Problems With General Contractor

[Bryan B.]

Hi all, I'm going to try to spell everything out the best I can without going into full specifics of things like numbers. We are in a bad situation and really don't even know where to go from here.

Earlier this year, we started a major renovation project on our home (above $100k, but let's use 100k as a base since it makes the percentages easier). In the beginning, our contractor was easy to work with, was very intimate with the job, etc. After a couple of weeks, however, he stopped being as involved, and a lot of things started going wrong. Now, as per our contract, we were to pay 30% up-front, 40% after demo, 20% at 75% mark, and 10% at the end). We had followed this to a T for the first two payments, and he requested the third payment a bit early, stating he needed it to continue work. So we gave it. At this point we had given 90% of the payment and it was a bit over half-way done.

At this point, work started to get... for lack of a better word, bad. All of a sudden things start going wrong. For example, as per our agreement and chat, we had specific things we were expecting that weren't followed through on, from materials to setup and design. This has been met with things like "I honestly forgot we agreed on this" or "Oh, I forgot to do tell them," which was then followed by asking for more money since he keeps saying his quote was based on his flawed view of what we agreed upon and it would have cost far more to do the right thing. For example, our 140' foot fence was agreed upon to be cedar, and it was done using pine (at a cost of $8k, despite originally saying it would be $6.5k, and only notifying us about the price increase after it was finished). We called this to his attention and he said he forgot we said cedar and that he would have had to charge another $5k+ for material alone. Through the entirety of working with him, he's asked for one payment after another to pay his subcontractors, so we've, based on the $100k model, paid $98k of it to him already and there's still a lot left to go on the work.

We've honestly been a bit lenient on things because we've been stuck out of our house for over 3 months during this process (we've spent over a month in hotels alone due to the massive amount of work being done and not having a kitchen for 3 months and 2 weeks now).We just want our house back.

Now, we've been called out and been asked for proof of the permit/inspection on our fence because the one he installed was not allowed by our city. Upon going to the city to get the permit, I went ahead and decided to pull all permits for work being done (things like a 2-door to 1-door garage conversion, with load-bearing wall removed, kitchen wall removal, new pantry created, turning the old pantry into a laundry room with new plumbing and a sink, extending a shower and tub into a 9' shower, and a lot of other stuff, including a lot of electrical changes like a new outlet and new light fixtures). The city notified us that no permits were ever pulled for anything. They also notified us that nobody was ever signed up as a contractor to work on our house, so now we were called out for it.

He kept saying to both us and the city that he doesn't need permits for any of the work that was done and doesn't know why they are even asking. In the end, he agreed to sign up as a contractor and pull permits. But now he's upset because of the work that has already been done and the city wanting to see behind the walls and under the new shower (and inside the garage wall where the load-bearing wall was removed to verify stability). He is pushing the idea that he trusts his workers and the work they do and so getting these permits is just a hassle for everyone and keeps saying the only reason the city cares is because "they want their money" and that it has no other purpose.

Today, he's reaching out to tell us that the city is making him rip down our fence and replace it with cedar. He says the permits he's pulling are also adding costs and that he doesn't have the money so he wants to work with us to figure out how to pay for these fixes to his work. For the fence, he wants another $5k now, again repeating that, despite our conversations talking about cedar, he thought we didn't care about the material (but wouldn't the onus be on him regardless, even if we were open to fencing type, to figure out what's allowed as per city law?). We purposely did not want pine because our last fence (before the law was changed) was pine and it had one issue after another due to weather here. He's also asking for the cost of getting permits and licensing for all of his workers, stating that he never billed us for any of this since it wasn't supposed to be needed for anything (based on what I can tell, he wasn't even planning on one for running a new power line from our breaker box to the kitchen for a double-stove). His words: "interior work doesn't need permits, only exterior work."

We are at a complete loss of what to do now. He's essentially asking for another $20k for a job we've already paid well over 100k for (and has increased costs many times along the way: for example, our stove was supposed to be included, then it was "$1100" for the wiring, then when we agreed it jumped to $1500 because he forgot it needs drywall when he finishes, and now it is jumping to $2000 since he thought he didn't need a permit for running electrical). On top of the money we've paid him, we've spent literally thousands stuck in hotels while this project has been ongoing. And now all work has been halted, leaving us with no kitchen or anything for the foreseeable future since he says he can't work on anything until we cover the costs of his permits and licensure and he doesn't have the funds to pay for any of it.

Now, with the background out of the way, here are two issues we're having.

It looks like we can't go to an attorney because it states in the contract, "In any dispute arising from or relating to this Agreement, the Parties shall first submit the dispute to mediation."

2) Regarding the licenses and permits, it specifically states: "Contractor shall at its own expense obtain all permits necessary for the work to be performed." and "All work shall be completed in a workman-like manner and in compliance with all building codes and other applicable laws." Even with this, he's stating that we are responsible for paying for this since he didn't charge us because he shouldn't need permits for anything.

We do have issues with other things as well, such as asking about making a change, him saying he would give information, and then finding out the work was already done and we were to pay x amount since it was completed, even though if we had known the cost we would have rejected it. Contract specifically says all changes must go through signed change orders but when we brought this up to him after the fact (after he had already tacked on $25k or so in charges for things we were just trying to get info on), he said he skipped them because it "is too much of a hassle to keep going back and forth with change orders."

I know this is a huge mess... and it's something I really didn't expect to end up in. We thought that by hiring a company that's verified on sites like HomeAdvisor that we were good. I never even would have fathomed a contractor not pulling permits and then trying to argue with us about how he doesn't need them since all work is "interior" and that makes permits irrelevant.

Does anyone have any clue as to where we even start with this? We've literally dumped everything we have into the project because we wanted to get it done. 3+ months without a usable home has been rough in and of itself, and now there's no end in sight. And if we have to pay attorneys up front I don't really know what to do because we quite literally are living off salads and keeping the heat off (despite it being 45 degrees inside right now) because we've had to spend so much on hotels and such while they work, plus him constantly pushing for more money and cutting off work until it's paid.

Thank you for reading this, and if there are any questions, please don't hesitate to ask.

[Arlen Chou]

@Bryan B. I feel very sorry for you. I had to handle a similar issue here in California for my parents. The guy is actually on BP... are you reading this Darryl? The so-called contractor was doing work for my parents. I stayed away from the project because it was their home and they had worked with him on past projects. Long story short, his contractor license was not valid, there was no written contract, there was no timeline, there were no permits pulled, the list of issues goes on...

Once I got involved, I got the project permitted and completed. The legal portion took a long time, but I won and my parents received a good-sized settlement. I did have to threaten a lien on some properties he owned, but the check did finally show up.

Here are the basic steps I took:

1) I handled all communication via email. Anything that was discussed in person or over the phone was verified in an email.

2) I went to the city and I was honest about the situation. They could have really dinged me on the permit issue with fees and penalties. But they worked with me and I got my permits in place.

3) I went direct to the subs. They can be your best allies in getting your project completed. Assuming they are professional, they will work with you to get things done correctly. I am not sure what the process is in TX, but I asked all subs for the release of lien notices upon direct payment. Basically, I took over as the GC.

4) In parallel to the above steps I interviewed new GC's and I eventually brought somebody else on board. 

5) As a third rail, I engaged with a real estate attorney to start the mediation process. We thought he would take our offer to pay for materials already used and we would move on. However, he fought us through the contractor license board and the court system. In the end, we moved from offering to pay a few thousand dollars to receiving a six-figure check.

The point is that you need to build a case. You give a crook enough rope and they will hang themselves. Document everything: dates, times, who was present, emails, text messages, checks cashed. You need to document, not just the above items with the contractor, but with the subs, the permitting office, onsite workers, everybody.

Dishonest players understand that the legal system is not built on right vs wrong, it is based on who can handle the pain of time/money lost in the fight. Only at the end is a win or loss decided, most individuals will cave-in before reaching the final verdict and the dishonest guy walks away.

I have had to fight 2 contractors in different cases. But they both tried the same thing: drag out the process and see if I would just go away. Both times I won because I was in the right, but more importantly because I had the documentation to prove it. 

You have 2 immediate jobs: get the project done by somebody who is competent and make sure the other guy knows that you will go all the way in the fight. Never go into a fight half-hearted or you are guaranteed a loss. This is going to cost you time and money. The money should come back if you win in court or negotiate things in mediation properly. If you don't have the time or money, do not let the other guy know that. Never show your weakness in a fight. I sincerely wish you the best of luck. Don't leave us hanging, let us know the outcome when you get things all sorted out.