Challenging Customer Question

Cape1

Hello,

I'm new here and have a situation to which I'm hoping others have insight.

Background: (remodeling of garage - total cotract 60k)
Customer came as referral. After contract was signed, I learned that customer has a history of burning/taking civil action against contractors. The customer has been extremely difficult all the way through the project. Now, at the end, we have approximately 5k of work to do but the customer has asked us to do about 5k worth of extra work. The customer has implied that he will not pay for this work and will not furnish final payment at all because he's not happy with the project. I told the customer that I will not finish the job unless he reconsiders his position on payment. The customer states that he will take action. Although small and just starting out, I'm structured as an S-corp.

I'm inclined to let this ride. Does anyone have experience with this kind of thing? What can this guy do realisitcally? I guess I'm looking for your experiences and what the outcomes were.

This guy is a real snake! Any help would be appreciated.

Mike Finley

Find out what you small claims court limits are and do whatever you can to get as much money out of him to make sure the remainder is within the limits of small claims. Take pictures of the work, get it well documented. When it's finally over and you can't get any more money out of him, lien his property and take him to small claims.

Bob Kovacs

I'd start by finding out what he means by "he's not happy with the project". Does he truly have issues that you need to address, or are they perceptions of issues, or is he just a total horse's ass?

If there are items that you need to address, get them written down, and send a letter to the owner stating what your position is on how you plan to address them. Also address that you will need to be paid for all work completed to date if he's behind on payments. If there's 5k worth of work left and you're owed 10k, shame on you for getting behind with the customer- if you're even at the moment, identify that no further work, either contractually owed or extra, will be done until the outstanding issues are agreed to in writing.

"What action he can take" depends on items that we don't know based on the info you've provided. Again, are there really issues you need to take care of? Have you been paid for more work than is completed? If you're owed less than it'd cost him to complete the work and you're deficient in finishing the project, he could take you to court for the extra costs required to finish.

I'd start with a nice, civil letter, and based on his response, it may be time to lawyer up.

Bob

Cape1

Thanks.

Clarity: We are about even - or damn close to it - on earned value. In other words, what is left to do is about as costly as what I feel I'm owed. The problem, the extras were things I did along the way and I was not good at bringing them to light sooner. The work left to do is contractual. As for his complaints, they are vauge at best. The building inspector told me that this guy has a history of this kind of thing - get lots of extras, wait until the end, get behind on money and then list a bunch of complaints as a pretext for not paying the builder.

Do you guys know if I was sued, what happens? worst case. He gets a judgement against my company? the company has no money so assume he has the ability to peirce the corporate veil and get to me. I get a lein on my house as a method of collection or something like that? I just wonder if that is even as bad as complying with him now on his terms - in other words, it seems like working on his terms is the worst case scenerio at this point? Thoughts?>

Thanks for all your responses so far. I'm really disheartened about this because we've alway prided ourselved on doing good work and the vast majority of our clients have always been happy, repeat customers. We are in a business where people always expect that Contractors are the bad guys - they don't realize that there are some bad customers too!

Mike Finley

SUE YOU FOR WHAT??????

You have to have damages to sue. You need to stop worrying about YOU being sued and start preparing for suing him in small claims to get your money.

The only damages he could ever come up with is if your work was so bad that it cost him $15,000 to finish the job. That's why the simple solution is get what you can out of him and finish the job then lien him and sue him for the balance in small claims. Document your work with pictures to prove you did competent work and completed the job according to the contract. The judge will look at it all and make the determination that he owes you the balance.

Bob Kovacs

You made several mistakes, imho-

- You let him get ahead of you on changes. You now know why that shouldn't happen.

- You don't have an arbitration clause in your contract, so if you have to sue him for the money owed. Since it sounds like it's over the small claims limit, you've got to lawyer up, and it's going to cost you more to go to court than you'll ever get out of this moron.

- The s-corp will only stand up if you've truly been running the business as a corporation. Have you held yearly shareholders meetings? Issued stock? Run ALL money through the coporate accounts (co-mingling no personal funds)? His lawyer would first check all of that to make sure you're not just corp'd to try and protect yourself- if you're not 100% clean, you're sunk.

Your best course of action is to write the letter, remain civil, and see where it goes. If you can't get anywhere with him and it's over the small claims limit, I'd figure on writing it off and chalking it up to experience- you'll waste more time and $$ trying to get the moeny from him, and the lien will be worthless unless he plans on selling or re-financing his house sometime soon.

Bob

PipeGuy

Get an attorney now (while you're still 'even' in the game). The questions you're asking are best answered specifically by a local attorney not anonymously by internet advisors.

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Fortunately I keep my feathers numbered for...for just such an emergency. -Foghorn Leghorn

Cape1

Well, that's what I'm saying. Playing devils advocate. He could pay to finish the job - say 5k - then come back to me and say that I owe him this because my charge for extras was invalid somehow. I think this is a stretch but possible. Bottom line - finishing will cost about 5k - I think my extras are about 5k - so we are even so far. Now I beleive I will not be paid. I would rather walk away than do work, not get paid and have to take him to court. Does this make sense?

I personally never want to see this guy again and I don't care if I take a little hit. It just makes me physically sickened to be in the same room with a man who goes to church every day and then does this kind of thing to people.

Cape1

Thanks guys.

Actually there is an Arbitration agreement in the contract. My corp is not very clean at all BUT there is no comingling of funds. We have help shareholders meeting, issued stock etc. but I've also used funds for personal expenses (however, keeping an eye on equitability). I guess it's a little flimsy.

I'm definitely going to talk with my attorney. BUT, sometimes it's good to hear from others in the field to see how others have handled things.

Thanks for your help

bergenbldr

These extras,did your obtain signed change orders and not invoice the customer or was there no writter c.o. ?If not the cust may have legal grounds for not paying. For example in new jersey a written contract is required by law for any work over $300,i believe it also applies to change orders exceding $300.Best practice is to req. full payment for c.o. at time it is signed.

Grumpy

My position would be to find out what he does not like and document it with photos. I would then put together a punch list of his problems and ask him to sign it stating that you acknowledge to fix those problems. I would also put together a change work order for the extra work he requested which is eliminating him from using the claim that you said the extra work would be free. If he refuses to sign you send certified mail the same punch list and change work order.

The game we are playing here is CYA, and who ever CYA's better wins in the court of law... which you said this guy likes to appear. Also remember if you stop work you are usually legally entitled to lost profit on the remaining work. Obviously you stopping work doesn't entitle you to lost profit, BUT him kicking you off the job for non payment does!

At very least you learned something. Never do extras without a change work order. Hey, nobody ever said an education is free. If you already did those extras without a change work order you lost alot of legal ground to say they cost extra.

Mike Finley

That's where you are taking the risk. If you don't finish the work you run the risk of him having damages by him hiring someone else to do the work. If he is a super prick he might make a deal with the other guy for a fake invoice for $20,000 to come after you with.

If you finish he has no damages and only you have damages. Small claims in Colorado is $7500 and from what you are describing is an open and shut case. I don't know what your small claims limits are where you are.

I have a lawyer and I have also used small claims in my lifetime, you need to know when to use which one. For me what you are describing is a perfect fit for small claims, not any reason to get an attorney involved. $30.00 filing fee and you're done. Just CYA from here on out on the job. It sounds to me like you are worrying about a lot of issues that are irrelevant. The guys intentions like most of the scum bags like himself are just to stiff you in the end and try to bully your into dropping it. Turn the tables on him and enjoy the ride.

Cape1

thanks

It's been good to hear from all of you on this. I actually just sent a copy of the contract, exhibits and proposed close out letter to my attorney for review. His assistant seemed to think that this guy is just talking tough and that his options are probably limited. We'll see what the best route is. I would rather not loose money right now by doing more work there. I'm inclinded to take my chance.

Good point on the doctored up invoice though. I think one could easily debate the legitimacy of such a thing though. For example, finishing a hardwood floor - $1.5 to $2.0 ft. is normal; >2.5 is being an animal; > 3.0 is a complete fruad. Plus he would have to find a guy willing to engage in criminal acts just to help him out. Could happen I guess.

Thanks for all your help guys.

fox builders

break is f n legs

first mistake you made you should have check this guy out before you signed contract. who gave you the referral did you no favors,they probaly knew this guy was an ass hole if building inspector did
and last never do additional work without having client sign for same and get paid for xtra work up front if you can

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joasis

I would be nice as possible...bring a camara, and a punch list and get his to specify what exactly the problems are and close the list. You correct to his satisfaction everything on the list, having him sign off each item. Then with your photos in hand, the signed punch list completed, the project completed...haul his ass to court. I don't know where you are but you may be able to file a mechanics lien also..if you can, file it and let him kow you will execute it. Or you can do what I would do...and flat tell him we will finish and you will pay...unless you plan on leaving the country.

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paintr56

I am not to sold on arbitration as a way to go. I was the painter on a job that ended up in arbitration by a customer that had a real history of not paying contractors. I was paid by the main contractor. I think I was the only one paid in full on this job.

Back to the arbitration part. It appeared to me that the arbitrator felt his job was to work out a compromise. That would be ok in an actual dispute involving two people that both have valid concerns. When one person goes in trying to use the system to lower what they pay regardless of the facts and they are willing to lie to acheive this aim any compromise hurts they one part and benifits the other.

The only part of the proccess I am real familiar with was the painting they refused to pay the GC for extras. The job started out as walls only and the stairway below the chair rail. at one point new drywall was added to the ceilings so prime and paint was added to the job. When the rest of the painting was being done it showed how bad the stairway above the chair rail looked so that was added. They made remarks about the quality of the paint job how any good painter would have painted the closets that they should have been included. That when i left the line at the ceiling wasn't straight. What they forgot was I do get signed agreements on change orders. I did have the closets excluded in the original contract as per our discusion of the scope. That they had told me and it was noted that crown moulding was going up at the ceiling and it did.
The GC told me the painting was the only part of the job he got paid in full for. That the arbitrator split the difference on every other item. Meaning the gc lost all his proffit and some of his expences.

Two years later I got a call from this couple about a "great" painting project they had and they would like a bid. I figured they forgot who I was and they surely wouldn't want someone they were so unhappy with, so I went out to the job to tell them and see the look on thier face. I showed up and asked do you remember me they said yes I asked why if they were so unhappy with my work are they calling for a bid They said oh we jest said that we were happy with your work. Takes all kinds and no I didn't bid it.

Jim Bunton

maceycon

I think you need to talk to an attorney not us. If you did nothing wrong and are satisfied with your product you shouldn't be so worried. If you are not satisfied with your work or have done something wrong you should make it right so he doesn't have a claim against you.

I can't tell you how many jobs I've done where I was warned about the home owner being a problem. I have always felt if you do quality work, use quality products, keep everything neat and stay within your schedule. You will not have a problem. Don't get me wrong I've had my share of pain in the a&& clients. But I've never been to court or been stiffed. Only came close once and a simple letter solved the problem.

Mike(VA)

Cape1,

I have seen and dealt with people like this. 99% of the ones who want to weasel out of the final payment are not interested in spending money to do so. I would have your attorney fire off letter after letter, repeat the following week, wanting this information or that information. (Overall, letters from an attorney are cheap). If you can cost him money to defend his position, I bet he changes direction rather quickly. Your attorney is the best one to suggest things that will cost the HO money.

I had one client who tried this a couple of years ago. I asked him to put his concerns in writing, he did. I addressed all his concerns and in the end he still had a problem with paying me. I immediately got my attorney to level a suit against him which caused him to get and pay for his own attorney. Didn't go very far; got my money 4 days after the notice of lawsuit was delivered.

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I EXPECT THAT SOMEDAY I WILL SEE THE FRUITS OF MY LABOR. IS IT SOMEDAY YET?
Clifton, Great Falls, McLean, Fairfax Station, Manassas, Virginia Renovation Contractor

buildpinnacle

An education money can't buy.

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rbsremodeling

A Telephone book and duct tape works best in this situation.


If you are physically fit it helps a bit.

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