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Final Inspections And Getting Paid

 
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Old 06-21-2010, 08:42 PM   #1
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Final Inspections And Getting Paid


What if any do you think is there a relation between final inspections passing and being paid final payment if no where in your contract is there any language in reference to it?

Curious what legal stand point would be?

If your contract doesn't say anything about final payment in relation to final inspections should you legally be able to demand final payment before final inspections?
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Old 06-21-2010, 08:46 PM   #2
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Re: Final Inspections And Getting Paid


On the back of the NJ building permit it states that “contractor shall not receive final payment until final inspection”. Or something close to that. I’ll take a pic of a permit tomorrow & post

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Old 06-21-2010, 10:26 PM   #3
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Re: Final Inspections And Getting Paid


I worked in NJ for years and always hated the BS on the permit card .
I don't really think its any of there business when we get payed .
My contract all ways states payment due on completion of work .
All final inspections are the responsibility of owner.

I don't think you can demand payment legally If you don't pass inspection.
I don't think you would have a happy customer .
unhappy = no last check in my book .
Our permits are good for a year so i get finals twice a year .
I get 4 or 5 finals in a morning and walk the jobs with the inspectors There is so much to look at most guys see nothing .


I do like to close the jobs out with the inspectors,They get very relaxed with me and its easier to work the system .

Ive only not been payed in full once or twice and i cant remember the jobs ,so it wasn't much of a beating.
Most jobs have 5 payments and the owners run out of the house waving my check when I'm done . John
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Old 06-22-2010, 07:51 AM   #4
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Re: Final Inspections And Getting Paid


Quote:
Originally Posted by Mike Finley View Post
What if any do you think is there a relation between final inspections passing and being paid final payment if no where in your contract is there any language in reference to it?

Curious what legal stand point would be?

If your contract doesn't say anything about final payment in relation to final inspections should you legally be able to demand final payment before final inspections?

Each state will be different, and vastly different at that, with respect to the legal stand point.

However, with all things being equal, if the contract is agnostic on the situation, the courts will in a general sense, tend to favor the consumer over the commercial entity. (In a very general and broad brush sense, the court will try to interpet the intent of the contract and the position would be that the intent was to deliver a complete kitchen remodel (just an example) and how could the remodel be complete without final inspection?)

However, with that written, the contract has to have some relation in it between final payment and a triggering event for final payment. This correlation will give you either the leg to stand on (or not).

In the past, commercial contracts I have written tied final payment to Completion, with the latter being a defined term that either referenced, in a utshell, CO in hand, final insoections passed, final inspections passed+punch list completed - all depended on the situation and deal at hand.

Last edited by DPCII; 06-22-2010 at 07:55 AM.
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Old 06-22-2010, 07:55 AM   #5
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Re: Final Inspections And Getting Paid


Dang, 3 responses?

Nobody gets permits or nobody gets final payments?
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Old 06-22-2010, 08:00 AM   #6
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Re: Final Inspections And Getting Paid


Often there could be unknown things that come up that are not even in our contract, Example, doing a second floor, adding a bathroom, plumbing inspector comes in checks out the rough in the bathroom, starts to poke around the basement notices some existing condition with the House trap that he says is not compliant. Cant get the final sign off until this non contracted issue is resolved, customer wants to dispute the need to do the work noting that it is an existing condition. I dont want my final payment being tied to something like this. GMOD
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Old 06-22-2010, 03:20 PM   #7
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Re: Final Inspections And Getting Paid


When work on the project is substantially completed, BUILDER will bill for work to date, usually
the final Progress Payment. Substantial Completion may be when all work is completed, when a Certificate of Occupancy has been issued, or when the work site may be safely occupied for its intended use.

I do this because there are often dumb little changes that won't stop a final inspection but stall completion: broken light fixture, defective boiler control, etc. If the project can be used for its intended purpose, I am entitled to bill for final and handle the little stuff under warranty.
If there's any time when the customer feels least like cooperating and most like you aren't Xod and didn't fix all the stuff you didn't contract to fix, it's right at that final check signature. Then it's good to have the earlier signature showing they had agreed to pay you.
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Old 06-22-2010, 03:40 PM   #8
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Re: Final Inspections And Getting Paid


Quote:
Originally Posted by Mike Finley View Post
What if any do you think is there a relation between final inspections passing and being paid final payment if no where in your contract is there any language in reference to it?

Curious what legal stand point would be?

If your contract doesn't say anything about final payment in relation to final inspections should you legally be able to demand final payment before final inspections?

No relation in the contract tying them together. That said occupancy cant be taken until final payment is issued. Use of structure prior to final payment is made constitutes accepted and completion. That being said I need the final for occupancy.
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Old 06-22-2010, 03:44 PM   #9
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Re: Final Inspections And Getting Paid


"When work on the project is substantially completed, BUILDER will bill for work to date, usually the final Progress Payment. Substantial Completion may be when all work is completed, when a Certificate of Occupancy has been issued, or when the work site may be safely occupied for its intended use.

substantially completed should be capitalized and there should be a paranthetical that it is (as later defined) - without this the linkage to its definition is not clear to the reader and may be used against you. Also, when you do define it, you should keep the tense the same Substantial Completion may be when.... "Substantially Completed may be when....." This way there is no question as to what you are referencing in the prior sentence.

Aslo, how do you define Progress Payment?
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Old 06-22-2010, 04:14 PM   #10
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Re: Final Inspections And Getting Paid


We've had a fairly weak inspection system for a very long time, but that is changing.

Up to now, we have no final inspection and only a rubber stamp completion card we sign and send in saying we were good boys and did the job right. Sometimes an inspector will follow up on this but only for hot button things like smoke alarms and GFCIs.

In the near future, we look to have certificates of occupancy so I may be broaching this subject in my contract soon as well.
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Old 06-22-2010, 04:28 PM   #11
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Re: Final Inspections And Getting Paid


Payments based on the inspection schedule if written in the prime contract or sub contract It's a gaurantee to the payer.
As a prime contractor, add 20% to the contract price and leave 10% of the price held out until final inspection. If the HO pays upon final inspection, great, if not, you're not out anything.
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Old 06-22-2010, 04:35 PM   #12
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Re: Final Inspections And Getting Paid


Payment due UPON SUBSTANTIAL COMPLETION. Period.

I'm in NJ and could care less about the inspection schedule. I even have language in my contract that says the they have to pay me regardless of final inspection.
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Old 06-22-2010, 04:37 PM   #13
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Re: Final Inspections And Getting Paid


Quote:
Originally Posted by skyhook View Post
Payments based on the inspection schedule if written in the prime contract or sub contract It's a gaurantee to the payer.
As a prime contractor, add 20% to the contract price and leave 10% of the price held out until final inspection. If the HO pays upon final inspection, great, if not, you're not out anything.
Unfortunately, most guys have a hard enough time bidding with a decent margin--let alone one that's padded another 20%.

Maybe the extra 20 would put them close to where they need to be.
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Last edited by ChrWright; 06-23-2010 at 02:13 PM.
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Old 06-22-2010, 11:46 PM   #14
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Re: Final Inspections And Getting Paid


Quote:
Originally Posted by Greg Di View Post
Payment due UPON SUBSTANTIAL COMPLETION. Period.

I'm in NJ and could care less about the inspection schedule. I even have language in my contract that says the they have to pay me regardless of final inspection.
So your contract can supersede the NJ law?
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Old 06-22-2010, 11:56 PM   #15
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Re: Final Inspections And Getting Paid


Quote:
Originally Posted by Greg Di View Post
Payment due UPON SUBSTANTIAL COMPLETION..
SUBSTANTIAL COMPLETION can be interpreted many ways.

Last edited by skyhook; 06-23-2010 at 12:00 AM.
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Old 06-23-2010, 06:28 AM   #16
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Re: Final Inspections And Getting Paid


"Aslo, how do you define Progress Payment?"

Progress Payments are what I call the draws and are listed and defined on the Payment Schedule in my contract .
And I define Substantial Completion earlier in my contract. I do like the idea of keeping the tense parallel throughout, and will change my wording. I've never been to court or arbitration over a contract in 35 years so not sure how it would be handled.
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Old 06-23-2010, 08:38 PM   #17
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Re: Final Inspections And Getting Paid


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So your contract can supersede the NJ law?



I suspect it's a case of "I've had this in my contract for over ___ years and I haven't had it contested in court yet, therefore it must be valid."

He's going to be a sad little kid on Christmas when someone hauls him into court or reports him to the registrar of contractors. Who knows what the NJ ROC would do, but I'd guess it would range from getting fined for willfully violating the statute to having his license suspended.

As to the OP - I'd break the payments up into smaller chunks based on the progress of the job, so you're only waiting on 1/5 or 1/4 the total at the end. IMO, a little delay in getting that last chunk is well worth it. It forces you to not let the rework slip, and you get a happy customer - which is extremely important, especially if you want work from their friends/relatives.
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Old 06-23-2010, 08:49 PM   #18
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Re: Final Inspections And Getting Paid


Money is tight for the small business owner today.In my state we can only get 1000.00 or 10% down,whatever is less.It makes things tough if the first phase of the job requires a large output for materials...I'm sure some of the more pompous guy's here would say "You don't belong in business if you don't have at least X amount in operating capital"...To that I say walk a mile in my (and many others around here) moccasins.
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Old 06-23-2010, 08:51 PM   #19
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Re: Final Inspections And Getting Paid


Quote:
Originally Posted by Greg Di View Post
Payment due UPON SUBSTANTIAL COMPLETION. Period.

I'm in NJ and could care less about the inspection schedule. I even have language in my contract that says the they have to pay me regardless of final inspection.
In my line of work, there is no way any owner/architect would even consider final payment until a Use and Occupancy certificate is issued. That is a requirement for Substantial Completion, as it should be, in my opinion.
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Old 06-23-2010, 08:59 PM   #20
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Re: Final Inspections And Getting Paid


Quote:
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As to the OP - I'd break the payments up into smaller chunks based on the progress of the job, so you're only waiting on 1/5 or 1/4 the total at the end. IMO, a little delay in getting that last chunk is well worth it. It forces you to not let the rework slip, and you get a happy customer - which is extremely important, especially if you want work from their friends/relatives.
Size of final payment is not relevant, whether it's $10,000 or $10, it the final payment. Customer satisfactoin isn't relevant to the question either, granted if there is an issue with final payment with a customer, it doesn't matter if gave them free gold toilets, the customer satisfaction is out the window.

The question is a legal one.

If your contract says final payment is due upon completion of work and says nothing about inspections. Legally, is the final payment due when you lay down the hammer and the client is 100% satisfied that the work on the project is done and looks great, or is it due a few days, a week or a 2 months later, when the inspector says here is my signature on your final... elec.. HVAC or whatever.

Also leave out certificant of occupancy, that's a different subject, this is about remodeling.

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