Home Contractor vs. Homeowner

When a contractor files a lien on a property, the first thing the homeowner frequently does is panic. This is generally because the contractor is now telling the whole world that the homeowner owes him money, and the homeowner is most likely embarrassed and humiliated. The reality, however, is usually not that bad. What does a lien do? A lien, in practice, will only affect the homeowner if he or she is trying to refinance, convey the property, borrow money or switch from temporary to permanent financing. If the homeowner has no intention of doing these things in the near future, then the lien can just stay there until the matter is resolved. If the homeowner is trying to do any of the above, then he has a couple of choices. By statute, the homeowner can post a bond to satisfy the amount of the lien, and then the lien can be dissolved. The bond does cost money, but it is perhaps the most straightforward way of getting rid of the lien. Another option is to call the contractor and n...

Someone recently searched the web about the difference between mechanic's liens and real estate attachments. The effect of both is the same. The lien or attachment gives the holder a secured interest in property that protects the party if a judgment is obtained. The difference, however, is the means used to obtain the lien. A mechanic's lien is an automatic right that a contractor has that is afforded by statute. As long as a contractor who has worked at a property complies with the procedure, the lien can be filed on the property for the amount owed. A real estate attachment is not automatic. In Massachusetts, a party must demonstrate a likelihood of success on the merits of his or her case, and show that the defendant does not have liability insurance to satisfy a potential judgment against him. If the attachment is obtained "ex parte," without notice to the other side, then he must show that there is a likelihood that the property is going to be conveyed or t...

For some reason, mechanic's liens seem to be shrouded in mystery. Although contractors have the right to lien property for money owed, they frequently seem not to do it correctly, and lose their opportunity to have security for a debt. The Massachusetts Continuing Legal Education book describes a mechanic's lien as follows: "A mechanic's lien is a claim upon real estate to secure payment for work or labor performed on or materials furnished for buildings or other improvements. The labor or material must have been provided at the request of the owner of the real estate." Under Massachusetts law, the creation of a lien occurs by recording a notice in the registry of deeds which must include a date by which the particular contract is to be completed. After creating a lien, the lienor must then record its statement containing the amount claimed due subject to "all just credits", and this statement must be filed within thirty days following the completion dat...

I received the following interesting response to my last post. I am not endorsing this organization, but they may provide useful information for homeowners: Many of the homeowners who contact us with builder complaints tell us that collecting is difficult. They have trouble finding good lawyers because of this. Homeowners are often prevented from suing because due to arbitration clauses. Of those that get arbitration or court awards, many have trouble collecting it. Arbitration has shown itself to have great potential for bias and abuse, and since it’s a private record, it hides complaints from the public when home buyers try to research builders before buying. Licensing agencies, (in the approximately half of the states that license builders at all), often protect builders more than consumers. Building codes aren’t being consistently enforced either. Many of the homes we hear complaints about have code violations, including serious ones that affect safety. The consumer is to...

Two weeks ago I obtained a judgment for a client against a contractor in the amount of $215,000.00. This included triple damages, attorney's fees, interest and costs. It was a great victory, but there is a problem: the defendant is virtually judgment-proof. In any lawsuit, a cost-benefit analysis needs to be done to determine if it is worthwhile to pursue a claim against a defendant. The money spent has to be balanced against the ability to collect a judgment if it is obtained. The best way to secure a potential judgment is to move for prejudgment attachments. The most common asset to attach is real estate. In Massachusetts, the plaintiff must demonstrate a likelihood of success on the merits (the he or she will probably win), and that the defendant does not have liability insurance to satisfy a claim. It the attachment is done "ex parte" (without notice to the other side), the plaintiff must also show that the defendant is likely to convey the property if given no...

I know that my posts have been infrequent over the last two months, but I have some exciting news about developments in my practice. I have moved to a new office, and my new contact information is listed in my profile. In addition, I have hired a full-time assistant, which will hopefully leave me more time to post. I plan to post on some recent cases that have affected the law regarding homeowner-home contractor issues. I will also continue to provide advice about how to avoid the common pitfalls that can occur. More posts to come...

The following link offers a useful article about hiring a home contractor: http://www.consumerreports.org/cro/personal-finance/what-if-you-need-to-hire-a-contractor-705/index.htm?resultPageIndex=1&resultIndex=2&searchTerm=contractor%20check

Most contractors start out on the same page as the homeowner. It is their goal to create a successful result that they can be proud of, and that will make the homeowner happy. Relationships usually begin on a good note. One of the issues that can derail a project, however is when the cost of materials increases. An unforseen hike in prices can cause a dramatic decrease in the contractor's profit and cause him or her to feel the need to cut corners in order to get the job done. The question is, how can this be avoided, and what should a contractor do if this happens? As always, a good project starts with a good contract. When a contractor hands a homeowner a proposal, that proposal should have an expiration date. Individuals vary greatly in their timeline for making a decision and implementing a renovation or addition. A homeowner may take a proposal and then end up being delayed in starting a project for any number of reasons. A contractor should not be forced to stick w...

Most of the home improvement contracts that I see are fixed price contracts. Homeowners ask for proposals and then choose a competitive bidder. Contractors must price jobs carefully. They should charge enough to cover costs and build in a percentage of profit, but they don't want to charge so much that they lose out on jobs. This forces contractors to build in a cushion for possible changes in prices of materials and/or labor. If contractors do not put a provision in the contract for increased prices, or make their proposals time-limited, they may put themselves in an unfortunate position where they barely break even. It is understandable that fixed price contracts may not offer the cheapest possible alternative for homeowners or contractors. For that reason, there seems to be an increase in the use of time and materials contracts. The arrangement for these contracts is that the contractor gets paid on a weekly or biweekly basis either in advance, or as each phase is complet...

I recently met with a new contractor client who was in financial trouble. He reported that his jobs were not profitable, that he bent over backwards to please clients, and his prices were generally lower than other bids. This contractor seemed to do an excellent job for his clients, but he was not doing well for himself or his business. Contracting is a business. Not all skilled craftsmen are business people and vice versa. As with any business, one has to recognize one's own strengths and weaknesses. Hiring a business manager, or taking a business class may greatly improve one's profitability. A friend who is a contractor says that she takes her cost and adds ten percent. She knows the price of her labor and materials and ensures her profit. If changes are requested, she requires written change orders. I can't emphasize this enough. You have a right to make a profit, and you do not have to bend over backwards and satisfy every demand of the client. For example, I...

Construction contracts frequently have mediation clauses, but few people understand what these mean, and whether they are useful. Mediation has a number of definitions, including assisted negotiation, but its most important features include a third-party neutral whose job it is to help parties identify the issues, generate options, and develop an agreement that comes from the parties themselves. Mediation is usually voluntary, and there is frequently an agreement signed stating that it is a confidential process. The advantages of mediation are numerous. When parties are in the midst of a dispute, the communication between them has often broken down. There is a great deal of emotion, and people need to vent. When people are involved in a dispute, and are angry, it is very hard for them to think rationally. Mediation is an opportunity to turn back the clock, and gives each side the chance to really listen to and hear the other's version of the story. Feeling listened to and und...

When a contractor delays a project, it causes problems for the homeowner. When a contractor abandons the job in its entirety, even more serious consequences may occur. How can a homeowner know when a contractor has abandoned the job? Sometimes it's obvious. If the contractor comes and packs up his tools, it is clear that he is finished. If she does not show up for an extended period of time, then it is likely that she won't return. It is not uncommon for a contractor to stop paying subcontractors prior to abandoning a job. What can a homeowner do? First of all, hopefully the homeowner has not paid the contractor in full. The homeowner should always have an agreement that some money will be retained (usually 10%) until the job is completed to the parties' satisfaction. Then, the homeowner should send the contractor written notification that the contractor has breached his agreement, and that the homeowner is going to mitigate damages by hiring other contractors to finish the...

I was notified a couple of weeks ago that I have been accepted to the panel for the Massachusetts Home Improvement Contractor Arbitration Program that is run by the state Office of Consumer Affairs and Business Regulation. I will report back as I start to get cases.

Contractors run into problems when they advance money for custom materials or do a great deal of work on a project without receiving payment from the homeowner. The best way for a contractor to avoid getting "burned" is to start with a good contract. If the homeowner breaches the contract and refuses to allow the contractor back to complete the work, the contractor is entitled to the value of the work done to date. He or she may also be able to claim lost profits if it is found the the homeowner has unlawfully terminated the contract. Unless the contractor has provisions in his contract entitling him to attorney's fees, interest and/or costs, the contractor will not be able to collect for those items. Contractors may incur other damages that are caused by the homeowner. If the homeowner delays in making decisions, or acquiring materials, he or she can cost the contractor money as a result of the delays. In addition, homeowners may bring other independent contractors onto ...

What are the damages that can be recovered by a homeowner when a home contractor fails to complete the job, or does the work improperly? The damages depend on the claims that are brought against the contractor. Typical damages include: Breach of contract - The homeowner has a duty to mitigate (reduce) his damages in a reasonable fashion, but may sue for the amount of money that it takes to complete the work, minus any money that was held back from the contract. The homeowner may also collect for moneys paid to do corrective work beyond the contract price. Under some state statutes, the homeowner may collect up to double or triple damages, attorney's fees and costs (filing fees, etc.). The doubling or tripling of damages is usually awarded when there have been unfair and/or deceptive practices, or extreme negligence by the contractor. These damages are "punitive" in nature, in that the double or triple damages are the punishment. Consequential damages, lost time from work ...

It may sound bizarre to say that I try not to litigate cases, but for most clients, going through litigation is incredibly stressful and expensive. Even if they have the right to recover their attorney's fees if they win their suit, these are not guaranteed, and recovery may be difficult. Settling disputes is usually preferable for a number of reasons: 1. Parties are more likely to comply with agreements that they create, as opposed to a decision handed down by a judge (studies have shown this). 2. Litigation can take years, and money now is frequently better than money later. 3. Even if one obtains a judgment, it may not be collectible. 4. Dragging out a dispute through litigation means it stays a part of your life for a very long time. 5. I have lost cases I should have won, and vice-versa. 6. Litigating a case can be like playing the lottery. That said, one should not start a case without being prepared to see it through. Clients need to know that there is frequently a flurry...

The Difficult Contractor Please excuse the delay in posting. The last few weeks have been quite busy. In a recent post I discussed how to deal with difficult homeowners. Now it is time to focus on the difficult contractor. What kinds of actions do contractors take that make life difficult for the homeowner? The first action is actually the opposite. The most common problem for homeowners is the contractor’s failure to show up at the work site on a regular basis. Jobs that are scheduled to be completed within a certain amount of time end up getting dragged out, and the homeowners despair as their home remains a construction site. The contractor has not abandoned the job, so the homeowner cannot claim that the contract has been terminated, but the work is taking forever. What can a homeowner do? First, this problem must be addressed in the contract itself. There should be a provision that states that the contractor will be on site for a number of days or hours per week. If the ...

As many of you may realize, I live in Massachusetts, where we have been facing the reality of The Big Dig for a very long time. For those of you who are not familiar with The Big Dig, it was the world's most expensive construction project (it may still be), and the plan was to submerge a raised highway that divided Boston, put in tunnels and connectors, etc. Given that Boston is one of the oldest cities in the United States, the traffic has greatly outgrown the layout of the city, and the bottlenecks through downtown can be quite bad. So, for Bostonians, The Big Dig seemed like a great idea. The problem is, the cost has greatly exceeded the budget (See this 2003 article for some figures: http://www.csmonitor.com/2003/1219/p02s01-ussc.html ) and now we have been faced with serious safety issues as well. After the fatal accident in which a woman was killed when a concrete ceiling tile fell, residents have been affected by the closing of the connector tunnel to the airport. We have be...

Someone recently googled the keywords listed in the title, alerting me to the fact that when one has lost the leverage of the final payment, the homeowner is frequently at wit's end. Many homeowners end up kicking themselves when a contractor abandons a job, or ignores the final punchlist once payment has been made. What is a homeowner to do? First of all, understand that you are not alone. Many bright, intelligent people make the final payment for a variety of reasons. Two, make a game plan. If there is work that still needs to be done, or punchlist items that have been ignored, send the contractor a demand letter outlining the work and proposing a schedule for completion. Tell him or her that s/he has x days to respond with a reasonable proposal (offer of settlement), or you will take further action. In Massachusetts, under the Consumer Protection Act, one is required to write a 30-day demand letter in order to pursue a claim that may ultimately pay double or treble damages, atto...

Let's face it, if you work in a service industry, occasionally you are going to run across a difficult client. One who is a micromanager, who needs to be overly involved in the project, and who actually impedes progress. Then there is the homeowner who can't make up his or her mind; who orders one type of tile and decides to remove it and use another. How can a contractor handle this type of client? As always, start with the contract. Make sure the description of the work to be performed and the materials to be used is crystal clear. Verify that the client understands the scope of the project and what the end result will be. Try to use pictures or illustrations to ensure that everyone is on the same page. Make sure that the client understands that all change orders will be in writing, and that new requests will cost extra. Designate a point person as the decision maker for the project and do not allow employees or subcontractors to perform work outside the scope of the contract...