Is it worth to sue a general contractor

[Brandon Arce]

My first contractor took many months doing minimal work, and took half my draws from my private lender, after electric inspection did not pass, I terminated his contract. The second contractor that took over quoted the job too low because he didn't realize he had to change the whole electric cabling in the house. He stared complaining how everything was costing him so much, and let me know straight up that he wasn't making any money. However he did passed all inspections, but now  after a $10K payment he demanded he refuses to answer calls, and has  not delivered the materials to compete the project.

I have seek attorney advise, and of course they advised they are ready to sue them if the contractor fails to complete with the work as per contract,  however I have read that even if lawsuit is won, is extremely difficult to collect the money.

I wonder if it is better strategy to sue them in small court myself for completition of the project or for $20K , which is the maximum allowed in NJ for small court, and that is really all I would need to complete  the project.

A few points to mention, they quoted me $48K, I have paid them $45 so far.

I still have $20K available to draw from my lender, but that is hard to happen since final work is not being done.

At the beginning I stood up to make $80K to $100K in this deal. Now I will luckly come out just even but that is due to the good initial deal I got on this rehab.

I would like to hear if anyone has actually recovered money from contractor in a lawsuit? I am out of funds, totally, even to pay for the lawyer I would have to borrow money.

I also have to worry about my project not complete, and the contract with the lender coming due in one month.

[Patricia Steiner]

There's a lot here.  A couple of things:

What due diligence was done on selecting the contractors?  Do you have contracts, detailed work plans, etc.?  You'll need the later for any legal proceeding.  

A draw schedule requires that certain work be performed before draws can be made. A request is submitted, the borrower approves it, the lender does an inspection, and then money is drawn from the line.  This process protects the borrower and the lender so I'm concerned what methodology your private lender used.  This will also be a factor in a legal proceeding.

What action have you taken against the contractor(s)?  Have you filed a grievance against their license with the state?  Reported them to the BBB?  Filed a complaint with code enforcement?  There's a lot you can do before filing a legal action as remedy. Most states have a fund to reimburse private citizens who have been wronged by a licensed contractor's negligence.  You will want to explore that option first.  Also the BBB will contact the contractor and seek his resolution of the complaint.  It doesn't cost anything to file and can lead to a resolution.  Code Enforcement might suspend the contractors' rights to pull permits if their work has been substandard.  You have to know how the system works - licensing, permitting, grievance filings - in order to make the system work for you.

You never pay a contractor based on whining.  And, they have to be managed to a work plan.  Leave the job to them and you'll be at their mercy to get it done - if at all.

As for the suit, you can file but it's doubtful you'll ever collect UNLESS you have the documentation referenced above to get a judgement and you know where they bank or hold assets in order to attach the assets once awarded a judgement.  Most people file the suit but never collect. I recommend going after their license and right to pull permits, their recommendation standing (bad reviews are killers) - and save the lawsuit only as a last resort.

Hard won lessons are still gold...be sure to really learn from this pain so you never experience it again.  And, don't back down. Go after his ability to work and it will work for you much faster than the legal route.