Help! I must be the worst judge of character on the planet. I made the ultimate mistake in dealing with a custom home client. I let them move in a few weeks before their home was completed so that they could save money on their moving expenses and rent (a total of $10k min. that they saved) and allowed them to hold back $40k from my final payment to guarantee that I finish the punchlist items. (I’m sure you can see where this is headed).
Now they want to keep adding to the punchlist. Yesterday they even hired a home inspector to try and add to the list. From what is on the punchlist right now, there is about $2400 worth of work to be completed. They are currently holding over $48k of the final payment (they changed the amount we agreed to hold back, as well without my consent).
I have a very strong contract to guard against this situation, but unfortunately I let them move in as a favor, and now am starting to panic that I’ll never collect any of the money.
Has anyone ever successfuly dealt with this problem? I could hire a lawyer, but I’d never collect all that is due…Any suggestions would be appreciated. And yes, I’ll never let anyone move in before completion/final payment again!
Replies
$40K on a punchlist?? You're nuts... but you don't need me to tell you that.
Get their punchlist in writing--give them a due date by which the complete and final punchlist is due. Assign a dollar value to each item on the list. Return a copy to them with an invoice for the amount you are owed minus the punchlist value. Include a payment due date on the invoice. Indicate that no punchlist work will be performed until they have caught up on their payments. If the payment is not made, proceed immediately with filing a lien and have your attorney handle communication from that point out.
If you are not contractually in a position to proceed in a forceful way, then you need a new contract. If you don't proceed in a forceful way, they will very likely exploit your weakness. We have all seen punchlists that continue to grow. Your contract needs to state that there will be ONE punchlist only, and there must be a contract date by which it is due.
Pete, due like the other poster has said:
1. Allow them to make ONE punchlist with a signature and assign a due date.
2. Make them sign a statement saying they will make ALL payments upon completion of the punchlist.
3. If they balk, tell them you've already contacted your attorney and a lien will be filed ASAP.
4. Amend your contract so that final payment will be made upon substantial completion (pending punchlist), and that only one punchlist will be allowed. Also, state in your contract that you will not allow retainers and that no changes in the payment schedule are permitted without a written, signed change order. By allowing the clients to change the terms of the contract, you have handed your authority over to them (not good).
I'm not berating you, brother, believe me, because I was in your shoes not 3 months ago. I had to call the GC with the words in #3 above...I had my final payment the same day. Just make sure your contract is AIRTIGHT. If future prospects balk at the statements in your contract, then you know you'd better pass on the job because the client is telling you they are not up to YOUR standard.
Good luck, and keep us posted!
Jason Pharez Construction
Framing & Exterior Remodeling
First<!----><!---->
Let me make this perfectly clear, I am no expert<!---->
And those that follow these forums know I have screwed up enough without things in writing and me being here writing/pleading for help<!---->
But I have learned a lot (thank you all) <!---->
Jason is right, it’s the only way I do punch lists now, and otherwise, it becomes page after page, punch list after punch list, day after day, week after week<!---->
If they are trying to find a way to save a dollar, they can care less about that good contractor that built the house, when its done, they care about saving enough for a new big Mac and game boy and the pride of saying……..I win<!---->
But from a bazillion years back from my screw-up, and trusting others, and then help here <!---->
All my contracts now read (in terms and conditions)<!---->
14) Substantial Completion: The project is substantial complete when items specified in the plans, specifications and /or contract have been constructed or installed. Substantial completion shall not include adjustment, repair or cleaning of any item constructed or installed.<!---->
15) Final Payment: (Your biz name) shall be entitled to final payment after substantial completion of the project. Final payment is due upon receipt. Punch list items requiring adjustment or repair or cleaning shall not be cause for delay in final payment, but rater be considered warranty items.<!---->
In the past three years since I’ve used this, only one time, before signing, has anyone asked me to clarify this, and at more then one time, have I had to fall back and say<!---->
in the terms and conditions you signed it says………….<!---->
Sometimes it’s as simple as, the windows aren’t clean or this window does not slide right so I’m holding 2k<!---->
I’ve even had people prime me, like its part of the game, and say, when this project gets near completion, we can look at things and discuss holdbacks. See its all part of the game some how. I just remind them, true but remember line 15 of terms and conditions……….. but , but , but
and hey , if you see a problem, tell me now, not 6 weeks from now.<!---->
Which by the way, every page of my contracts has a place for initials, as I’ve learned that one too,…………….. I didn’t see that page………… well here is your intials...oh<!---->
Unfortunately we live in a world that is me me me, and if someone can find a way to screw you you you, they will<!---->
<!----> p.s yes there are tons of good honest homeonwers out there, that make it all worthwhile, and to those good honest souls, I say thank you very much for your biz.friendhsip and trust, and you know in your hearts, and I in my heart, I am not talking about you in the above story. <!---->
Edited 6/4/2005 6:34 pm ET by Isamemon
Edited 6/4/2005 6:37 pm ET by Isamemon
Amen bro! It seemed like for the longest time, I would have to go back after every job and amend my contract because another issue came up. And I still am adding or changing specific clauses as new issues come up (or as customers find new ways to misconstrue the language therein to their benefit).Jason Pharez Construction
Framing & Exterior Remodeling
Line 15 is a great addition. I'll definitely include that and the initials on every page option.
I spent 20 years working in project management and consulting with large and small companies before starting a homebuilding business three years ago and it just completely amazes me how often people think they can get something for nothing when it comes to homebuilding. They watch a few shows on HGTV and suddenly they think everythhing is easy and shouldn't cost anything. It really discourages me to see how poorly people view our business. I'm sure some of it is deserved, but I really agree with your comments about the me me me mentality that seems so prevelent...
The bottom line on the project was that my company built this individual a home (2 months ahead of schedule) for $405K, that appraised for $450k, and instead of being thankful that he has $45k of instant equity for doing nothing, he's trying to cheat me out of $40K.
Guys, thanks for your advice!
It's only a mistake, if you don't learn from it...
Don't forget to include in your contract that should you have to sue to collect any payment, CLIENT SHALL BE RESPONSIBLE FOR ALL ATTORNEY'S FEES.Oh, and just because you may not have had this on your current contract, does not mean you can't collect them. If they don't pay, lien and immediately file for enforcement of the lien. Sue for attorney's fees as well and any other damages you may have incurred. I got no tolerance for thieves.
Get competent legal opinions(s).
blue
PS I know a guy that is still chasing 300k from a deal.