UNDERSTANDING DISPUTES BETWEEN CONTRACTORS AND HOMEOWNERS
When you are doing a renovation project, the last thing you want to deal with are mistakes. You’ve invested a lot of time and money into your home remodel. However, if there are construction defects, this could very easily lead to a contractor legal dispute.
The contractor legal dispute could stem from a disagreement on payment terms, unfinished work, or other contested issues. Because of everything you have invested, the stakes are too high to just accept a construction defect and not take action to resolve the issue. It is not just money that is at stake, but it is also the ownership over your living space that might be at risk.
When things awry with a home improvement project, it can be an expensive proposition to resolve the mistakes. This is why taking legal action, in certain circumstances, might be necessary.
TYPICAL LEGAL DISPUTES BETWEEN HOMEOWNERS AND CONTRACTORS
Usually project changes carried out during construction will add onto the total project cost. This can later potentially result in a contractor legal dispute. Both contractors and homeowners are not able to forecast all the potential problems that could arise out of a home remodel project. However, construction issues can translate into additional spending and more time invested by your contractor.
That is why it is helpful to have in your contract a “change order procedure,” which outlines how both parties should go about adding in changes to the original construction plan.
As a homeowner you should also consider requiring Lien Release Waivers when making payments to the contractor. This is known as a “Conditional Lien Release.” This means a contractor is basically waiving his or her rights to filing a Mechanics Lien against your property for that portion of the construction job that you are paying for. “Conditional” as it is based upon payment being satisfied, such as the check clearing your bank and the contractor receiving the payment. If the contractor disputes being compensated for the work, the homeowner has proof in the form of a signed release from the contractor, as well as a cancelled check.
When it comes to renovation projects, having a timeline is not necessarily required, but more of a suggestion. Nonetheless, there can be an ambiguous area between what the homeowner and what the contractor thinks is a reasonable delay for a home renovation project. There is a huge difference between a project that is delayed by a couple weeks versus one that is delayed for many months.
Keep in mind that a delayed project can cost a homeowner a lot of money, and this is especially true if you have to arrange for alternate living accommodations while the work is being done.
WHEN TO TAKE LEGAL ACTION AGAINST YOUR CONTRACTOR
First it is important to be clear that we cannot tell you when and when not to sue over a construction defect. This blog article is not intended in any way to offer legal advice. Ultimately, you should consult with an attorney who has expertise in this type of law before deciding what legal actions, if any, to take.
That being said, there are some general guidelines for when you might consider suing over a contractor legal dispute.
(If you want to read more about Breaking a Contract and the dangers of a contact breaching, read more here.)
REASONS TO PURSUE LEGAL ACTION
One motivation for potentially taking legal action against your contractor is if you are facing an extreme situation. For example, if your contract calls for a start month of April 2022 and your contractor has not begun work and it is now July 2022, a judge is likely to perceive that as severe or egregious.
If you have a contractor legal dispute because you find it challenging to communicate with your contractor – they’re not promptly returning calls or emails – that will not rise to the level of being cause for taking legal action.
CLEAR EVIDENCE OF BREACH OF CONTRACT
Even if you do not have clear written evidence of breach of contract with your contractor, that does not mean you can never sue under any circumstance.
As an example, suppose your contractor explicitly outlines the breadth of work to be done for your renovation project, and your contractor has failed to accomplish much of it, that is sufficient proof of breach of contract. In fact, it would likely stand up in court.
It is important to note that suing your contractor should only be done as a last resort. You should opt for legal action against your contractor after you have attempted various ways to communicate with them or you negotiated on expectations, etc. If all other avenues have failed to resolve the issue, then think about hiring an attorney.
TYPES OF LEGAL ACTIONS AGAINST YOUR CONTRACTOR THAT ARE AVAILABLE
Retaining the Services of a Lawyer and Suing — This is the most expensive and time-consuming option. However, it might be appropriate if your contractor legal dispute involves quite a bit of money.
Small Claims Court — You would represent yourself with this option. With regard to small claims court, it is a more accessible option and you won’t be needing the services of a lawyer. Be prepared for the fact, however, that in this venue, you are not able to collect anything other than money from your contractor. For example, a small claims court cannot force a contractor to complete a job. They can only issue an order to pay a specific amount of money. Each state has a maximum amount of money you are able to claim. In Washington State, it is $10,000 if brought by a natural person; $5,000 for all other cases.
Seeking Reparations from Your State’s Guaranty Fund — If your contractor is licensed with your state, you could opt to seek reparations from your state’s guaranty fund. This fund is established by your state for circumstances where licensed contractors are unable to fulfill their contractual obligations, and it is funded through a one-time fee that contractors pay when they receive their license. Each state has their own maximum amount that a consumer/homeowner can obtain from the fund. For the vast majority of states, it is approximately $25,000. Be aware that this process might take many months or years to complete.
PREPARING FOR LEGAL ACTION AGAINST YOUR CONTRACTOR
While we at Aultman Law are not advising you to pursue a particular course of legal action through this blog article, there are specific things you might think about prior to hiring an attorney.
Be Sure You Establish a Paper Trail: If you plan to prepare a legal case against your contractor over your contractor legal dispute, you will be well served by maintaining a detailed record of all communications that are evidence of a breach of contract. This can include text messages, emails, notes, etc. At the minimum, having a dated journal would be helpful so you have your facts organized. You would also want to have available all relevant pictures that could prove your case.
Know Whether or Not Your Contractor Can Take a Lien on Your Property: If you are refusing to compensate your contractor for work completed on your renovation project as stipulated in your contract, be aware that your contractor could take out a lien on your property.
What are the consequences of this? A lien provides your contractor with the right to seize and sell your property if you do not fulfill the obligations of your contract. As a result, even if the amount of money you are withholding from your contractor is a low amount, for example, $4,000, your contractor might take possession of your home.
Also, a contractor has the right to file a lien on your house for the services rendered if you do not pay your contractor. In some states, they are not legally mandated to divulge to you that they are taking this action. Be sure that you understand this potential risk prior to refusing to make payment with the intention of suing.
Review Your Original Contract: You will want to find proof of breach of contract if you plan to take legal action against your contractor. Refer back to your original contract and be on the lookout for mention of anything that your contractor has violated. This will be useful to present your case to a lawyer or at a later date in court.
DETERMINE IF YOUR CONTRACTOR IS LICENSED AND/OR BONDED
Finally, if your contractor is licensed, you might be better off filing a complaint to your state’s licensing agency instead of hiring a lawyer. Also, if your contractor is bonded, meaning if they do not complete the renovation project or any facet of it, you as a consumer and homeowner are partially protected by a surety company. A minority of contractors pay a premium to this surety company for this security, while other contractors do not. Investigating these options might very well be easier than hiring an attorney.
(Surety Bonds are limited anywhere from $12,000 to $15,000 per contractor and not per incidence or complaint. Unlike other types of insurance where the risk is spread across everyone insured, the bond pays out to the limit of $15,000, that’s it.)
LOOK TO AULTMAN LAW FOR CONSTRUCTION DEFECT ISSUES
Construction defect litigation can be highly technical. If you have questions about your rights or obligations, you need the assistance of a construction litigation attorney. Most matters can be resolved without an expensive courtroom battle. In fact, your contract may determine how your matter should be resolved.
If you need help with a construction litigation matter in Benton, Franklin, or surrounding counties, contact my office today.
Get The Help You Need in the Tri-Cities at Aultman Law
At Aultman Law, experience is the difference! We are a small law firm with big law firm experience! Our law firm’s practice areas are personal injury law, business litigation, construction defect law, and insurance defense. If you need help with a personal injury matter in Benton, Franklin, or surrounding counties, contact my office today.