Problem General Contractor- Need Ideas
First rehab - 4000 sq ft. Hard money lender 6 months no payments. Entire house basically gutted. Hired a GC because I'm only in town 1/2 the time. He told me 3 months to complete. Well he underbid himself, found major problems he didn't see before he started. He is a small contractor and saw this as an opportunity to make a name for himself as it is a home in an historical area with alot of history. Because money has been so tight - he is moving like a snail and my clock is ticking. In the contract there was no time frame unfortunately. Do I have any legal grounds to do anything or do I just have to wait impatiently while he takes his time??? :-?
I am in the middle of a similar situation, only I was able to just fire the contractor, and take on the job of GC myself. My contractor was moving SLOOOWWLLLYYYY, and was doing VERY inferior quality work. I just called him up, told him he wasn't getting anything done, or even anything done correctly, and I didn't need him any more.
Don't know if you can do that, but I certainly did. It ended up being VERY expensive for me, but if he had stayed on, I would have lost everything, but as it is, I'm looking at perhaps a SMALL profit anyways(10-15k).
The similarities between your project and mine, are my contractor WAY underbid on the project, took on stuff he didn't know how to do, then ran into MAJOR issues once he started, and had NO clue as to how to fix them. As I took the project over, I'm finding stuff constantly that he was paid to do, and either never did, or I'm having to pay someone else to re-do. Hell, he never even got a PERMIT, even though I asked him numerous times where it was, he always had a good song and dance ready for me.
If anybody in Atlanta wants to know this deadbeats name, just PM me, so you won't get stuck with him, either....
Unfortunately if you signed a contract with no completion date clause then you are at his mercy, unless you can get him to void the contract. My suggestions to all of you rehabbers out there is to stop trying to hire the cheapest guy in town. I am not saying this to be mean but let's face it, you get what you pay for. More consumers, as well as investors, need to educate themselves when it comes to hiring a builder. The building industry is full of people that think they need to get involved in bidding wars, give their advice away for free, and unfortunately too many in the industry have no clue. Try to find a builder that works on a cost-plus fixed fee. There are all sorts of variations to this, find one that works best for all. Pay a few more bucks, get quality work, and save in the end. Makes sense to me. Oh, and I don't care how experienced a builder is, if you are getting into major rehab, structural ect, they usually won't have an idea of what they are getting into. Therefore, how can they possibly bid a job with all the unknowns? Cost-plus people....it works best for all involved and everyone can walk away happy
I agree Tom...........and dont forget about getting a home inspection when in doubt, it will often pay for itself (most inspections are around $300.00) in no time.
I would take the contract and consult with a lawyer........chances are he / she will get you out of your mess.
While you are at the lawyers office, have them draw you up a generic contract for future reference. Many lawyers that deal in the investment area already have them precanned.
Rehabbing and New Construction are two different animals.........when problems do arise in rehabbing then the contract should have a kick out clause to protect all parties involved.
good luck
NC
Thank you all for the replies. I think I'm going to have to see a lawyer unfortunately. I don't think the house is going to get finished any time soon.
Betsy
Dear Betsy,
I feel very strongly that a background in construction is a necessary if you are going to rehab or buy and even quick fix.
I use a standard Cal Contract and insert into it a time clause calling for penalties on over time. I also always walk the job with the Contractor and or Sub Contractor and take it item by item to be sure that all things are known and considered. As to the Permit I will go to the Building Department if I do not find it displayed on the job site. As to insurance and etc. I make very sure that such items are present. If not I will make arrangements to fund coverage and such fundage will be noted in the contract.
I have worked with many Contractors and am experienced. I had a General Contractors license for many years. When I got out of the business I lent it to a relative. Name your mistake they made it. I covered all the costs but dumped the license. But for some reason I seem to keep getting involved in construction no matter how hard I try to stay out of it. I of course do not contract but oh my god the time I spend on the Job Site. Seems to be the only way to insure the work is correct. Also we are getting into very advanced construction in Container to Housing and I find nobody has any experience. It is all new stuff. Soo here I go teaching and learning and working out new ways of doing things. I must admit that I do like it.
Lucius
Lucius,
Thank you for your reply. I seem to have to make every mistake in the book once. I live in New Orleans most of the time but all of my real estate investing has been in Indiana unfortunately. My husband is in Indiana most of the time, but this project was my baby. 4300sf and the exterior was ok but the house had been a foreclosure and had been turned into a boarding house. I bought it for 56,000. Had a hard money lender do the financing. Believed after much research the best use and best return was to make it back in single family. Contractor came highly recommended and the person who recommended him is horrified about what all has transpired. I think the contractor has a gambling problem to be quite honest . He bid too low and has had cash flow problems since month one. Plus he ran into more structural problems. We agreed to pay him 11,000 more upon completion because I did not believe it would get finished otherwise and didnt think anyone else would come in and get it finished for even twice as much. When we agree to pay the additional money I told him I wanted it finished by August 17 which is one month longer than he originally said it would be done but never had that in writing. He agreed verbally to have it finished "on or about" August 30th. He just faxed me the contract for the addition and he put at the bottom Sept 04 or Oct 04. I'm not signing it. But I really don't know what to do. What he has been doing is other jobs to help with his own cash flow and no one has been doing anything for the last week at the house.
I won't make this mistake again. Even though there was no date put into the original contract - it isn't implied that work will be going on daily. Don't I have some rights regarding that?????????????????????? :cry:
for that kind of money I think I would talk to an attorney. Far cheaper in the long run. I think I would put in a penalty clause that would subtract $100 per day for work completed after the date you specify.
Make this contract supersede all other contracts in writing.
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As for your "rights,"...yeah, you can fire you contractor. That's about it.
Really, managing a contractor is an art, and a lot of it is in solid groundwork beforehand. It can, however, be learned. I've found a really good site, TameYourContractor. Run a google on it.
Lucious (and others), I'd be careful about calling it a "penalty" for those late fees. The courts frown on that word, but they will uphold a "liquidated damages" clause in your contract. And yeah, $100 a day is reasonable assessment against a contractor who he runs over his contract time.
Run a google on liquidated damages. When that is inserted in a contract you have your hammer well poised above the contractor's head. Just as it should be.
I would spend $50 and have a BIG sign made informing ALL of your neighbors who is the contractor and that if they want a 30 day job done over 5 months they should use the same guy (you might have to be a little creative to fit it all on a sign).
But hopefully he'll get the idea - maybe you could even put a small ad in a local newspaper about his lack of willingness to fulfill his commitment to you.
Certainly a call to city licensing would help him from doing this again to others.
I think that I would not follow the post about the sign. YOu would be open for liability and since you probably have more assets than the general are a larger target for an eager young attorney....
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