Friday, July 21, 2006

Terminating the Contract-The Homeowner

When can a homeowner terminate a contract? That should be determined by the contract, but if it is not, the law in your state will govern. However, one should also use some common sense to decide when the time has come. If the contractor has stopped showing up, then he has abandoned the job, and the homeowner has the right to mitigate damages by hiring someone else to finish the work.

If the contractor has failed to pull permits, or done something illegal, or blatantly in violation of the contract (substituting inferior materials, for example), the homeowner does not have to stand by and accept it.

What about when the homeowner just isn't happy with the work? That is a more tricky issue. Some homeowners have unrealistic expectations about what things should cost, or are not understanding when an unforseen problem arises. Homeowners should voice their concerns to the contractor and give him a chance to address the issue. If after numerous attempts at repair the problem continues (the leaks increase and will not go away), it may be time to hire someone else to fix the damage.

One should consider hiring an independent inspector to evaluate the work and write a report with his recommendations. This may protect the homeowner if the contractor states that the homeowner unlawfully terminated the contract. At the same time however, the homeowner should realize that most contractors will not have funds to return at the end of the day, and the easiest way for them to deal with problems is by fixing them.

I have seen many cases where homeowners are forced to terminate the contract due to poor workmanship, abandoning the job and failing to follow the building code requirements. This is the reason that homeowners should never pay for the job in full before it is finished. Otherwise they will not have any leverage if work needs to be repaired or if there are still punchlist items that need to be done. In Massachusetts, the final payment is not due until the work is done to "the mutual satisfaction of the parties."

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At 3:09 PM, Anonymous Anonymous said...

Good afternoon! This is the most informative site I've seen on this general topic!

My wife and I are in the final phases of a home improvement project that has cost approximately $60K. We have payed $56K (just under 95%) of the total project cost to our general contractor and we're all payed up with sub-contractors (except for the fact that the GC still owes our Electrical Sub $1K -- roughly 20% of Electical Sub's ttl bill. If push came to shove, we'd be willing to pay that $1K directly to the sub, even though we already paid it to the GC.

We're holding back the final $4K payment from our GC (who also did the carpentry work and installed hard wood floors) because the work is not to our satisfaction. The biggest issue is that he used the incorrect species of wood -- a fact validated by two independent flooring specialists.

We don't have confidence that the GC could fix the hard wood floors or do it in a timely manner (he's been very behind schdule the entire way). We plan to hire someone else to fix the floors. This will cost around $4K plus or minus $500.

A few questions...

1. Can we terminate the contract with our GC, or do we need to give him the first shot at fixing it?

2. If he does have first right to fix (but we want to hire someone else) do we need him to formally, in writing, release us from any further payment? Is there a standard legal form for that?

Interested in your opinion on this. We think we can back-up our low-confidence claim with both pictures and external experts if he doesn't sign such a release. Also not sure what his incentive would be to sign such a release unless we were willing to eat a few $ and give him something.

Thanks for any insight you may have!

 
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