Suing a Builder-Part II
I have written about suing a builder for new construction previously, but I would like to spell out in more detail the remedies that a homeowner (or even commercial construction for that matter) may have when a dispute arises.
As I have now stated over and over, the place to start is with a good contract. Particularly when new construction is involved, there are usually benchmarks for progress payments. Homeowners should be particularly vigilant regarding those benchmarks, and builders should be clear about which work needs to be completed and whose approval is required before the payment is made. On the builder side, it is nice when those payments are automatic upon inspection (bank or town should be specified). The homeowner may want to include a provision that he/she should be allowed to inspect before payment is issued, but the builder should be able to protect himself at that point so the homeowner cannot have full power to determine the definition of what constitutes completion.
If the homeowner is not happy, he should start out with a demand letter to the builder spelling out the problems, and if in MA, write the letter pursuant to c. 93A. If delay is the problem, then the homeowner should negotiate a new schedule for completion with the builder and each party should sign off on it. If quality is a problem, the homeowner may want to bring in an independent inspector to evaluate the work and write down which corrective measures must be taken. If the property does not pass inspection, the building inspector will specify what needs to be done to bring the structure into compliance.
In any event, once quality or delay is an issue, there should be a clear cut agreement about when the contract will be considered breached, and what the remedies will be for the breach of contract. The homeowner should be able to know at which point she can hire someone else, and the builder should ensure that he will be paid for work to date or even the full value of the contract if the homeowner terminates it unlawfully.
Homeowners have two means of securing judgments against builders. They can either prevent progress payments, and/or maintain an amount for retainage until the work is complete (usually when a certificate of occupancy is obtained and punch list items are completed), or file suit and move to attach the builder's property.
Putting a lien on property is more difficult with new construction because if the builder is incorporated you can only obtain a lien on corporate property. Under the Home Improvement Statute, the company's designee is individually liable, but that does not apply to new construction.
When new construction is involved, the approach to a dispute is similar to that of a renovation or addition issue, but the law does not provide as many built-in protections. That is why a good contract is even more important for new construction, and why homeowners should monitor the work.