What Rights Do You Have as a Homeowner
Many homeowners do not realize that their relationship with a contractor is established through the terms of a contractual agreement. While there are some provisions in state or federal laws that govern the relationship between the homeowner and contractor, courts tend to look to the language of the contract between the parties to determine what is required.
What are the Obligations of Contractors? As noted above, contractors and homeowners first need to understand that their relationship is governed by contract. The terms of this contract are extremely important. When you hire a general contractor, you are entering into an agreement for your home construction project. In Michigan, the Contractor’s Licensing Act requires home improvement contracts over $600 to be written, and if not written, the homeowner may be required to pay nothing under the contract (although you can always file a lawsuit even if not required to pay). Most homeowner-contractors agreements are governed by contract law, and although there are various statutory requirements that they also must comply with, the law is generally governed by contract.
Elements of a Breach of Contract Any lawsuit that is filed relating to a construction project will be an action for breach of contract. That is one of the reasons that you should almost always have a written contract with a contractor. A contract exists when there is an agreement, such as a written agreement, to do or give something in exchange for something else . In essence, a contract is nothing more than a voluntary association of two or more parties to act according to the terms of the agreement. In order for there to be a breach of contract, one party must fail to comply with the terms of the contract. There must be a valid contract in place before there can be a breach of contract.
What is Required to Sue a Contractor? The elements of a breach of contract are: If any of these elements are missing, then you may not have a valid claim for breach of contract. If you attempt to sue a contractor who did not perform any work at all on your house, there may not be a valid claim for breach of contract. It is important to understand that although contractors are required to provide you with reasonable notice, whether he has provided you with sufficient notice before beginning a construction project is often a matter of opinion, and he is free to give you the notice that he wants to. That means that even if he gave you not enough notice, he is not failing to perform according to the terms of the contract, and he will likely be able to avoid liability. That is why it is essential to negotiate as many elements of the contract as possible in advance before starting construction. If the contractor gives you the appropriate notice that he must provide but you were not expecting that notice, it is unlikely you will have a claim for breach of contract. This is just one example of how contracts can harm you if you do not agree upon all the necessary terms.
Reasons Why You Might Sue a Contractor
There are a number of common reasons homeowners tend to sue contractors. Most often, homeowners bring lawsuits against contractors for breach of contract. When homeowners and contractors enter into a contract—or agreement—contractors have certain obligations. If a contractor fails to meet those obligations, it can be brought to court. Homeowners also commonly sue contractors for substandard workmanship, substandard materials, failed projects and violations of building codes. Homeowners may even sue contractors that completed their projects recently but have not yet been deemed finished. Below are real-world examples of lawsuits against contractors.
Here’s an example of breach of contract: A homeowner hires a roofer to repair his roof after it has started to leak. The contractor agrees and provides the homeowner with an estimated cost. After the work is done, there is still a leak. The homeowner sues for breach of contract and the court awards the homeowner $10,000 for the leak in the roof.
It’s an example of substandard workmanship: A homeowner hires a contractor to paint the interior of her home. The contract states that the contractor will paint the interior of the kitchen and the bathrooms. The homeowner tries to get in contact with the contractor so she can explain details about which cabinets the contractor should and shouldn’t paint. However, the contract states the homeowner must provide access to the home between 8 a.m. and 5 p.m. The contractor every time shows up at 5:15 p.m., but the homeowner gives him access anyway because she realizes it is too late to argue. At the end of the renovation, she realized the contractor painted the kitchen cabinets and her son’s homework was all over the newly painted bathroom. She awards her $1,000 for damages.
It’s an example of substandard materials: The contract states that the homeowner wants a particular type of flooring installed in his home. However, the contractor installs a cheaper type and then picks up the remaining cost of materials. The homeowner is unhappy with the way it looks and sues for substandard materials. The homeowner wins and the court awards her $5,000 for the damages.
It’s an example of delayed project: A homeowner hires a contractor to do several renovations to her home. The renovations are completed, but the contractor still hasn’t installed a balcony railing for the third floor. The contract states that the project must be completed within 30 days. After 30 days, the homeowner stops payment and sues the contractor for completing the project. The court awards the homeowner $2,000.
It’s an example of violation of building codes: A homeowner hires a contractor to build her home under the International Building Code. She wants the contractor to follow all building regulations and codes. However, the contractor violates the IBC while removing the ceiling and the walls. The homeowner realizes the lights in her kitchen are flickering and notices the ceiling is sagging. The court awards the homeowner $7,000.
How to Collect Evidence for Your Contractor Case
When it comes to suing a contractor, the key factor is having a strong case that is backed by evidence. The contractor has lawyers who are likely going to try to downplay the work you had done, or say they completed all work. They may even say you agreed to compromise work or that you owe them money. So, before you pay a dime, make sure you have the evidence to back up your claim.
The most important evidence is photographic proof. You should take photos at various stages of the work, and document changes in color, materials and so on. You should also take photos of the completed work and of any leaks, buckling or damage over time. Additionally, if you make any changes to the work, a subsequent phase, fill an area, make a repair or anything else, take photos to document those changes. When there is a dispute over whether work was done or whether work was substandard, photographic evidence is vital to prove your case.
Next, you want to print out and save all emails between yourself and the contractor. Emails can provide reference points to timelines and costs of the work. Create a spreadsheet that shows the initial project cost and includes columns for the work you paid for against lines to add in extra payments made to contractors. This spreadsheet allows you to show what you did pay a contractor. In addition to the spreadsheet, current balance statement from contractors can be helpful to show what the contractor says you owe. You want to make sure you have evidence of everything you paid for on the work in dispute.
After you compile a spreadsheet of costs, you should save every receipt for a job. If you went to Lowes to pick up nails or other supplies, get the receipt and make copies. If you had to pay a subcontractor for work, keep that receipt. Write out receipts as if they were issued from a business so that you have a detailed account of costs for particular line items. Any reputable contractor should be able to provide their own receipts. Make sure to update your spreadsheet with these receipts.
It’s also extremely important to interview subcontractors in person and not by phone. This means you should have been around when they performed work on your home. If you notice that substitute materials were used, or that work wasn’t completed, your best evidence will be a firsthand look at the contractor’s work. You can then get statements from witnesses, employees and subcontractors that detail the work done. A transcript or detailed notes can be made immediately following the incident. This is critical because memories can fade and details become lost over time.
Finally, get estimates and work orders for the materials that were used on the project. Signaled by the contractor, these documents can be valuable evidence. You do not need to wait to file a lawsuit to gather evidence.
Steps for Filing a Lawsuit Against a Contractor
If you are unable to resolve a dispute over defective and incomplete work with a contractor, you may need to file a lawsuit to recover your monetary damages. The process of suing a contractor for faulty work generally begins in one of two ways. You can either file a complaint in court or sometimes you may be required to file your complaint with the Clerk of Court for your county’s Mechanics’ Lien Register. These two processes are discussed in turn below:
Step 1: Clerk of Court Complaint.
Many counties have a separate process set up for homeowners to file lien claims against a contractor in addition to or instead of filing a traditional court complaint. In a traditional court complaint, a Plaintiff files a complaint in Court, pays a complaint filing fee and is assigned a trial date. In some counties, there is a separate process set up for homeowners to file complaints against contractors with the Clerk of Court for their county to recover damages caused by the breach of a home improvement contract. The process generally requires the homeowner to fill out a complaint form provided by the Clerk of Court and file that complaint directly with the Clerk of Court. The homeowner may need to pay a small filing fee to the Clerk of Court. An example of a complaint form used by the Montgomery County Clerk of Court is attached here. If the Clerk of Court has a form complaint that it requires to be filled out, an attorney should be retained to prepare the complaint because there may be specific legal requirements that a homeowner is not aware of to submit a complaint.
Step 2. Traditional Court Complaint.
If your county does not have lien filing requirements through the Clerk of Court or if the damage is of a substantial value, the homeowner can sue the contractor through a traditional court complaint. Generally, when you sue someone through a traditional court complaint, you go in with an attorney, file your complaint and pay a filing fee to the Court. The Clerk of Court assigns a hearing or trial date. The process of filing a complaint should generally be done by an attorney due to the complex issues which are raised by the pleadings and the potential loss of rights if something in the complaint is defective. There also may be pre-complaint requirements (usually referred to as arbitration or mediation) which must be exhausted before a complaint can be filed. These pre-complaint requirements are set forth in Chapter 93-A of the North Carolina General Statutes.
In this type of complaint, the homeowner is referred to as the Plaintiff and the contractor is referred to as the Plaintiff. A traditional Court complaint is generally more expensive than filing a claim with the Clerk of Court. An example of a complaint filed against a contractor for defective and complete work in a "traditional" action can be found here. The Plaintiff files the complaint with the Clerk of Court for the county in which she lives. If the plaintiff cannot afford to hire an attorney, he or she can file the complaint in pro se. This means the person will represent themselves in the case. But it is generally advisable to seek an attorney for the following reasons:
Many factors weigh into whether an attorney is necessary for a filing of a court complaint. The attorney will provide guidance on the right course of action. However, in some small claims court cases, it is possible to appear before a Magistrate without an attorney. The Clerk of Court may or may not provide assistance to homeowners in preparing and filing a claim.
How Alternative Dispute Resolution Works
An alternative to litigation is participating in one or more forms of Alternative Dispute Resolution ("ADR"). First and foremost, the common forms of ADR are mediation and arbitration. These processes are less formal than litigation; thus, people may feel more comfortable participating in the process.
Mediation is an informal, voluntary and confidential process whereby a neutral third-party mediator or conciliator facilitates negotiation between the parties to help them reach a settlement in the dispute. The mediator does not make any decisions for the parties and will not make an award. While we understand this may be difficult to believe, consider it similar to the Old School Family Feud whereby the survey said . . . "number 1 answer is: fight!"
Arbitration is a dispute resolution process whereby the parties submit their dispute to one or more arbitrators . An arbitrator is a neutral third party who makes a binding or non-binding decision or award. Arbitration can be a more efficient and cost-effective process, depending on the complexity of the dispute. There are several arbitration venues, including the American Arbitration Association and the Better Business Bureau. Many small disputes can be arbitrated for free or a nominal fee.
Even if you are successful in arbitration, remember there are grounds to challenge an arbitration award; however, those grounds are narrow and limited. Also, "only in exceedingly rare circumstances will a reviewing court disturb the findings of fact made by the arbitrators."
Regardless of what form of ADR you choose, we strongly encourage you to consult with an attorney before you begin the process.
Possible Outcomes and Remedies You Could Receive
If you win a lawsuit against a contractor, the court might award you monetary damages, forcing the contractor to compensate you for any additional money you had to spend on completion or remediation of a project. Or, the court might terminate the contract, allowing you to hire a different contractor to perform any uncompleted work. You may also ask the court to order the contractor to complete the work. Alternatively, the court could award attorneys’ fees and costs if it finds the contractor acted in bad faith.
If the court rules against you, you will still be responsible both to the current contractor and to the subcontractor. The court decision can jeopardize your relationship with future contractors and subcontractors if it finds that you impeded the contractor’s ability to complete the job. For example, the court could determine the contractor lost so much money due to your interference that it now owes the contractor compensation. Or the contractor could seek damages for its time spent coordinating the project, obtaining necessary inspections, or having to redo the work due to your actions.
The court decision may not end the matter. The contractor could appeal a ruling if the parties cannot resolve the issue amicably. In the event of an appeal, the litigation process continues until the appellate court makes its own decision.
Preventing Contractor Troubles Moving Forward
While the process of suing a contractor is easily broken down into steps, it’s much harder to address what to do and what not to do when it comes to working with a contractor. However, preventative measures can be taken to avoid a conflict altogether. It all begins with the vetting process, which should be taken seriously, and not as a passing formality.
A thorough review of your contractor’s qualifications is in your best interest. After you’ve gotten the names of several contractors from your peers and/or via a quick internet search, it’s important to search their names online to scrutinize their qualifications. Once you’ve narrowed down your list of candidates, it’s important to check their licenses to make sure that they are legitimate licensed contractors. For example, licensed contractor information can be found at the California Contractors State License Board website.
After you’ve completed your homework on contractors , it’s time to move on to understanding the fine print of your contract. Most of the disputes clients have over construction projects can be boiled down to two things: misunderstandings over unit prices, and the scope of the project. Fortunately, there’s a simple remedy to avoid these disagreements. If the unit price of the project doesn’t make sense to you or if you feel like the numbers don’t add up, the phrase "discuss with your attorney" is the most useful advice. This will help you see the full picture of how much your project will cost, and it will keep you informed before it’s too late.
In addition, clarifying the scope of the project can not only avoid disputes, it will also keep both you and your contractor satisfied with the progress of the project. The scope should be as in-depth as possible. Thus, if you’re building an addition to your home, the scope of the project should include your vision, the square footage, and even what color you want the roof. In short, being as precise as possible will save you money and time.