Investor · Littleton, CO · Member since 2015 · 12 posts · 2 votes
So - I had hail damage from the May 8th storm. I hired a general contractor to make restorations. We are having an issue over $1800 of non-recoverable depreciation. He thinks I owe it and I don't.
Once the repairs are complete, can I withhold any of the money owed until there is an agreement on the $1800? Basically, I want to pay the "final" amount due - Not the amount I feel I owe and then still have the $1800 hanging out there. If i do that then I don't have any leverage to close the issue.
It was around a $30K job. I have paid $19k. We pretty much agree on everything other than the $1800 and one or two items on the Statement of Work.
Can I legally hold 10-20% of the job back until they give me full lien release? There isn't much in the contract outlining payment disputes. Just that I owe the balance upon completion and will be charged 1.5% interest on the balance.
Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
8y
@Shawn Loftis was does your contract with him say? There are many items missing from your explanation. What type of insurance policy did you have? Is it actual cash value (you would technically owe depreciation)? Is it replacement cost coverage (you would not owe it, the insurance company would pay for it).
So now the down and dirty on insurance. Most insurance pays very generous on the unit cost of damages (they want good contractors working for them). Smaller companies with low overhead and cheaper labor tend to have wide margins. Often times they will cover the depreciation and even the deductible with those wide margins. Technically they are not supposed to do this and I've been told it is against the law for them to absorb the deductible so the owner does not pay it. This is the case when the insurance payment goes directly to the contractor from the insurance company. You would be on the hook for the deductible and depreciation (if applicable).
The caveat to this is if the payment was made to you as the homeowner and then you are contracting outside of the insurance relationship with a contractor to do the work. When you do this the insurance company holds back some of the money owed you until proof of the work is provided. If you can get the work done for cheaper than the payout minus deductible and depreciation (if applicable) then you get to pocket the difference. You may think this is the way to go but in my experience the insurance adjuster does not have same scope as a contractor. For example, the insurance company might give a $20 payout to fix a bit of damaged trim on a window but the contractor has some sort of kryptonite that gets the insurance to agree to replace the windows. In addition, when there are multiple trades involved in making the repairs, the contractor tacks on a 10% project management fee but insurance refuses to allow that for a home owner.