Issues with General Contractor

[Senta J.]

Hi All,

I am hoping I can get some advice regarding my situation with the general contractor I hired.

My husband and I are doing our first flip and we took 3 months vetting general contractors to make sure we end up with the right one. We spoke to 13 contractors and finally found one who seemed to be perfect. He came highly recommended by a very experienced flipper at our REIA, is licensed and insured, very experienced and professional. I looked up as much as I could online and found nothing negative about him. Unfortunately, something happened along the way and we don't know what to do.

We are currently a month over schedule, he says he'll do x,y and z in a given week and it doesn't get done. Then, he doesn't respond to phone calls and texts until days later. He always has some excuse: phone isn't working, family emergency, etc. Then, when he does work he'll say such & such item will be done tomorrow and wants payment. In the beginning, since things were good and he started out strong, we paid him a day or two before that work item was done. Now, however, there are several things he's been fully paid for but are only partially done. Recently we found out from one of the subs that he hasn't gotten paid for the work we paid the GC for. I don't know what the payment status is for the other subs he used. 

The investor who recommended him called recently and told us this contractor didn't pay his electrician for her job and the electrician put a lien on the house so she had to pay twice to be able to sell it. When she confronted him and withheld payment for the next work item until he pays the electrician, he walked off her job. She said he told her he would pay her back but hasn't done so yet and it has been a few weeks. 

I'm not sure what to do here. We made a lot of mistakes since this is our first flip and we trusted him. Our contract with him does not have a termination clause so I don't know if that means we're stuck with him. I have a call in to our attorney but I'm hoping the BiggerPockets community may have some ideas on how to deal with this.

Thanks in advance for any suggestions you can offer. 

Senta

[Chris Seveney]

First question is what state is this taking place in. Before suing you can call the licensing division and file a complaint. In Virginia you can actually recoup portions of money as well. J Scott also notes the next point which is whose contract did you use? 

Another question is did you get lien waivers (I assume not). If you had him sign a lien waiver for payment then that would protect you from having to pay twice. One carrot to dangle to him is to have him come back to finish an item, pay him but tell him you will only pay him after he signs the lien waiver (which basically states that he got paid for the work and is responsible for paying all subcontractors). 

When I general contracted my house one of my contractors stiffed a sub out of $15k, but fortunately I had the lien waiver executed and when the sub filed the lien I showed the court the waiver and they dissolved the lien and told the subcontractor he had to sue the contractor he was working for.

Whatever you do, if you do terminate for him, make sure to put it in writing and mail it certified, also state the reasons for it. Any correspondence you have also should be followed up in writing, such as if he says he will have X,Y,Z done tomorrow, after he says it send him an email noting "confirming our conversation, X,Y, Z will be 100% complete on XYZ date. That way when termination occurs you have a paper history of the facts as in court he will say you made changes etc. then its your word vs. his. ALWAYS DOCUMENT.

Lastly I cannot express enough to people NEVER pay upfront. Contractors (and I am one) are not your friends, this is a business and many are extremely good at the work they do but horrible at managing money. There are reasons for contracts and outlining when to pay someone. If anyone wants a sample contract or scope I would be happy to send to them. The benefits of it too are contractors who see this who may not be the most honest look at it and would never sign it in a million years. Its another way of confirming you are getting a decent contractor.