Author Topic: How Screwed Am I? (Contractor didn't pull permits)  (Read 25276 times)

Mocontractorsmoproblems

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How Screwed Am I? (Contractor didn't pull permits)
« on: October 28, 2013, 11:14:45 AM »
I've done a few flips, and the last one with a new (for me) contractor that came recommended by another flipper.  Everything went smoothly for the most part.  Everything permitted and inspected. I'm working my full time job so I need someone I can give a lot of leeway to.  I'm going to call my Contractor "Joe".

I decided to do one for myself; bought a house with a huge unfinished basement, decided to add an in-law apartment for me to live in.  We're talking about adding bathrooms and bedrooms and electrical and a second kitchen (gas stove) and drywall- oh, and remodelling the garage. Took Joe to do the job.

It started out very smoothly, then suddenly everything ground to a halt.  I kept checking on the house and finding no one working.  Work stopped.  Joe was still fairly responsive, would meet with me and have all kinds of excuses and apologies, did a good job of taking responsibility and apologizing for his workers not showing up.  He explained that he had decided to start doing more jobs at once, and hiring more subcontractors and workers, and was having trouble finding reliable ones and wasn't realizing they weren't showing up.

But things got slower and slower.  The six week project dragged on.  My contract specifies a $50 a day late penalty.

We started this project in late June.  Projected end time was early August.

It's still going.

I told him I couldn't pay him more until I saw a lot more work done right around the 70% point, and so he stopped asking me for money for a little while...then he finally banged out a decent bit of work, I cut him another 5% check because he seemed to finally be working again, then it stopped again.  Then I started getting bills for some of the work he did. For example, he hired out the garage remodel to another company (including materials) and then didn't pay them, and then they contacted me threatening to lien the house if I didn't pay them. 

So with those bills, that brings it to about 85% paid out.  I'd say he's done maybe 60% of the work.  He's accumulated about 10% of the contract *in late fees* so far and growing.

 Joe's excuses became more absurd and he has become increasingly unresponsive.  He won't take calls and won't call me back.  He will text me back once a day.  He doesn't show up to meetings.  In the last two weeks there's been a sudden flurry of activity as he hired out a subcontractor to do all the tile work.  These guys are great!  They're workhorses.  Except...he didn't give them the material that I had already paid for.  For two weeks they showed up to the job site several times (I happen to run in to them while checking on the property) and had no materials to work with.  When they run in to problems, they can't get ahold of him (for example, they can't tile the kitchen right now because he forgot to run the gas line up for the stove).

He finally brought them the tile and they've been installing like nuts.  I'm suspecting, however, I'm gonna get hit with the bill for it again.


Here's where things get really ugly.

At this point, I was about ready to say, "Ok, I take a little loss here, but I can fire him, sue his bond for breach of contractor, and hire someone else to finish the work."

And then I started doing research.

The Department of Licensing website shows that my contractor's license was suspended in August, about two months after starting the job, due to cancelling his bond.  I texted Joe, and he claims there's a mistake, he thought he handled that, and that he'd set up a new bond with another company.  I remember him actually mentioning this back in August and he showed me the printed receipt...I wish I'd actually written down what I saw on that receipt.  I don't remember it now.


In the previous job, he'd posted the permits on the site.  I texted asking if he had pulled permits since I didn't see any up.  He texted me back that "Things aren't posted but we're good".

Then I checked the permits office.

No permits have been taken out on the house.

I double checked online for all permits taken out on that street in the last year.  Nothing.


I was ecstatic that after three months of almost nothing being done, tile work is finally being done, but NOW I'm scared. He's done a ton of work that should have been inspected- plumbing, walls, and electric.  He added four bedrooms and two bathrooms and is about to do a kitchen.  There's still materials I paid for that haven't been dropped off on the site (particularly, the granite countertops and cabinets- I called and paid for these directly at his request, and he's been promising every week for two months to "go drop the materials off tomorrow").


I reviewed our contract and it's right on the first page- the contractor is responsible to maintain his bond, insurance, and take care of all permits and inspections and all costs relating to making sure these are up to date and pass.

What do I do here?  It's obvious I'm going to have to sue him, I think, but do I report the current situation to the city and risk getting the permit office to come down on me?


Thank you all for any help.

CommonCents

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Re: How Screwed Am I? (Contractor didn't pull permits)
« Reply #1 on: October 28, 2013, 12:42:11 PM »
Wish I had advice for you.  Can you call the town office anonymously to ask them about what happens if a homeowner discovers permits haven't been pulled for work?  Consult with the lawyer it sounds like you'll need anyhow?

Do they have the funds in the business to pay you back for what you bought, etc? 

GuitarStv

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Re: How Screwed Am I? (Contractor didn't pull permits)
« Reply #2 on: October 28, 2013, 01:07:09 PM »
Missing permits, or missing inspections?

If the work is being done without inspections it may need to be torn up for the inspectors to check everything anyway.  Keep everything on your end above board.  Contact the town office before this goes further.

huadpe

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Re: How Screwed Am I? (Contractor didn't pull permits)
« Reply #3 on: October 28, 2013, 01:13:53 PM »
I've done a few flips, and the last one with a new (for me) contractor that came recommended by another flipper.  Everything went smoothly for the most part.  Everything permitted and inspected. I'm working my full time job so I need someone I can give a lot of leeway to.  I'm going to call my Contractor "Joe".

I decided to do one for myself; bought a house with a huge unfinished basement, decided to add an in-law apartment for me to live in.  We're talking about adding bathrooms and bedrooms and electrical and a second kitchen (gas stove) and drywall- oh, and remodelling the garage. Took Joe to do the job.

It started out very smoothly, then suddenly everything ground to a halt.  I kept checking on the house and finding no one working.  Work stopped.  Joe was still fairly responsive, would meet with me and have all kinds of excuses and apologies, did a good job of taking responsibility and apologizing for his workers not showing up.  He explained that he had decided to start doing more jobs at once, and hiring more subcontractors and workers, and was having trouble finding reliable ones and wasn't realizing they weren't showing up.

But things got slower and slower.  The six week project dragged on.  My contract specifies a $50 a day late penalty.

We started this project in late June.  Projected end time was early August.

It's still going.

I told him I couldn't pay him more until I saw a lot more work done right around the 70% point, and so he stopped asking me for money for a little while...then he finally banged out a decent bit of work, I cut him another 5% check because he seemed to finally be working again, then it stopped again.  Then I started getting bills for some of the work he did. For example, he hired out the garage remodel to another company (including materials) and then didn't pay them, and then they contacted me threatening to lien the house if I didn't pay them. 

So with those bills, that brings it to about 85% paid out.  I'd say he's done maybe 60% of the work.  He's accumulated about 10% of the contract *in late fees* so far and growing.

 Joe's excuses became more absurd and he has become increasingly unresponsive.  He won't take calls and won't call me back.  He will text me back once a day.  He doesn't show up to meetings.  In the last two weeks there's been a sudden flurry of activity as he hired out a subcontractor to do all the tile work.  These guys are great!  They're workhorses.  Except...he didn't give them the material that I had already paid for.  For two weeks they showed up to the job site several times (I happen to run in to them while checking on the property) and had no materials to work with.  When they run in to problems, they can't get ahold of him (for example, they can't tile the kitchen right now because he forgot to run the gas line up for the stove).

He finally brought them the tile and they've been installing like nuts.  I'm suspecting, however, I'm gonna get hit with the bill for it again.


Here's where things get really ugly.

At this point, I was about ready to say, "Ok, I take a little loss here, but I can fire him, sue his bond for breach of contractor, and hire someone else to finish the work."

And then I started doing research.

The Department of Licensing website shows that my contractor's license was suspended in August, about two months after starting the job, due to cancelling his bond.  I texted Joe, and he claims there's a mistake, he thought he handled that, and that he'd set up a new bond with another company.  I remember him actually mentioning this back in August and he showed me the printed receipt...I wish I'd actually written down what I saw on that receipt.  I don't remember it now.


In the previous job, he'd posted the permits on the site.  I texted asking if he had pulled permits since I didn't see any up.  He texted me back that "Things aren't posted but we're good".

Then I checked the permits office.

No permits have been taken out on the house.

I double checked online for all permits taken out on that street in the last year.  Nothing.


I was ecstatic that after three months of almost nothing being done, tile work is finally being done, but NOW I'm scared. He's done a ton of work that should have been inspected- plumbing, walls, and electric.  He added four bedrooms and two bathrooms and is about to do a kitchen.  There's still materials I paid for that haven't been dropped off on the site (particularly, the granite countertops and cabinets- I called and paid for these directly at his request, and he's been promising every week for two months to "go drop the materials off tomorrow").


I reviewed our contract and it's right on the first page- the contractor is responsible to maintain his bond, insurance, and take care of all permits and inspections and all costs relating to making sure these are up to date and pass.

What do I do here?  It's obvious I'm going to have to sue him, I think, but do I report the current situation to the city and risk getting the permit office to come down on me?


Thank you all for any help.

Do not talk to the city yet.  Talk to a lawyer first before you do anything else.  This is a messy situation and you want to make sure you handle it right.  You absolutely need legal advice in this situation, and you probably need to act quickly.  Document everything you can about the situation and consult an attorney ASAP.  You'll most likely end up talking to the city after talking to the lawyer, but you want to make sure you're handling it right.  You're going to need the lawyer's services for the lawsuit anyway.

tooqk4u22

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Re: How Screwed Am I? (Contractor didn't pull permits)
« Reply #4 on: October 28, 2013, 01:33:40 PM »
You could be pretty screwed.

Best case
it is just a misunderstanding, your contractor pays the subs,  all work has been done correctly, and city can easily see everything without opening it up and they are able to permit/inspect/certify.

Worst Case
the money you paid is gone, the contract has nothing to go after, you will still owe the subs that weren't paid, and the city will make you open up everything to inspect, then when they do they see that none of the work was done to code and you have to replace it all. 

Hope for the best but prepare for the worst, although based on your post my guess is the best case scenario has left the building.

CommonCents

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Re: How Screwed Am I? (Contractor didn't pull permits)
« Reply #5 on: October 28, 2013, 03:00:08 PM »
You could be pretty screwed.

Best case
it is just a misunderstanding, your contractor pays the subs,  all work has been done correctly, and city can easily see everything without opening it up and they are able to permit/inspect/certify.

Worst Case
the money you paid is gone, the contract has nothing to go after, you will still owe the subs that weren't paid, and the city will make you open up everything to inspect, then when they do they see that none of the work was done to code and you have to replace it all. 

Hope for the best but prepare for the worst, although based on your post my guess is the best case scenario has left the building.

+1

That's what I was driving at with my question earlier about whether the contractor has the money.  I'd hold off on any remaining sub work until you resolve this - no reason to risk paying even more out twice....

Have you talked to the person who recommended the contractor at all, to share some of your issues and find out more details on their past work?

willn

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Re: How Screwed Am I? (Contractor didn't pull permits)
« Reply #6 on: November 04, 2013, 11:31:22 AM »
Wow! That sucks.  I hope this doesn't come across as rude, but can we use this post as a case study in "How not to do a construction project"?  By the way, I've made many of the same mistakes, this isn't personal, but it is a good reminder of how risky these projects can be if you don't confirm lots of details and do the legwork.

Quote
Work stopped.  Joe was still fairly responsive, would meet with me and have all kinds of excuses and apologies,

This is when you give a contractor 24 hours to start making real progress, or you fire him.   As in, they need to be working a good 50% of the next 24 hours, not starting at 3 pm tomorrow.  I now give a contractor precisely 1 warning:  "You are falling behind.  The reasons don't matter.  If you haven't made a full day of steady progress by this time tomorrow you are fired. This is the only warning I'm going to give you and if you ever don't show up and make progress as scheduled again, you are fired."

Quote
I told him I couldn't pay him more until I saw a lot more work done right around the 70% point, and so he stopped asking me for money for a little while...then he finally banged out a decent bit of work, I cut him another 5% check because he seemed to finally be working again, then it stopped again.

See above.  Never would have gotten to this point if we let him go early or get him back to making real progress.   And the payments should be contingent on specific inspections being completed:  "Upon a passed framing inspection I will pay x%".  "Upon a passed rough electrical inspection I will pay z%".  Not sure what your arrangement was but it sounds too vague.  This method also helps make sure inspections are happening, too.  I also ask in contracts to be notified of inspection schedules--its not a bad idea to be on site for those.

Quote
And then I started doing research.
Too late, of course. Would have saved you lots of money and hassle if you'd done this first..  Even if he'd slipped past due diligence at that point, later, you should have noticed the permit wasn't posted.  Should have confirmed its issuance before anyone breaks ground/starts work.  Don't forget a hard copy certificate of liability insurance and worker's comp probably too. Get it delivered from his insurance agent.

Suing him seems about right.  But don't expect much.  Guys like this end up not owning much to take, so it's hard to punish him and get whole.

Thanks for the reminder of how important and complex this stuff is.  I hope it works out.