even started work today marked day 75. In our latest meeting he is saying that when he signed the contract he was not Lead base paint certified but now is meaning he has to handle the exterior paint job differently adding cost and time to the job. Also in our last meeting he stated that cost of wood has gone up 10-25% and that he is unable to do the project without more cost for me. Per the contract it states "All work with material is guaranteed to be as specified in the work scope and will be completed in a skillful manner as required by the city code specifications." I interpret that as the cost of materials going up is not my problem. As far as the lead base paint goes, the scope says he will pressure wash and Apply two coats of paint to the exterior. So thats what he budgeted to do but now that he is lead base paint certified he knows he cannot get away with that and that the handling will cost far more. But again I believe this is not my problem and he needs to eat the loss according to the wording on the scope "completed in a skillful manner as required by the city code specifications." I know it sounds immature of me to not just pay the difference but the contractor refuses to give me a price difference. I seems like he just doesn't want to do the job.

Due to this major delay I am stuck. I don't have enough time to hire a new contractor, apply for permits, and sell the house within the rest of the 6 month loan. Causing me to miss out on $31,000 of profit as well as the cost of acquiring the loan that I otherwise would not have if I didn't hire him $8,000. Also other contractors are quoting me at $75,000 - $82,000 which is well over what he said he could do it for. 

I would like to add I have learned many valuable lessons from this and am not trying to take advantage of the situation. I did more research on this contractor and found many complaints on his prior companies as well as an arrest for fraudulent depositing bad checks (wish I would have found this out before I hired him). Anyway I went back and found the insurance documents he sent me before I hired him and found his surety bond company. I found out his surety bond is for $25,000.00 but i'm wondering if I should file a claim and if so what amount of money should I be asking for?

Thank you for reading and I look forward to your replies!

[Todd Rasmussen]

@Ross Pino

Aside from the obvious things like, this guy should have been fired after the first week he didn't start performing...

Bring on a partner for the extra bit you need to complete the project, or get out of it as soon as you can. At least the electrical work is done right? Hopefully that helps offset your selling costs and you don't lose too much on this deal.