Out of state developer builds 4 buildings with local subs, etc. Client is local and gets local construction loan. Buildings are completed, subs asked to get their respective final inspections before payment, the source of the construction loan offers subs short term financing to make payroll until the developer gets the last draw, final inspection passes, subs turn over lien waivers, and developer gets pat on back and big final check.
Developer then finds minor issues with value of extras on each final invoice and files court case against the various subs, but since it’s an out of state matter the nearest date is 18 months out. 18 months was too long for the lender to extend the hefty short term loans and calls them in bankrupting at least one well established company that’s been in business for 25 years.
Don’t hand over those lien waivers too quickly.
Along other lines, Idaho implemented a mandatory contractor licensing requirement, which isn’t bad in itself, just no teeth so a meaningless beaurocratic step for the most part. I was shocked to find out another requirement is providing potential clients with a couple of forms describing lien waivers and listing subs and suppliers, which has to be done prior to the start of a project or the contractor loses the right to lien the property. It seems like something the state could mention when you get a contractor license. I’ll bet not 1 guy in 10 around here knows about it.
There is a very recent case where the homeowner wrongfully shafted a contractor and was all to quick to let them lien the property…now it makes sense. To get the lien removed it will be a simple court case and the contractor is sure to lose on the technicality.
Speaking of liability, it was sort of fun talking to a young engineer about a beam he sized, then to get a call from his supervisor a few days later informing us of the new size and a made up story (“um…well…gee….it’s….well….um…..”) of why the beam calculations have suddenly changed. They could have just told us the extra size was for cya reasons, but we know it has to be kept a game of sorts. Liability costs are doing strange things to us all.
I miss my young and dumb days when this kind of stuff wasn’t even on the radar screen and the biggest worry was how much select pine the budget could handle and what color marvin clad windows to get.
Beer was created so carpenters wouldn’t rule the world.
Replies
Interesting story Don.
Here in MI, builders routinely take the small subs for thousands any time they want because they know the costs involved in litigating will be enough to persuade the sub from going through with the suit. A builder can make 2500 per minute just by tearing up an invoice and telling the sub "lien me, I'll just post the 250 bond and see you in court".
I also miss the good old days when the carpenters carried heat in their vans and houses burned when the builders didn't pay up.
blue
"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
Here in MI, builders routinely take the small subs for thousands any time they want because they know the costs involved in litigating will be enough to persuade the sub from going through with the suit.
You mean to use the word "disuade" I believe. Desuade?
It's the opposite of persuade.[email protected]
Yes, Eric, I think the proper word would be disuade. Thanks.
blue"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
Did I hear you're turning the School into a motel????
Nah..........[email protected]
Actually, that would be "dissuade", with two esses.
Sorry guys, I just couldn't help myself. : )
I kinda knew it had two ss's but I was too lazy to edit.
Eric, no I'm not doing a motel. We have tons of them in this town. It looks like empty nester condos and lofts but I'm hellbent on saving the gym and keeping it a gym for an ammenity. If we can get the numbers to work, and get some concessions from the township, I think it's possible.
We're in the end game for getting it financed. I'd already be going like hell if I had any money.... MI suks!
blue"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
Actually, that would be "dissuade", with two esses.
Actually, that would be two s's!
I knew something wasn't right.
And to be as gracious as Blue; thank you kindly for the correction.
Eric[email protected]
LOL. You're right.
And I'm glad you two didn't react negatively. My post was intended as a (hopefully) humorous comment on correcting each other's posts.
Jim, I didn't know you were funning with us, but I certainly see the humor. I'm just glad when I learn something. That's primarily the reason I read and post here.
blue"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
Aahhhhhh!
The new and improved BT![email protected]
I also miss the good old days when the carpenters carried heat in their vans and houses burned when the builders didn't pay up.
One summer when I was about 6 or 7 I was going to work with my dad a few days a week just to get out of mom's hair.
Some builder owed him for two houses and Mom went to pick up the check at the agreed upon time. The builder was there but had no check. He told her " Go away b*& (*. You'll get your money when I have it".
Can't leave a 7 y/o alone with the crew so when dad found out, in the truck and off to see the builder we went. Dad picked him up by the face and threw him thru an Andresen slider. Stepped down out of the house, picked him up again and threw him thru the other side.
Dad always got paid after that. By everyone.
I love that story!!
One of the few times I was not paid/paid less than the deal made; I told Gino; "fine, pay me x but you and I both know we had an agreement for x0".
I'll just come in 5 or 6 hours early with a chainsaw. Have you ever seen what a chain saw can do to rough framing Gino?
I got paid on the spot every penny he owed me.[email protected]
I got a good laugh out of that one. In the late '90s I had a customer that was GCing his own house and hired me to do a few jobs including installing the stairs. By the time we were ready to start on the stair system, I had noticed that as a job neared completion he would be out of town or otherwise unavailable for anywhere from 3 days to 2 weeks.
He was very willing to come up with the 50% deposit for us to start on the stairs and once that check cleared the bank I had materials delivered and we got right on the job and started building stairs. I let him know we were going to be through in the next day or two and casually mentioned that if he was going to be leaving town before we finished to please leave the final payment with his Uncle who watched the job site when he was gone.
Sure enough the next day about noon, the Uncle shows up telling us that the customer had been called out of town. I asked if he had left a check to cover the balance of the job. The Uncle says "nope, he didn't mention anything about it." My day was already shot, so there wasn't any sense in packing up and trying to get to a different job site. I finished out the day and got the stairs done. I call the Uncle, he comes over and looks the stairs over, says they look great. I tell him that my next call is going to his nephew. I get ahold of him on his cell, tell him the stairs are done and I need my check. Long pause on the other end of the phone..... I forgot to leave one, and won't be back for at least a week. So I explain to him that I will be back in 2 days on Friday, and I want cash or I am going to take a sawszall to the top of the stairs and cut treads, risers and anything else I can as I come down.
When I pulled up Friday morning I got out of my van, grabbed the sawszall, chucked up the biggest nastiest looking blade I had and slung a 100' cord over my shoulder, and headed for the house. The Uncle comes running out the front door with a fist full of hundred dollar bills. Paid the balance in full, with a $100.00 bonus for me having to make a special trip to get my money. After that, as soon as I completed a job for him, he had cash in hand to pay his invoice and was never out of town when I got done with one. Trust your neighbors, but brand your calves.
TCW Specialists in Custom Remodeling.
Back in the late 90's Kansas City setup a redevelopment corporation to fix up an enertainment area in the minority community. A minority contractor was hired. In addition to the orginal contract there was a lot of additional work required. The corp never paid for the addtional work. There where no complaints about the quality of the work or that the extra work was not needed or contracted for. In fact there was lots of praise for his work. They just would not pay.He got judgement against the redevelopment corp. But the city just folded it up and setup a new one with the same directors.In the meantime the contractor went bankrupt.But he kept after the city. After a number of years (maybe 6-8) the courts declared that the redevelopement corp was a sham and that the city was responsible so they ended up paying 4 times the amount (IIRC) for interest and punidtive payments..
.
A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
I'm curious why the subs signed the lien waivers when they had not yet been paid. All they did was get loans.
I'm kind of surprised the bank went along with all this since they knew full well the subs had not yet been paid. seems like the bank had some sort of sweetheart deal with the GC.
That's the part that caught my eye. Why would you sign a lien waiver, that essentially says you've been paid in full, until you've been paid in full?
The developer should be shot, but the subs gambled and lost.
Here in MI, a "conditional" waiver could be signed. A guy would be crazy to sign an "unconditional waiver" without full payment.
blue"...
keep looking for customers who want to hire YOU.. all the rest are looking for commodities.. are you a commodity ?... if you get sucked into "free estimates" and "soliciting bids"... then you are a commodity... if your operation is set up to compete as a commodity, then have at it..... but be prepared to keep your margins low and your overhead high...."
From the best of TauntonU.
"Developer then finds minor issues with value of extras on each final invoice and files court case against the various subs, but since it's an out of state matter the nearest date is 18 months out. "
What does out of state have to do with it?
And why was it an out of state matter?
The contracts where local, the sub's where local, the work was local, and the GC should have have a local (instate) agent or else they would have been illegal.
.
A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
And why was it an out of state matter?
I'm not entirely sure how the courts priortize cases, and it might not have had anything to do with the location of the out of state contractor.
Beer was created so carpenters wouldn't rule the world.
"I miss my young and dumb days when this kind of stuff wasn't even on the radar screen and the biggest worry was how much select pine the budget could handle and what color marvin clad windows to get."
Careful Don, yer showing yer age....they'll be fittin' you out for crutches next
Don,
Oregon has had the license and lien requirements since the late 70's.
Before you get your contractors license you must pay to take classes that amount to a short course on lien law and business law as it concerns contractors.
Unfortunatly the courses don't teach you how to do a decent job of building at all.
I really wish New Hampshire would get some kind of regulation of contractors on the books, as it is now the only requirement is two arms, two legs and a hammer; brain is optional.
We took our test recently for the Mass Construction Supervisor's license, requiring a 7 week course prior. All we did was go over the code book, which was essentially the BOCA with some unique state additions. In addition, although the requirements for the testing and licensing require proof of 5 years in the business, there were many there who had never driven a nail and managed to work their way around that requirement and INTENDED to jump in the business on their own shortly after.
As for lien waivers, I've had residential customers request lien waivers, which is fine, once I'm paid I'll provide them from my subs, my suppliers and whoever else.
Also, I'm actually preparing to file a lien on a customer here in NH and have learned a bit doing my research, one is that here in Mass and NH, one must jump through a few hoops in order to 'perfect' a lien. Subs have the additional burden of having to provide a form specifically for the 'right to lien' at every phase or they lose their right to perfect a lien.
Also, as for out of state court cases, in most areas, the matter will be heard in the jurisdiction of where the work took place. A contractor could request an out of state hearing on the claim that getting to the originating state is a hardship, but its up to the judge and if everyone else is able to arrive, one claim probably won't move the hearings.
"one must jump through a few hoops in order to 'perfect' a lien."I would hope that is true every place.From what I have seen it does not take anything put a form and small fee to file a construction lien. Typically anyone could file one against any property.The process of perfecting it gives the HO a chance to challenge it..
.
A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
yes, Bill, in New Hampshire actually, I have am required to file suit simoutaneously, which is what I am doing. I don't believe a lawsuit filing is required in Mass, but I am certain that at least the lien must be approved by the court prior and notice served to the property owner to give them opportunity to contest. Here in NH, the grounds on which an owner can contest are pretty limited to whether the lien attachment is based on the correct property, if the contractor worked there before and if the amount owed is not inflated for the attachment.
Don,
This thread is a great argument for construction management. Worked under one for 15 years, always paid.
My brick mason back in the 80's would always put a pane of glass between a course of flue liner on any job for a new builder, or a builder with a reputation. Tony always got paid.
Chuck S
This thread is a great argument for construction management.
Are you reffering to a separate entity that manages the project?
Beer was created so carpenters wouldn't rule the world.
Exactly,
"CM at risk" guarantees a price.
"CM" manages a project for a fee. All COs are cost plus a fixed percentage. Did institutional millwork for many years under a CM. No regrets.
Here is a link to a major CM whom specializes in DOD projects.
www.saic.com/
Chuck S
live, work, build, ...better with wood
Edited 4/4/2007 10:17 pm ET by stevent1