What is this document, and what can you do about it? We'll shed some light on this here.
A mechanic’s lien is a document that can be publicly filed by a person or entity that improves real property, when they believe that they were not fully compensated for their work. Usually, contractors, subcontractors, or material suppliers will file liens; although architects and engineers can file them as well, in certain situations.
Let's say you had a contract with a general contractor to renovate your home for a lump sum of $20,000. The contractor did all of the work, yet you paid only $10,000. The contractor could sue you for breach of contract for the remaining $10,000, and could also file a lien on your property for that same amount.
Similarly, imagine that the contractor in the above example hired a plumbing subcontractor, ABC Plumbing, Corp., for $10,000 but paid it only $2,000. The subcontractor neglected to pay the plumber the remaining $8,000. The subcontractor can sue the contractor for breach of contract, and can also file a lien directly against your property!
Liens are typically filed in the clerk’s office of the county where the property is located, and thus are publicly available. They represent a cloud on your title to the home. In other words, a lien indicates to the world that the lienor has a legal interest in the property in the amount of the lien.
The purpose of liens is to create a relatively inexpensive, efficient mechanism for companies or individual contractors to obtain payments they are owed. Liens can give bargaining power to small outfits, for example to ensure that big owners, developers, or contractors do not cheat them. At the same time, liens can cause aggravation for homeowners, sometimes unjustly.
As a homeowner, you certainly want to remove liens from the title of your property as quickly as possible. They represent a liability and a legal risk. Liens will impede any efforts to refinance your home, and will also make it difficult if and when you want to sell. Moreover, the lienor could even attempt to foreclose on the lien; that is, file a lawsuit, possibly forcing sale of your home (though this rarely happens).
As a homeowner, you have some options for how to respond to a mechanic’s lien, including:
If a subcontractor or supplier filed the lien, you should check your contract with the general contractor. The contract might require that the general contractor keep the property “lien free,” meaning it's the contractor’s responsibility to settle the lienor’s claims. You should immediately notify the contractor, letting the contractor know that this current situation is unacceptable.
Second, if time is of the essence and you need to sell or refinance your home quickly, you can contact a surety company to obtain a lien bond. A lien bond is essentially an insurance product. Proof of the bond can be filed with the county clerk, and the lienor’s lien will be attached to the bond instead of attached to your property. Essentially, lien bonds are a mechanism for clearing title to property relatively quickly.
Although it's probably not the most preferable option on your list, you can attempt to settle with the lienor directly. For example, you might offer to pay some percentage of the amount that is claimed quickly, in exchange for removal of the lien and release of all claims. Often, contractors are willing to settle for a lower amount of money rather than maintain a lien and enter into a lengthy legal battle.
Finally, you could choose to fight the lien. In other words, you could file a lawsuit to vacate or remove the lien from the property records, arguing that the lien is invalid. You might do this if you believe that the lienor is genuinely not owed any money. Perhaps you already paid in full, or the work was shoddy, or the limitations period on filing a lien has already expired.
Keep in mind that the laws surrounding mechanic’s liens vary widely from one state to the next, and even from one county to the next. If a lien is filed on your property, your best course of action is to consult a construction or real estate attorney in your jurisdiction who has experience in removing mechanic’s liens.
]]>Imagine that you are hired by a homeowner to construct a new garage next to a two-story house. The contract is for $20,000, payable in installments. You finish the project per the agreement with the homeowner and, at the end, send them your final invoice for the last $5,000. She never pays. What can you do?
Don't file a lien just yet. First, try to seek payment amicably. Contact the homeowner by whatever methods she seemed most responsive to before (such as phone, text, or email). Follow up by sending a formal demand letter, either on your corporate letterhead or from your attorney. These types of letters will put the homeowner on notice that you are still owed money, and that you intend to pursue your legal remedies. (They also could show a judge that you tried to resolve the dispute in good faith before rushing into a lawsuit.)
If none of these options result in payment, you might assume that the homeowner has simply decided to stiff you. At this stage, you can file a lawsuit for breach of contract, as well as other damages such as quantum meruit. But the lien law gives you an additional remedy: You can file a mechanic’s lien.
A mechanic’s lien is a short standard-form document, typically just a few pages long. While the specific requirements vary from one jurisdiction to the next, the lien will ordinarily require you to state the name of your company, the name of the homeowner, the address, the services performed or materials provided, and the amount of money still due and owing.
You must publicly record the lien by taking it to the county clerk where the property is located. Also, you will need to formally serve it on all other contractors or entities with a legal interest in the property, as well as the homeowner.
The lien becomes a cloud on the owner's home title, meaning that the title is subject to your company’s interest in it. This will make it difficult for the homeowner to sell the property or refinance it through a bank or other institutional lender. In other words, the lien can incentivize the homeowner to settle with you in order to get you to remove the lien.
As mentioned, mechanic's liens are not only for general contractors. Subcontractors and suppliers are also able to file liens, even if they did not have a contract with the homeowner. Subcontractors and suppliers normally have a contract with only the general contractor. But this does not affect the ability of the subcontractor or supplier to file a lien against the property.
First, consider the message that it sends when you file a mechanic's lien. Homeowners can easily perceive it as an aggressive action. It might put them on the defensive, and encourage them to get lawyers involved, or to retaliate by publicly claiming that you did shoddy work. Perhaps this is the direction that you need to take, unfortunately, if the homeowner is refusing to pay.
The single most important legal consideration when considering your ability to file a lien is time. Each state has a specific statute of limitations limiting the time within which a contractor can file a lien. Sometimes, this limitations period is only a few months. Often, the period depends on whether the property is public or private, or whether it is commercial or residential. The time limitation for filing a lien is far more limited than the time for filing a lawsuit (which is sometimes as much as three to six years).
Finally, before filing a lien, you must consider the specific requirements of local lien laws. Each state, and indeed each county, has its own peculiarities with the technical aspects of filing a lien. What information must be included? What pages need to be notarized? Who needs to be served with the document?
In other words, there are many technical and procedural issues to consider. For this reason, it often makes sense to consult a construction attorney with experience in the county where the real property is located. A bit of advice can go a long way towards making sure that your lien rights are preserved and not precluded based on a mere technicality.
]]>Fortunately, you might be able to recover what you're owed more cheaply and with less stress using other methods. These are worth considering even if you have a good legal claim against your home seller, selling agent, or inspector. For example, you might:
Assuming the agent who represented you isn't the one you believe to be at fault, going back to that person should likely be your first step. Your agent should be in regular professional contact with the seller's agent, and both of them want to make sure the deals they supervise don't go sour. If yours is not a terribly complex situation, the agents might help arrange, for instance, reimbursement from the seller.
By simply asking, in writing, that the responsible party pay the costs of repairing the defect, you might get what you want. A demand letter offers an opportunity to:
You don't need a lawyer to write such a letter. Give it some close attention, though, and perhaps have others read over it. The goal is to make sure it is clear, polite, and professional. This is not the time to fire off an angry email.
Another option is to ask for cooperation in arranging a mediation.
Mediation is a form of alternative dispute resolution in which the interested parties work cooperatively toward a settlement or fair resolution with the help of a neutral mediator. It's far less expensive than hiring an attorney (though you could certainly consult with an attorney separately). Many communities have low-cost mediation services, in some cases associated with the small claims court.
The mediator is nothing like a courtroom judge, but is there to guide the discussion in a productive direction. That said, you should prepare for this event in some of the same ways as you would for a court proceeding. Gather the evidence that you want the other party to be aware of, write out a timeline of events if relevant, print out photos if possible, prepare a summary of your concerns and wishes, and bring written notes or a bullet-point list to work from.
For example, if you discovered a hole in the floor upon moving a potted plant that the seller left behind, and the damage required hiring a contractor to perform repairs, you'd want to bring photos of the plant as it was originally placed (ideally including the home listing photos), photos of the hole that you discovered, the contractor's bills, and a statement from the contractor or other professional stating that the damage appears to have been there for some time. Then you'd also want to write notes on how this was an apparent effort to hide serious damage, and you'd like full compensation for the repairs.
Be ready to compromise, but not too fast. The idea is to give the other party a chance to be heard, and to craft a solution that everyone feels is fair.
For more information, see Mediation: The Six Stages. And if you find you need professional legal help, check out Nolo's Lawyer Directory.
]]>I hired a well-known local contractor to fix the pipes in my bathroom. He works out of a small garage, and has a truck saying “Bob the Contractor” on the side. On this particular job, not only did he use sub-par pipes, but they burst soon after he left, flooding my bathroom and causing extensive damage.
I want to sue—probably in small claims court, since we're only talking a few thousand dollars for the job and damage—but I’m unsure whether to sue Bob individually or whether I should find out if he's also an LLC or something, and sue that entity.
A homeowner who hires a contractor to perform a large-scale home renovation would almost always enter sign a contract with that contractor's company, usually a corporation or an LLC. If you signed a written contract, look for the company name on this document.
But for homeowners hiring handypersons to perform smaller-scale projects, such as fixing a window, painting a garage, or replacing a pipe, the relationship can be more ambiguous. Sometimes it's unclear whether you are forming a contract with a specific person (“Bob”) or a company (“Bob the Contractor, LLC”).
More often than not, if all goes well and nobody needs to sue, it doesn’t really matter. The contractor performs a service, and you pay as agree upon. But in a situation like you now face, the name of the defendant suddenly matters a great deal. All courts, small claims and otherwise, will require that you provide the specific name and address of the defendant individual or the defendant business that you are suing.
Here, you have specific evidence that you were dealing with a business called “Bob the Contractor,” based on the writing on his truck. Also have a look at any written contracts or correspondence between you two, and check the company's website, if one exists. Bob might have just been puffing a bit with his auto paint ad.
To determine whether your contractor actually has a business entity registered with the state, search your state’s Secretary of State website for the name. If you cannot find any business entity that seems reasonably related to your contractor, then you should probably sue personally. He will then need to try to dismiss the lawsuit by pointing you towards his real business entity, which you can then sue in his place.
As a broad rule, you cannot sue someone individually if you really had a contract only with their business. But there are exceptions. Some business entities are essentially empty shells with no assets; sometimes the homeowner never actually signed a contract indicating a relationship with a business entity. In such cases, you would have a good faith basis upon which to sue the contractor as an individual.
If you believe that your contractor is trying to evade lawsuits by hiding behind empty LLCs or corporations, name him personally in the litigation. This could force him into settling outside of court. After all, any judgments against him personally would impact his credit rating beyond simply the business.
My contractor was supposed to keep to a strict work schedule when repairing my home electric system. He was three months late in finishing, despite my repeated communications and warnings. He also didn’t install the correct wiring.
I sued in small claims court, hoping to get my deposit back. But when my contractor filed his answer, he included a counterclaim for nonpayment, asserting that I still owe him money! Is the small claims judge likely to accept his side of the story? The last thing I want is to pay for small claims court and come out owing even more.
First of all, do not panic. It is not uncommon for a defendant in a lawsuit to file a counterclaim. Sometimes it's based on meritorious facts, but other times it's merely a strategy—a technique to put the plaintiff on the defensive and push to settle the case, since you too now have “skin in the game.”
A counterclaim turns your contractor into a plaintiff himself. Just as you must prove your claims against him by a preponderance of the evidence, he too must prove the claims against you.
First, check with your court clerk on whether you're allowed to file a document called a “reply.” A reply is like an answer, except that it responds to the allegations in a counterclaim, rather than the allegations in a complaint.
If you can file a reply, use it to carefully respond to whatever your contractor has alleged. Here, you might respond by saying that you did, in fact, pay your contractor every penny you were required to under the contract, and that his counterclaim is entirely false. Or you might say that you stopped paying once it became clear that your contractor was in breach of the contract himself.
If your court does not allow written replies, be prepared to address your contractor’s allegations on the trial date, before the judge. Consider the evidence you might bring to refute the contractor's claim. If he’s falsely saying you never paid, you might bring copies of cancelled checks or bank/credit card statements showing exactly how much you paid. Also bring copies of the original written contract (if you had one), along with any emails or correspondence you have showing the date when he breached the contract.
If you were confident in the facts of your case before you knew about the counterclaim, nothing has changed. His claim is based on the same facts and circumstances as yours. Therefore, if you still believe that you can prove your case, and are taking steps to ensure that you present a convincing, well-organized case, you have little to worry about.
I’m a supplier of brick and wood materials. I provided materials to a general contractor who was building a new home in a suburban area. We agreed on a price and a quantity, and had a written contract. But now the contractor isn’t paying. He’s claiming that the homeowner never paid him, and so he doesn’t have the money to pay me or other suppliers of materials. What can I do to get what I'm owed?
This is a tough situation, and not uncommon in the construction industry. The homeowner pays the general contractor, often in large installments. The general contractor, in turn, pays subcontractors and suppliers from those payments.
As a materials supplier, your contract is with a contractor (or a subcontractor). You might have never even met the owner or developer of the project, and your only knowledge of it comes from the contractor who asked you to provide materials. In legal terms, you have no “privity of contract” with the owner, which makes it difficult to sue.
However, you still do have many avenues of recourse if you are not paid.
First, send the general contractor a formal demand letter. This should state the amount of material the contractor ordered from you, the date you supplied it, and the invoices you’ve sent to date. This letter creates a paper trail to show that you made diligent requests for payment. If your claim is small enough, perhaps the contractor will find a way to pay you, despite the fact that the owner has not paid in full.
Next, file what's called a mechanic’s lien. You will need to file this with the clerk of the county where the property is located. Its purpose is to secure the interests of an unpaid subcontractor or supplier, especially in a situation like this one where the owner has not paid the general contractor for the supplies.
Liens cost a nominal fee to file, and are subject to strict filing limitations. Thus, you should act fairly quickly to preserve your lien rights. Contact your county clerk’s office for details on the filing procedure. Expect a one-page form that can be filed without an attorney’s assistance.
Liens create a cloud on the homeowner's title, making it difficult for the person to sell or refinance the home. Thus, a lien might pressure the homeowner into paying the money owed to you.
Third, you could simply sue the contractor. Notwithstanding the homeowner’s failure to pay the general contractor, he still breached his agreement to you. A lawsuit might put the necessary pressure on him to pay off your outstanding invoices.
]]>Now what? Will such zoning amendments adversely impact what you can now do with your house or your ability to enlarge, refinance, or sell it?
Virtually every city, town, village, or other municipality has some form of land use ordinance or bylaw—usually called zoning—that governs the dimensions of building lots, the uses to which the lots can be put and, less often, the dimensions of the structures that can be built on the lots.
As a municipality changes (for instance, sewer lines are extended further from the center of the town, a new highway shortens the commute to the nearest city, or improved school, fire and police services attract more families), zoning regulations tend to change as well. The purpose is often to contain or at least shape new residential development.
Typically, the new regulations increase minimal dimensional requirements, like front, rear, and side-yard setbacks or minimum lot size and street frontage, or they decrease the number and kinds of uses that will be permitted on the lot. These amendments, if applicable, can severely restrict existing homeowners’ use of their homes or land.
Accordingly, municipalities often protect homeowners from hardships created by zoning amendments by “grandfathering” existing building lots. The local zoning bylaw or ordinance, or the state zoning enabling act, might provide that increases in area, street frontage, or front, back, and side setback requirements for specified uses will not apply to building lots that conformed to code when the zoning amendment went into effect.
Different states might further qualify this protection in different ways. For example, in Massachusetts, in order to qualify for “grandfather” protection, the building lot must ordinarily have a minimum of 5,000 square feet of area and 50 feet of public road frontage, be located in a district zoned for single- or two-family residential housing, conform to existing zoning when legally created, and be separately described and held from any adjoining land when the more restrictive zoning changes went into effect.
Be sure to check online or with your town or municipal clerk to get a complete list of additional conditions that might limit the scope of your town’s “grandfather” provisions.
If a change in the zoning ordinance is not covered by its grandfather provisions, for example, there's a new limitation on the height of front, side, and rear yard fences, your only recourse might be to ask your local board of zoning appeals for a variance from the new zoning regulation.
“Hardship” is typically the test for whether a board of zoning appeals will grant a variance. Boards are, however, usually sympathetic to claims that a zoning change, while not grandfathered, nevertheless imposes a real hardship on existing property owners who could not have anticipated the more restrictive regulation when they purchased their home.
]]>As a homeowner, what should you do if you believe a lien on your property is frivolous or exaggerated? That's what we'll discuss here, including:
Mechanic’s liens are a legal tool for contractors, subcontractors, and suppliers to secure and obtain payment for work that they performed on real property. Liens are relatively simple documents, typically filed with a local clerk and recorded on the property docket. They essentially indicate the amount of money still owed to the contractor, subcontractor, or supplier for work, labor, or services that they performed to improve a piece of property.
Lien laws are highly specific, and regulations vary not just from state to state, but even from county to county, as is fitting given the highly localized nature of property records in the United States. They can be filed on property that is either commercial or residential, and either public or private.
For example, imagine that you hired a general contractor to renovate your basement for $10,000. The contractor then hired a subcontractor for $2,000 to do the tiling of the bathroom. However, the tiling contractor was never paid. The tiling contractor could file a lien, and ultimately sue you, as the owner, to pay his $2,000, since he performed work to improve the value of your property. This lawsuit is known as "lien foreclosure" in most jurisdictions.
Obviously, liens can be a nuisance for owners. They serve as a cloud on title, as they are filed on the public property docket. In other words, the prospective buyer of a house would be unlikely to purchase it if there were liens for unpaid construction work still listed. The purchaser would become liable for these liens. For the same reasons, banks are hesitant to lend against real property that is encumbered with liens. Consequently, liens are frustrating for homeowners who wish to sell or refinance their homes.
As the owner of a piece of real estate, you will never be pleased if a contractor, subcontractor, or supplier files a lien on your property. You might feel, for instance, that the subcontractor should simply work out the dispute with the general contractor, or that the general contractor is not entitled to any more money from you. One might call these “good faith disputes.” Here, you can have a sensible negotiation. Perhaps you agree on some payment plan, or some compromised amount of money. Or perhaps the contractor will agree to an additional scope of work in exchange for further payment.
But in some situations, liens can make no sense at all. For example, imagine that you have a lump-sum contract for a kitchen renovation for $7,000. One day, the contractor abandons the job after spending the full budget, and then puts a $100,000 lien on your home. How can the contractor possibly lien for an amount greater than the entire job, when this was a lump-sum contract? And how could anyone possibly have spent so much renovating a small kitchen? Such a lien is likely exaggerated.
Another example: Imagine that a contractor files a lien that includes attorneys' fees in its numerical total. In most cases, attorneys fees are not “lienable,” because they do not represent the value of the work, labor, or materials contributed to the real property. Similarly, a contractor normally cannot legally lien for lost opportunities; for example, if another project down the street could have provided a higher profit, a contractor who took your project instead cannot try to reclaim that difference through a lien.
What should you do in a situation where you're facing an inappropriate or frivolously filed lien? Some states have legislation that specifically prohibits willfully exaggerated liens. They might, for example, create liability for those who file such liens; the filer might can face damages and penalties, and their lien can be stricken. So, if you believe that an exaggerated lien has been filed on your property, you should contact an attorney to offer you counsel and perhaps write a strong letter to the lienor demanding that the lien be removed.
If a letter is unsuccessful, there is also a remedy through the courts. A lawsuit, often called a motion to “vacate” a mechanic’s lien, asks a court strike a lien that is false. Any lawsuit can be time-consuming, unpredictable, and expensive, but it is essentially “calling the bluff” of the lienor.
Finally, remember that sometimes it makes more sense to settle with the contractor than to fight the lien through a court action. Particularly in home improvement situations, liens are sometimes small. It might be more economical to negotiate in exchange for a voluntary removal of the lien. In most cases, contractors will be eager to collect some money and move on to other projects.
]]>Liens are essentially clouds on the title to your home, usually filed by contractors or subcontractors who claim that they are owed money for work done on the property.
Imagine, for example, a roofer who claims that she fixed your roof without adequate compensation, or a brick company that claims it provided siding to your house but was never paid the contract balance. These entities can potentially sue you for breach of contract. But assuming they've met all the prerequisite paperwork requirements, they can also secure their financial interests without filing a formal lawsuit against you in Ohio’s Court of Common Pleas, by filing a lien.
What exactly is a mechanic’s lien, and what can you do if one is placed on your Ohio home?
As an Ohio homeowner, you have hopefully never encountered a mechanic’s lien. These legal documents are somewhat obscure, and many homeowners have not heard of them at all.
A lien is a document that gets publicly filed in an Ohio county clerk’s office in the county where the relevant property is located. Once filed, the lien creates a situation where your home title is subject to the contractor’s stated financial interest in it.
If your project is large enough, either you or the contractor might have been in contact with the county office long before a lien is file. The lien filing can be the culmination of a three-step process, which requires filing:
However, if you're the owner of a single-family home, the first two steps can be skipped; in which case the contractor will be able to file the lien as its first point of contact with a government agency. (We'll briefly describe the other two steps below in any case.)
Unlike in most states, Ohio requires that before certain property improvements begin, the property owner or contractor files a “Notice of Commencement.” (See Ohio Rev. Code § 1311.04.) However, the law exempts "home construction contracts" for single- and double-family homes, and creates a few other exceptions. (See Ohio Rev. Code § 1311.011.) The Franklin County Law Library offers a model version of the Notice form. It asks for information such as the company name, the property owner’s name, the location of the property, and details about the financing and the improvements to be made; and it also describes an option for filing a payment bond, such that contractors on major projects might never have to file mechanics liens at all.
As the next step in these larger projects, any subcontractors would need to file a Notice of Furnishing with the same clerk's office, describing what work or materials they have been or will be providing on the property.
If you were to fail your contractor the agreed-upon sum once the work is done, the contractor could go to the clerk's office in the county where your property is located and file a lien, using a form like this one.
In most situations, you should be able to avoid the nuisance of having mechanic’s liens filed on your property, by engaging in a reasonable negotiation with your Ohio contractor. Liens are typically a sign of frustration and a relationship that has broken down. The contractor believes you are either ignoring payment requests or have no intention of entering into a good faith negotiation.
If your contractor asserts that you owe an extra sum of money, do not ignore the phone calls or invoices. While you might think that this “strong signal” will convince your contractor to simply go away, the contractor might view it as a sign of disrespect, prompting a lien or a lawsuit or both.
You and the contractor might have a good faith disagreement about whether certain work was part of the contract, or about its quality. Have a frank discussion, or consider going to mediation. In mediation, a third-party neutral (often an attorney or individual with experience in the construction industry) would help you and the contractor negotiate a fair settlement.
In both negotiation and mediation, you should be open to creative settlement strategies. Rather than paying a lump sum, for instance, perhaps you could schedule payments over time. Rather than a monetary settlement, maybe you could offer the contractor a public endorsement or reference. Rather than fighting in court, you could offer the contractor discounted payment in exchange for a limited scope of ongoing work. The possibilities depend on the facts of the situation.
Of course, there are legal remedies available to Ohio homeowners to fight a lien after it is filed. However, you are likely to save time and money if you find a way to settle the payment dispute directly with the contractor. This does not mean you need to give into all of the contractor’s demands, but it does mean that you should keep in mind the costs of legal action and do your best to avoid it.
If a lien is placed on your property, it will be helpful to familiarize yourself with the statute that governs liens in Ohio. The procedure for the filing of the notice is contained in Ohio Rev. Code § 1311.04.
Like with most states’ lien statutes, Ohio’s is complex, containing many exceptions. These tend to depend on the type of property involved and the work performed. But there are general concepts to remember as you plan your response to a lien filed on your property:
How can you get rid of a lien once it’s filed? There are several strategies to get the lien removed in Ohio. The first, as mentioned, is to negotiate a resolution with your contractor.
A second option is to obtain what's known as a “lien bond,” through a surety company. The bond essentially guarantees payment to the contractor in the amount of the lien if the contractor is successful on the legal claims, but also removes the lien from your property record.
A third option is to petition a court (the Ohio Court of Common Pleas serving your county) to remove the lien. Your grounds could include that the contractor never did the work that the lien claims, or that the work was already compensated.
You can also attack legal deficiencies in the contractor’s lien. The most common involves the deadline for filing. The deadlines are spelled out in Ohio Rev. Code § 1311.06. On residential projects, the deadline is only 60 days from when the contractor or subcontractor last provided labor or materials. In other words, if the lienor attempts to file a lien more than two months after the “last date,” you can ask a court to strike the lien.
There is one other important deadline to keep in mind. Under Ohio Rev. Code § 1311.13, mechanic’s liens are valid for six years. This gives lienors six years in which to either settle with the owner or contractor, or file a suit to foreclose on the lien in an Ohio state court. If they do neither, the lien can be stricken as invalid.
Keep these deadlines in mind. Often, busy contractors will sit on their rights for too long, in which case Ohio law will no longer permit their liens to be sustained against your property.
Retaining an attorney with experience in construction or real estate law might be worth your expense, depending on the amount of money in dispute. Check out Guide to Finding an Excellent Attorney.
]]>Mechanic’s liens are essentially clouds on the title to your home and property, usually filed by contractors or subcontractors who claim that they are owed money from you. A lien lets them secure their financial interests without immediately filing a formal lawsuit in Florida’s Circuit Court.
What exactly is a mechanic’s lien, and what can you do if one is placed on your Florida home?
As a Florida homeowner, you have hopefully never encountered a “mechanic’s lien.” Many homeowners have not even heard of them at all. Nevertheless, disputes with contractors are not uncommon, and some can lead to lien filings.
Specifically, the disgruntled contractor would file a lien in a Florida county clerk’s office. There are 67 counties in Florida, and the contractor would need to file the lien in the county where your home is located, not necessarily the county where his or her business is based.
The lien, once filed, becomes a cloud on your title, meaning that your ownership title is subject to the contractor’s stated financial interest in it.
Consider this example: You hire a tiling company to redo the tiles in your Sarasota kitchen. After finishing the job, the contractor's company tries to charge you $1,000 more than was agreed to in the original contract, or claims that you asked for additional work when you did not. You refuse to pay the additional sum. The contractor could then file a $1,000 mechanic’s line with the Sarasota county clerk. Anyone who later buys your property would buy it subject to owing the contractor that $1,000. This can make it difficult to sell or refinance the property, since no one would want to take property that is subject to this claim. They'll expect you to pay the money to remove the lien or lower your selling price accordingly.
Contractors therefore use liens as a means of incentivizing property owners to settle with them in order to get them to clear the title.
You might be able to avoid the nuisance of mechanic’s liens on your property by engaging in a reasonable negotiation with your Florida contractor before the lien is filed. Liens are typically a sign of frustration and a relationship that has broken down. The contractor believes you are either ignoring payment requests, or simply intend to “stiff” them for the work.
If your contractor asserts that you owe an extra sum of money, do not just ignore the phone calls or invoices. This might be viewed as a sign of disrespect, as well as a sign that you have no intention of honoring the request. The contractor is likely to dig in his or her heels and cause legal trouble for you, either through a lien or a lawsuit (or both).
You and the contractor might have a good faith disagreement about whether certain work was part of the contract, or about the quality of that work. Have a frank discussion about it, or consider going to mediation.
In mediation, a third-party neutral (often an attorney or individual with experience in the construction industry) can help you and your contractor arrive at a fair settlement. Try to remain open to clever settlement strategies. Rather than paying a lump sum of money, for instance, perhaps payments could be made over time. Rather than fighting in court, you could offer the contractor discounted payment in exchange for a limited scope of ongoing work.
Naturally, there are legal remedies available to Florida homeowners with which to fight a lien after it is filed. However, you are likely to save time and money if you find a way to settle the payment dispute with the contractor beforehand. You need not give into all of the contractor’s demands, but keep in mind the costs of legal action if the contractor files a lien.
If a lien is placed on your property, it will be helpful to familiarize yourself with the relevant statute: Florida’s Construction Lien Law, at Florida Code § 713.001 et. seq. As with most states, Florida’s lien laws are complex, containing rules and exceptions that depend on the type of property involved and the work performed.
Broadly speaking, Florida law permits many different types of entities to file a lien on a home if they're left unpaid. Under Florida Code § 713.04, that includes anyone who performs services or furnishes material under a contract related to construction or improvements. This commonly includes contractors, subcontractors, and material suppliers. Moreover, architects, landscape architects, interior designers, engineers, and surveyors and mappers have the right to file a lien.
Also know that the contractor will be expected to comply with various procedures, including filling out and submitting a short form that lists your name and contact information, the contractor’s name and contact information, the name of any general contractor involved (if a subcontractor or supplier is filing the lien), the amount of money allegedly due to the lienor, and a description of the lienor’s labor or materials provided to the property.
Now that you know that mechanic’s liens can create problems for you, how can you get rid of a lien once it’s filed? There are several strategies to get the lien removed. The first, as mentioned, is to negotiate a resolution with your contractor.
Another is to obtain what's known as a “lien bond,” through a surety company. This essentially guarantees that you will pay the contractor in the amount of the lien if the contractor is successful on the legal claims, but in the meantime, it removes the lien from your property record.
Yet another is to petition a court (the Florida Circuit Court serving your county) to remove the lien. Your grounds for removal could include, for example, that the contractor never did the work that the lien claims, or that the work was already compensated.
You can also attack legal deficiencies in the contractor’s lien, such as that the contractor missed the strict deadline for filing. To be valid, the unpaid business must file the lien “at any time during the progress of the work or thereafter but not later than 90 days after the final furnishing of the labor or services or materials.” (See Florida Code § 713.08.)
Once the lien is filed, the person who did so must serve a copy of it on the property owner (you) within 15 days. Consequently, you should be conscious of the contractor’s “last date.”
Many contractors will get tripped up by these deadlines. Courts construe them strictly, and if the lien is filed or served too late, it will be stricken.
Moreover, if the lien is filed by a subcontractor, Florida law adds some requirements. Subcontractors are hired by general contractors, rather than directly by you. While contractors you hire directly can immediately file a lien for monies due, they must provide a “Notice to Owner” within the earliest of either (i) 45 days after the commencement of work on the project or (ii) before the date of the owner's final payment to the contractor. (Florida Code § 713.06.)
If the subcontractor fails to meet this gateway requirement and jumps ahead to file a lien anyway, the lien is most likely invalid. You would be able to petition the court to remove it from your property docket
Finally, Florida law actually prohibits certain subcontractors from filing liens at all. Under Florida Code § 713.015, only those entities with a direct contract with the property owner can file a lien if the total price of the improvement is $2,500 or less. In other words, if a subcontractor that you never directly hired files a lien for an amount lower than $2,500 (whether the sub gave you “notice” or not), that lien can also be stricken.
Fortunately, few contractors in the Sunshine State wish to actually initiate lien-related litigation against a homeowner. Most would prefer to settle with you quickly for a reasonable sum. Keep this leverage in mind as you explore the legal options available to you under Florida law.
]]>Unfortunately, disputes with contractors can happen, and mechanic’s liens are sometimes the result. If you refuse to pay, contractors can place liens on your property, thus halting your efforts to sell or refinance. A lien is a mechanism for construction-type companies to secure their financial interests without immediately filing a formal lawsuit in the local Texas District Court.
What exactly is a mechanic’s lien, and what can you do if one is placed on your home after your renovation project?
Contractors’ rights to file mechanic’s liens are spelled out in the state’s Constitution. Article XVI, Section 37 provides that “Mechanics, artisans and material men, of every class, shall have a lien upon the buildings and articles made or repaired by them for the value of their labor done thereon, or material furnished therefor.”
“Mechanic’s liens” are somewhat obscure, and many homeowners have not heard of them. A lien is a document that gets publicly filed in the Texas county clerk’s office, in the county where your property is located.
There are 254 counties in Texas, more than any other state. The contractor would file the lien in the county where your home is (not necessarily the county where the business is based). The lien, once filed, becomes a cloud on your title, meaning that any transfer of the title would come with the contractor’s stated financial interest in it.
Consider this example: You hire a brick company to redo the exterior of your Dallas home. After the contractor finishes the work, the two of you argue over the agreed-upon payment amount. The company tries to charge you $7,000 more than the original contract, or claims that you asked for additional brick work, when you did not. You refuse to pay the additional sum. The contractor could then file a $7,000 mechanic’s lien with the local Texas county clerk. This essentially means that anyone who buys your property would buy it subject to owing the contractor that $7,000. This will make it difficult for you to sell or refinance the property, since no one would want to take property that is subject to this claim (and the accompanying potential litigation). Contractors therefore use liens as a means of incentivizing you to pay.
To get a sense of what a lien actually looks like, search for sample Texas versions of the form online (though the version filed on your home might look slightly different). Filing liens is intended to be a fairly simply procedure, as compared to filing a lawsuit.
The standard Texas form includes, among other pieces of information, the contractor’s company’s name, the property owner’s name, the location of the property (your home, in this case), and the amount of money still allegedly due to the contractor. The contractor must also describe the labor or material provided to the property.
As with most states, however, Texas’s lien regulations are complex. They contain many rules and exceptions, depending on the type of property involved and the work performed.
In most situations, you should be able to avoid the nuisance of mechanic’s liens on your property by engaging in a reasonable negotiation with your Texas contractor before the lien is filed. Liens are typically a sign of frustration. The contractor believes you are either ignoring payment requests, or simply intend to “stiff” them for the work. Filing a lien is a way of protecting their interests.
If your contractor asserts that you owe an extra sum of money, do not just ignore the phone calls or invoices. This might be viewed as a sign of disrespect, as well as a sign that you have no intention of honoring the request. While you might think your contractor will eventually give up and go away, the contractor is just as likely to dig in his or her heels and cause legal trouble for you, either through a lien or a lawsuit (or both).
You and the contractor might have a good faith disagreement about whether certain work was part of the contract, or about the quality of that work. Rather than ignoring this, have a frank discussion, or consider going to mediation.
In mediation, a third-party neutral (often an attorney or individual with experience in the construction industry) can help you and your contractor negotiate a fair settlement.
Be open to clever settlement or compromise strategies. Rather than paying a lump sum, for instance, perhaps payments could be made over time. Rather than a monetary settlement, maybe you could offer the contractor a public endorsement or reference. Rather than fighting in court, you could offer the contractor discounted payment in exchange for a limited scope of ongoing work.
Naturally, there are legal remedies available to Texas homeowners with which to fight a lien after it is filed. However, you are likely to save time and money if you find a way to settle the payment dispute beforehand. This does not mean you need to give into all of the contractor’s monetary demands, but it does mean that you should keep in mind the costs of legal action if the contractor files a lien.
Who, exactly, has the right to file a lien on your home? Most mechanic’s liens in Texas are governed by the more specific provisions of Texas Property Code, Chapter 53. Under Tex Prop. Code § 53.001, almost any entity that participates in the “direct prosecution” of the improvement of real property" can file a lien, as long as the strict statutory requirements are obeyed. The statute allows contractors to file liens even if they have only contributed to seemingly minor improvements, such as landscaping, tree planting, or other aesthetic fixes.
]]>My wife and I recently bought a very old home outside Boston. She's eager to research its past and perhaps register it as a historic property. I'm worried that doing so will mean we have trouble painting the place the color we want it or adding a bedroom. Am I right to be concerned?
If you have a very old house that hasn't been greatly altered or that was associated with important historical events or activities (as in, “George Washington slept here”), you might indeed be able to register it as a historic property. This can be done on the federal National Register, on a state historic commission register, or on a municipal historic register.
You will, in order to register, need to submit an application and have your property evaluated.
Why do people choose to register property? One reason is prestige and networking opportunities. The National Register, for instance, allows you to display a bronze plaque, and it facilitates communication with other historic property owners. That might help if, for instance, you're planning to run a B&B or similar short-term rental.
Also, registering typically qualifies a property for grants, loans, and tax incentives.
Contrary to rumor, registering federally does not directly impose design restrictions on the renovation or remodeling of the building’s exterior or interior. However, municipal zoning bylaws or other ordinances might restrict what you can do with your home if it's in a town historic district or otherwise qualifies as a historic structure. (Your home might be subject to such bylaws whether it is actually registered as a historic building or not!)
Some historic districts impose relatively few restrictions on renovating a building there, while others are extensive and even onerous. Such regulations may extend to the color of outside paints, authentic fixtures and other hardware, use of appropriate materials like wood instead of plastic, or the style of window treatments.
Other ordinances can require a homeowner to give notice of the intention to tear down a home in a historic district, even if it’s to replace it with something equally authentic. And then the homeowner must wait, usually six months or a year, before beginning demolition.
Check online to see if your state regulates the renovation or remodeling of a house that's on its historic register. Then, to find out whether you are subject to local zoning bylaws or other ordinances that impose design standards on the renovation or remodeling of your home (regardless of whether it's registered on the National Register or with your state historic commission), check online or speak with your city or town clerk.
Nothing, of course, prevents you from making historically appropriate repairs or improvements to your home without registration, if you are so inclined, so long as you’re not prevented from doing so by a local zoning ordinance or other bylaw.
My husband likes buildings that have a historic flavor. I like modern conveniences: central air conditioning, hard wiring for electronic devices, and so forth. My husband would like to be in a historic district, which I suspect will come with requirements for conformity with existing style and architectural character. Can we build an entirely new house there, and have it look old, but actually be modern?
States and municipalities create historic districts that are worthy of restoration and preservation. But even the most congested historic districts, like the neighborhoods surrounding a picturesque New England town green, often have vacant building lots.
Vacant lots are most often created when an existing structure decays beyond the economic utility of renovating it. Other vacant lots come into existence when existing house lots, containing an existing structure, can be further subdivided and the new lot sold.
Regardless of how a vacant lot becomes available, new construction in a historic district is typically possible, but governed by the same types of design guidelines that control renovating or remodeling of an existing building there.
Guidelines are often detailed and comprehensive, especially if the district contains well-preserved and consistent architecture. They tend to focus on exterior design issues like height and breadth, roof pitches, window treatments, color, use of materials, setbacks, impacts on street life, and general compatibility with the neighborhood.
However, the local historical commission or planning board that enforces design regulations will likely be less demanding about interior treatments. Of course, you’ll be legally required to meet modern code standards.
This is not an undertaking for anyone on a limited construction budget. Properly qualified professionals—architects, engineers, and contractors, preferably with prior experience with building or renovating historic structures—will be a necessity.
Once you’ve developed plans for your new home, a meeting or two with the local historical commission and the local planning or zoning board, accompanied by your experts, will offer the best assurance that your project won’t be rejected outright or end up costing far more than you'd planned on.
Most planning boards and historic commissions are eager to encourage new construction that will increase the economic viability and appeal of historic districts. You can usually count on their support.
I bought a house that's a piece of local history, and am looking forward to restoring it as nearly as possible to its condition when first built. But will improving it require all sorts of regulatory approval?
Your options depend on the type of listing, for starters.
If your property is listed on the National Register of Historic Places (which prior owners would have done—it doesn't happen top-down), this won't by itself limit what you can do if you remodel. It might actually qualify the house for grants, loans, and tax incentives if you’re willing to conform your work to historically authentic standards of design and workmanship.
In many states, renovations to existing structures that require funding, licenses, or permits (but not building or other local permits) from a state or federal agency must be reviewed by a state commission for impacts to historic and archaeological properties. A listing in the National Register does not necessarily require state review; at the same time, lack of listing does not eliminate the need for review. State review sometimes imposes restrictions on the scope of the proposed renovation, but this is usually left to a local agency or commission.
Localities often impose their own restrictions and limitations on the renovation of historically significant buildings. These are usually part of the local zoning bylaw or of a separate historical preservation bylaw. Either way, a local conservation or historic commission often must review renovations to structures with historic significance and issue permits for the proposed work.
Some localities have created special historic districts; within which, proposed renovations might be subject to review and regulation. Other localities rely on the National Register or a state register to designate structures as subject to regulation by a local commission or agency.
You can easily check at your town or city hall or visit the municipality’s website to see whether your house is on the National Register or registered with your state, or whether it's located within a historic district. The clerk will direct you to the zoning or other municipal regulations that may apply to your proposed remodeling.
If you learn that your house has historic significance, you’ll want to meet with the local historic commission or conservation commission to learn what restrictions on remodeling apply and what design ideas are recommended. Historic commissions maintain lists of recommended architects and contractors who have appeared before the commission, as well as preferred materials, hardware, paint colors, and other design elements.
Our house is so old that it's in danger of looking like the local haunted house. I'm worried that any remodeling will involve major upgrades to bring it up to code, not to mention the inevitable surprises and cost overruns. Can I legally just tear it down and start over?
Starting all over with a new, modern house avoids regulations governing the remodeling of an existing historic structure. It could, however, depending in particular on the age and historic significance of the home, trigger a different kind of regulation.
State or local regulations might require you to give notice to the appropriate agency or commission (most likely the local historic or conservation commission) of an intention to tear down the structure.
A waiting period will follow, typically six to 12 months from the date of the notice. This allows time for the commission, the locality, or even private individuals to react, perhaps by identifying a purchaser for the property who is prepared to restore or preserve it as a historic building.
]]>When a contractor files a mechanics’ (construction) lien, it makes your home into what’s called “security” for an outstanding debt, which the contractor claims is due and unpaid for services or materials. The practical result is that, after a period of time, the contractor can (in the extreme case) attempt to collect that debt by forcing a sale of your home.
Mechanics’ liens are creatures of statute; that is, laws passed by your state legislature. Although the idea behind them is straightforward; a contractor or a builder needs protection against the wrongful refusal to pay for work done; how, exactly, that is legally achieved varies state by state.
Each state has its own mechanics’ lien system on the books. The details can vary significantly. For example, in California, mechanics’ liens expire within 90 days if not perfected (sued on), whereas in most other states, the laws provide longer expiration dates. It's one year in New York, by contrast.
Check with a lawyer familiar with how mechanics' liens work in your state.
To establish a valid lien, the contractor typically must comply with a number of statutory requirements:
If any of the above conditions are not met, the lien is invalid. You can easily check this for yourself; but if you conclude that you’ll need to go to court, you might wish to have an attorney review your work.
In most states, the law applicable to mechanics’ liens on residential property afford more protection against involuntary sale than liens filed against commercial property. Even so, if the lien is valid, if the contractor’s lawsuit is successful and no alternative to foreclosure is available, the contractor could potentially force a sale of your home to collect the debt.
A mechanics’ lien, once recorded, creates a title problem that must be dealt with before you can sell or refinance your home. If, after investigation, you are persuaded that the lien is invalid, you will have to go to the county courthouse or registrar of deeds to remove it.
If the lien appears to be valid, try resolving the underlying conflict with the contractor. Once the lien is filed, both you and the contractor have an even stronger financial incentive to reach agreement before you get to the courthouse. The contractor has already borne some expense in filing the lien, and would incur much more by filing a lawsuit to collect the debt.
For you, the resulting lawsuit and the additional title issues make it worthwhile to resolve the issue quickly. Consider mediation or, if the amounts involved are substantial, binding arbitration.
Prior to negotiations with the contractor or before mediation, you will want to marshal all of the documentation that serves your defense (invoices, letters, photographs, logs of telephone calls, witnesses to the shoddiness or absence of the work or materials, and anything else that supports your position).
Also see, How to Handle Disputes With Home Contractors.
Once the underlying issue is resolved, the contractor can voluntarily file a withdrawal of the lien.
If the contractor refuses to settle, or to engage in mediation or arbitration, you can either contest the filing of the lien immediately after it happens or you can wait until the contractor brings a suit for unpaid materials or uncompensated time. In either case, you’ll want your documentation at hand, even if your claim is a statutory one (for instance, the contractor didn't provide you with a preliminary notice of lien) and be prepared and dissolve the lien.
Also see, Can I Sue My Home Contractor Over a Frivolously Filed Mechanics' Lien?.
If you intend to sell or refinance your house in the near future, time is an issue: you might want to see the lien dissolved quickly, even if you could negotiate a better financial solution with more time.
]]>Despite the name, mechanic’s liens have little to do with actual mechanics. Instead, they are legal documents that essentially reserve someone's rights to seek compensation in the face of nonpayment by whoever commissioned them to do some work. These liens are usually filed by contractors, subcontractors, or suppliers who never received payment for a project that they completed or materials that they provided on a someone's house, land, or other real property.
Imagine, for instance, that you are a homeowner who hired a contractor to build a new swimming pool in your backyard. He does all the necessary work and creates a beautiful pool. But at the end of the project, you refuse to pay the final $5,000 on the contract balance. The contractor can, of course, sue you for breach of contract. But the lien laws give the contractor an additional remedy: filing a mechanic’s lien against your property.
Mechanic’s liens create a cloud on title, and appear in public property records. Liens are sometimes said to “travel with the land,” meaning that anyone who buys your house would take the property subject to the contractor’s lien (or, more likely, demand that you pay it off first).
Practically speaking, this makes it highly unlikely that you would be able to sell your home until you pay off or otherwise deal with any outstanding liens. Similarly, banks and lenders are ordinarily unwilling to refinance homes or lend against property that is encumbered by liens. One way or another, you'd have to pay the lien off or come to some agreement such that the person who filed it will cancel the lien.
For all of these reasons, liens are a nuisance for homeowners. But they give important leverage to contractors, subcontractors, and suppliers.
It is not just general contractors, like the pool installer, who can file a lien. Subcontractors and suppliers also potentially have this remedy. For example, imagine that the pool contractor hired a concrete subcontractor to pour the concrete for the base of the pool. The subcontractor would have no contract with the owner of the property; only with the general contractor.
What happens if the general contractor never pays the subcontractor? She could sue the general contractor for breach of contract. But she can also file a lien directly onto the property owned by the owner. This gives her leverage, since the homeowner will immediately receive notice of the lien and likely pressure the general contractor to remedy the situation and remove the lien. The legislative purpose of these lien laws is to encourage settlement, and also to ensure that workers receive their due compensation.
Not all costs can be included in the amount claimed under a lien. While the exact rules vary from one state to the next, contractors can normally only file a lien for labor, materials, and services that they provided that improved the real property.
In the above example, the subcontractor could include in the lien the value of the concrete, the rental costs of equipment, and hourly time cost for services. But the contractor could not include, for example, money spent on attorneys’ fees to file the lien, since these did not benefit the value of the property. Nor could the contractor include amounts for punitive damages, emotional distress, or other sorts of qualitative damages. The amount of a lien must, broadly speaking, be limited to the hard costs of the improvement to the land or property.
While many legal documents look essentially the same from one state to the next, mechanic’s liens are highly state-specific. In the United States, individual counties are typically in charge of their own property records. This means that different county clerks might have highly particular practices regarding how they require liens to be formatted in order to be accepted.
Moreover, each state has specific limitations periods for when liens can be filed. In some jurisdictions, the time limitation is different for private and public property. For example, in New York, a lien must be filed within eight months of when the last labor was performed or materials were provided, unless the lien is against a single family home, in which case it must be filed within four months.
Because of minor distinctions like these, it is extremely important to consider local law and practice. Before trying to file a lien yourself, you might wish to speak with a local lawyer, specifically one who practices construction law.
]]>Nothing is more infuriating than a remodeling job that starts and then stops because the contractor drops out of sight. You've probably already tried talking in person, emailing, and more. But give one last thought to whether you've missed anything; or can escalate a bit.
A formal written letter, for instance, which lays out the whole chronology of events and what would satisfy you going forward, can get attention when the zillionth in a string of emails won't. See How to Write a Formal Demand Letter.
If you've been working primarily with a foreman, contact a supervisor.
Also, if you haven't already given up on phone calls, take contemporaneous notes on every conversation: whom you spoke with, on what date, and what was said. For double efficacy, follow important phone calls with an email, saying, "This is to confirm the understanding we reached by phone today, that you would...."
Be prepared to be somewhat sympathetic. There can be many reasons for the contractor’s disappearance, some understandable—the contractor has gotten sick or was injured on another job, for instance. With patience, the situation might be one that can be resolved. But other excuses are not so understandable—the contractor is in financial difficulties or took on too much work, for instance.
At a certain point, if all forms of communication are getting you nowhere, you'll need to seriously escalate matters.
If you've received everything you paid for so far, such as labor, materials, and parts or components, then the best choice might simply be to engage another, more reliable contractor.
Keeping the same contractor on the job would save you the immediate trouble of cranking up the search process (research, references, and the rest), but it would invite a repetition of the same problem, perhaps at far greater financial cost. It’s probably not worth it.
If you have paid the contractor in advance for supplies and materials, parts, or components, and you don’t have possession of them, or if the contractor did substantial damage to your house before disappearing, or if you have otherwise sustained financial harm because of the contractor’s negligence, you might have no other choice than litigation.
You will want to balance the cost of litigation against a reasonable estimate of how much compensation you will receive if you win. (Think in terms of monetary compensation; the judge isn't likely to order your contractor back to work, in particular in small claims court, where judges don't have the power to issue "injunctions" at all.)
Fortunately for your pocketbook, your state is likely to have a small claims court system. Here, you can file claims for limited amounts, in most states between $3,000 and $20,000. (See this 50-State Chart of Small Claims Court Dollar Limits.)
What's more, because evidentiary rules and other procedures are simplified in small claims courts, you aren't expected to, and don’t need to, hire an attorney in order to succeed. Most small claims cases are simply presented before a judge, with no attorneys or jury present.
If you have a choice between a judge and jury trial, consider issues like:
Also see this Overview of Small Claims Rules.
In preparation to present your small claims court case, you’ll want to compile documentation supporting your claim. These should show the judge the chronology of what happened, the contractor's bad faith, and the low quality of the work that was done (if applicable). It should also clearly show what work was left undone, long after the expected completion date. Good forms of evidence might include:
All of these will be useful to bring when you appear in court. Be sure to follow the court's rules on making copies for everyone. Fortunately, small claims court clerks can be enormously helpful; their staff are trained to assist with all the procedural matters.
You'll also want to prepare a statement of your key points for the judge and possibly jury to consider, explaining and wrapping up your complaint in an understandable manner and anticipating what the contractor will say in defense. The formal letter you wrote to the contractor can help you prepare this.
If the extent of the damage exceeds the maximum small claim amount, you might prefer to file a claim with your county court. (Alternatively, you can stick with small claims court, while accepting that the most you can be awarded is your state's pre-set maximum amount.)
The additional expenses, however, (in particular, attorney’s fees if you decide representing yourself is more trouble than it's worth), could change your decision about whether or not to litigate. But if the damage amount is high enough, talking to an attorney might be worth your while.
You can file complaints with the Better Business Bureau, Angi, online review sites, and most important, your state’s contractor’s licensing board or commission.
Typically, these boards or commissions have simple, online filing procedures that make it easy to make a complaint against a negligent contractor. The complaints might not lead to a full recovery of the amount of your loss, but you’ll have the satisfaction of knowing that, in the future, this contractor will be less likely to harm other innocent homeowners.
]]>Imagine, for example, an electrician who says she fixed the lighting in your Los Angeles condo without receiving compensation from you, or a brick company that claims it laid bricks in your San Francisco driveway but was never paid the contract balance. These entities can potentially sue you for breach of contract. But even before going to court, they can secure their financial interests by filing a lien.
What exactly is a mechanic’s lien, and what can you do if one is placed on your California home?
As a California homeowner, you have hopefully never encountered a mechanic’s lien; and might not have heard of them at all.
In a nutshell, a lien is a document that gets publicly filed in the California county clerk’s office where the subject property is located. You might know that there are 58 counties in California; the contractor would file the lien in the county where your home is (not necessarily the county where his or her business is based).
Once filed, the lien creates a situation where your home title is subject to the contractor’s stated financial interest in it.
To understand how a lien functions in practical terms, imagine that the electrician who said you never paid her files a $5,000 mechanic’s lien with the Los Angeles county clerk. This essentially means that anyone who buys your property would do so subject to owing the contractor that $5,000. You'll have a tough time selling or refinancing the property, until you either pay off the lien or lower the price by $5,000.
Contractors therefore use liens as a means of incentivizing property owners like you to settle with them.
Now that you have a basic understanding of what liens are and what they do, you can consider how to fight them.
The best way to fight a lien is to avoid it altogether. You might be able to avoid the bother of having a mechanic’s lien filed on your property by engaging in a reasonable negotiation with your California contractor before the lien is filed. Liens are typically a sign of frustration, indicating that the relationship between you and your contractor has broken down.
If your contractor asserts that you owe an extra sum of money, do not just ignore the phone calls or invoices. While you might think that this behavior will convince your contractor to simply go away, realize that the contractor might view it as a sign of disrespect.
You and the contractor might have a good faith disagreement about whether certain work was part of the contract, or about the quality of that work. Rather than ignoring the issue, have a frank discussion about it, or consider going to mediation. In mediation, a third-party neutral (often an attorney or individual with experience in the construction industry) can help you and your contractor to negotiate a fair settlement.
In both negotiation and mediation, you should be open to creative strategies. Rather than paying a lump sum, for instance, perhaps you could schedule payments over time. Rather than fighting in court, you could offer the contractor discounted payment in exchange for a limited scope of ongoing work. The possibilities depend on the facts of the situation.
Of course, there are legal remedies available to California homeowners to fight a lien after it is filed. However, you are likely to save time and money if you find a way to settle the dispute.
If a lien is placed on your property, it will be helpful to familiarize yourself with the statute that permits liens in California: California Civil Code § 8000 et seq. Like with most states’ lien statutes, California’s lien laws are complex. They contain many rules and exceptions, depending on the type of property involved and the work performed. But there are some general important concepts to remember:
Any person or entity that has provided labor or materials to benefit property is entitled to file a lien. California Civil Code § 8400 specifically says that someone who works on improvements have a right to file a lien, including the direct contractor, subcontractor, material supplier, equipment lessor, laborer, or design professional (such as architects, engineers, or landscapers).
According to California Civil Code § 8430, lienors can file a lien in either the amount unpaid under the contract or in the amount of any additional (uncompensated) work that they performed above and beyond the contract. Lienors cannot include consequential damages in their lien, such as lost profits, damages due to delay, or attorney’s fees. They are largely limited to the value of the labor or materials that you contributed to the real property.
Under California's statute, the person or entity filing the lien must include on the document the company’s name, the owner’s name, the location of the property, and the amount of money still due, among other pieces of information. The lienor must also describe the labor or material provided (in other words, how the contractor improved your property). If they fail to follow these procedures, the lien might fail.
There are several strategies to get a lien removed in California. The first, as mentioned, is to negotiate a resolution with your contractor.
A second is to obtain what’s known as a “lien bond,” through a surety company. This bond essentially guarantees payment to the contractor in the amount of the lien if the contractor is successful on the legal claims, but also removes the lien from your property record.
A third option is to petition a court (specifically, the California Superior Court serving your county) to remove the lien. Your grounds for removing the lien could include, for example, that the contractor never did the work that the lien claims, or that the work was already compensated. This would require you to present evidence in support of your allegations, possibly through expert testimony.
You can also attack legal deficiencies in the contractor’s lien filing. For example, California is somewhat unusual in not letting would-be lienors simply file a lien out of nowhere. They must first serve a formal “notice” to the owner (you!), or your general contractor (if you have one, and a sub is filing the lien). (See California Civil Code § 8200.) The public policy purpose is to advise owners of the fact that someone is claiming to be owed money on a construction project, creating an opportunity to work out the dispute.
The notice must include a general description of the work done, an estimate of its total price, and a lengthy formal statement of the owner’s and lienor’s respective rights, using language spelled out in the lien law. If your notice didn't comply with the statutory rules, you've got grounds upon which to fight the lien.
Even after giving you this notice, lienors must meet another critical deadline: Under California Civil Code § 8412, the lienor must file their lien within 90 days after completion of the work or delivery of the materials for it to be valid. Three months is a relatively short time, which means that you might be able to defeat a lien it the contractor files late.
Keep track of each of these deadlines: They are a homeowner’s friend. Often, busy contractors will sit on their rights for too long, in which case California law will no longer permit their liens to be sustained against your property.
Finally, remember that liens and the laws surrounding them in California can be highly technical. Retaining an attorney with experience in construction or real estate law might be worth your expense, depending on the amount of money in dispute. For more on retaining a qualified lawyer to suit your situation, check out Guide to Finding an Excellent Attorney.
]]>Winning your case in court isn't the end of the story, however. The contractor might not follow through and pay the amount ordered by the judge. Is it worth it to chase your home contractor down for the money?
It can be extremely frustrating to win a lawsuit only to realize that you still need to chase after the deadbeat contractor. Most established businesses will pay their judgments after losing in court, because they want to maintain favorable relationships with banks and lenders and avoid online one-star reviews.
For some businesses, though, this isn’t the case. Sometimes that’s because they simply don’t have the cash on hand to pay the judgment. Other times, it’s because they hope that you will be dissuaded by the difficulty and decide not to pursue them.
If your contractor finally picks up the phone or shows other signs of being responsive, you might try working out a payment plan, whereby the contractor agrees to pay the judgment over a series of months. The contractor might appreciate this courtesy, and it might make the large judgment seem manageable.
If your contractor continues to be nonresponsive, your calculus is more difficult.
You can return to your county clerk and ask about your state’s judgment-enforcement process. In most states, this involves either filling out a garnishment application or sending an informational subpoena to your contractor forcing disclosure of the business's assets.
This will require at least one additional notice to your contractor that you are really intending to collect on your judgment; this alone might scare him into paying.
If the contractor still does not pay up, and assuming the court ultimately approves your request to garnish or “attach” certain bank accounts or property, you will likely need to retain a third-party collections company to pursue those assets.
Such companies typically charge fees; either flat fees, or a certain percentage of whatever they collect. This will be in addition to court fees (usually not too onerous) that you’ll pay for the filing of the garnishment application.
Also consider your time and effort in filling out these documents and communicating with the court and the collections company. All of this is time-consuming. You’ll need to think carefully about whether the amount of your judgment is really worth all of that time and energy. But if you have a judgment for a large amount of money, the time and fees are more likely to be worthwhile. You might, after all, be ultimately successful!
]]>Certain projects add more resale value than others. Here are some that generally have the best financial impact.
Almost any project has the potential to negatively affect resale value. A general rule is that the more personal your choices are—meaning they're made to suit your particular lifestyle or taste—the less likely they are to have a positive effect on resale value.
This doesn't mean you shouldn't do the project. It just means you shouldn't expect it to add value to your home and should anticipate that your home could be more difficult to sell as a result. For example, while a soundproof music studio might be your dream come true, it won't be practical for a young family looking for an extra bedroom for their new baby. These types of buyers won't pay the premium it cost you to build the studio and they might even be turned off by it.
Here are some general indicators that a project might have negative resale value.
Luxury upgrades. While no one wants to see the absolute cheapest renovations in a home, the highest-quality upgrades often don't have the return of mid-range ones, unless you're in a very high-end home. Marble floors in the bathroom or custom cabinets in the kitchen might be nice, but don't assume buyers will pay proportionately for these luxuries.
Rooms that don't fit with the floor plan. Converting the back patio to a family room might be a perfect way to add more space to your home, but if your dining room window now looks into the family room, it probably won't be well loved by prospective buyers.
Garage conversions. Garage conversions can give homeowners much needed space, but buyers like having garages, too. Thus converting this space usually won't increase value.
A swimming pool. A pool might seem like the ultimate luxury to you, but when it comes to selling, it could be more of a hindrance. It could be seen as a safety hazard by parents with small children. Consider also whether it's usable most of the year—while a pool might be a major selling point in parts of Florida and California, it could be a serious liability in Minnesota or Wisconsin.
Even if you do the right kind of projects, you're not guaranteed a high return on your investment. Before deciding whether an improvement will add value, consider some more general factors.
Your changes should conform to the neighborhood. If you live in a neighborhood of two-bedroom bungalows and you add a second story to put in a couple extra bedrooms, you aren't likely to see a high return. Buyers looking for homes that large won't be looking in your neighborhood. On the other hand, if many of your neighbors are making similar improvements (perhaps because these affordable homes are on large lots and in a great school district), you might fare well doing the same.
Upgrades to a newer home probably won't have the same impact that they would in an older home. In a 1950s home, an original kitchen's aged or out-of-style cabinets and floor tile might make buyers think: "I guess we'll start with a kitchen remodel!" The same isn't necessarily true of a house that's just a few years old, which means you're less likely to increase a newer home's value significantly by remodeling.
Your upgrades should be in sync with the rest of the house. Focusing narrowly on only one room—the perfect master suite, for example—can be a mistake. If the rest of your house was last updated 30 years ago, it will look even shabbier in comparison to the upgraded suite.
Stay within the price range for similar homes. From a practical perspective, you shouldn't expect to recover as much from improvements to a modestly priced home as you would for improvements to a high-end home. Spending $30,000 remodeling a kitchen with top-of-the-line appliances in a home that costs $150,000 won't have nearly the return the same remodel would in a $500,000 home.
The real estate market always has its share of "flippers"—real estate investors with varying levels of expertise who buy properties and fix them up, only to turn around and sell them for a profit a short while later. However, before you get dollar signs in your eyes, realize that it's mostly the pros who can make a living at this. They've got contractors on staff and a fine-tuned idea about how to get the highest return for the lowest project costs.
And the flippers are keenly aware that even projects with the highest resale return don't necessarily pay for themselves. To see what you can expect to recoup, visit Remodeling Magazine's Cost vs. Value Report. Then ask yourself how important it is to recoup your costs. After all, part of the idea is to enjoy the house while you live there.
]]>Often defined as a house that is 80 to 400 square feet, and built either on a traditional house foundation or on a trailer bed (with or without wheels), tiny houses have grown rapidly in popularity. Although a uniform set of building standards has been developed that applies to the construction of these miniature houses, not all municipalities have adopted them. (The uniform standard is called "Appendix Q.")
Accordingly, in some cases, depending on a number of factors including size of the tiny house and its location, a building permit might not be required.
If the intent is for the tiny house to be occupied, though, in most all cases the local building code will apply. Building codes (as well as Appendix Q) impose certain safety and construction standards to make sure structures are safe for occupancy.
For example, your area's building codes might impose minimum standards for the installation of electrical components in a house to make sure those components are safe and not a fire or electrocution hazard. The concern about making sure a house is safe for occupancy remains even when the house is a tiny house.
Depending on the location and type of the tiny house, a different safety standard might apply. For example, if the tiny house is built on wheels, the local jurisdiction could require that it comply with the same safety standards that apply to recreational vehicles.
A good next step is to contact your local building department to inquire about the zoning, standards, and what permits you must obtain. A building official can help determine what, if any, construction standards apply to your proposed tiny house.
Unfortunately, complying with building codes that aren't tailored to tiny houses can be difficult. For example, you might encounter a building code that requires at least one room of 120 square feet. That can be difficult to accommodate in a tiny house.
A contractor who is familiar with the applicable building code and the issues facing tiny-home builders can be a valuable resource. Tiny houses have their own complications, including how to get all that stuff into a such a small place. An expert can help avoid pitfalls with both the permitting and construction processes.
You also might seek out other tiny-house owners in your area, since they will hopefully be familiar with the applicable building code.
Some property owners might be hesitant to contact the planning or building department in fear that it will increase building costs and alert the local jurisdiction that they will be building a tiny house. Attempting to conceal one's activities is, however, a risky choice. If a neighbor complains to authorities about the tiny house, you might have to remove the tiny house and pay fines.
If unsure of what your legal obligations are, contact a land use attorney in your area.
]]>But such an arrangement can go awry. The homeowner might neglect to pay you, and dodge your calls and emails. What can you do? Do you always need to sign a written contract for every little job?
Few things can be as frustrating for a small business owner than a customer who refuses to pay. Small contracting businesses have a great deal of overhead, between the equipment and the labor and materials necessary. A non-paying customer can disrupt those cash flows. What should you do if a customer refuses to pay after you’ve rendered contracting services? Here, we'll suggest the following possibilities:
First, see whether you can discuss the situation (if you can get the customer to answer the phone). Was there a particular area of the work that the customer was unhappy with? If so, is it easily fixable, for example, by installing a different doorknob or switching a small fixture? It might be worth your effort to put a bit more work into the project, if that will break down the barrier to payment.
Second, if the disagreement is larger or if the homeowner is simply unwilling to talk with you about the nonpayment, send a demand letter. A formal letter, written on your business letterhead, will likely be taken seriously, especially if you note that you are “reserving all legal rights” to collect on your earnings. The letter should be polite but firm, stating all of the facts and reminding the homeowner of the obligation to pay.
If other options aren't working, consider filing a mechanic’s lien in the county clerk’s office where the property is located. Such a lien essentially creates a cloud on title to the property. Homeowners hate having such liens, because it makes it far more difficult for them to sell or refinance the home.
Speak with your county clerk about the specific procedure for filing a lien. Sometimes a lien will add the necessary pressure to force the homeowner to write you a check.
Finally, consider suing the homeowner. A small claims court lawsuit does not require a lawyer, and it puts the homeowner on the defensive. The fact that you do not have a written contract is not a bar to the lawsuit or the mechanic’s lien, with the right evidence in hand.
Consider the different ways that you could prove the existence of the agreement, for example through emails or witnesses. You can also sue for the fair market value of the labor and materials that you’ve provided to the home, even without a formal contract in place.
As for whether it's worth signing written contracts over small jobs in the future, you will soon have a sense of how the time balances out, and might decide to make use of the written-contract option more often.
]]>Unfortunately, if a dispute arises, having no written contract can make matters difficult to resolve. Let's say, for example, that you hire someone to install new carpet. But she puts in the wrong color, or the wrong fabric. Or maybe she tries to charge you more than originally agreed. A small job, but a concern you can't just let ride. Can you sue the contractor, even without a written contract?
First, the good news. You can sue a contractor for breach of contract, even without a written contract. (Actually, the contractor can sue you as well, for failing to uphold your end of the oral agreement.)
Something called the statute of frauds—a legal doctrine describing when a contract must be written in order to be enforceable—does not bar the enforcement of an oral contract for the provision of services.
Then it's a matter of proving the oral contract existed, however. You can end up with a classic he-said-she-said situation.
An alleged oral contract creates difficult evidentiary questions for the judge. As the plaintiff (the person suing), you would have the burden of proving not only that you entered into such a contract, but that (continuing with an earlier example) you and your contractor agreed to a specific type of carpet, and that she then provided a different type.
The mere fact that the contractor showed up at your house and did some work (which she isn't likely to disagree with) provides a starting point for alleging that the two of you had entered into an oral agreement. If you made any deposits or partial payments, evidence of this will be helpful, too.
As to the specifics, you might need to come up with additional evidence, such as emails between you and your contractor, a witness to your conversations, or perhaps even carpet swatch samples.
Similarly, if your contractor wanted to sue you for money you allegedly promised to pay, she would need to show emails or to present witnesses, or otherwise show proof of the reasonable value of her services.
Given the small amount of money at stake, small claims court might be your best option, allowing you to proceed without hiring an attorney. But this means it will be up to you to gather and present the sort of evidence described above.
See Breach of Contract Cases in Small Claims Court for more on this.
In many states, the statute of limitations (legal time limits on how long you can wait before suing) is different for oral contracts than it is for written contracts.
Typically, the statute of limitations on oral contracts is a bit shorter, reflecting the belief that oral promises might be forgotten over time. Therefore, as a plaintiff, you should be sure to double-check the relevant statute of limitations in your state to ensure that you don’t miss your opportunity to file suit.
]]>We'll also discuss the consequences of failing to comply with the law.
After doing preliminary research about the qualifications you're looking for (a carpenter with fine woodworking skills or a nanny with a background in child development, for example), you'll probably have a few options:
Hire a company. Usually, if you hire a company to do the work, the company will send over qualified workers and be in charge of paying them. It will also pay employment taxes and have insurance coverage to protect you in case of worker injury or damage to your property. (Ask for proof of this insurance.) It's not uncommon to hire companies to clean your home or garden or to service your pool.
Hire a worker through an agency. If you want a skilled professional but don't know where to look or want one already individually vetted by a third party, you can hire through an agency. You could pay the agency directly, in which case the agency will probably be the actual employer and will cover insurance, handle employment taxes, and pay workers. (Confirm this with the agency first.)
Other agencies might charge you a fee to find you a qualified employee, but you will be the employer and handle these tasks. This is common when hiring a nanny, for example.
Hire an individual. If you want to screen and select your own service provider, pay and negotiate directly, and direct the person's work, your best bet is to hire an individual. As we'll explain below, you have more obligations as the employer if you elect this route.
If you decide to hire an individual (not a company or agency) to work in your home, the question arises as to whether the worker is considered your employee or an independent contractor. The answer will make a big difference in which tax laws and other rules you have to follow. Broadly speaking, you have more responsibility for an employee than you do for an independent contractor.
To complicate matters, there's no one definition of who qualifies as an "employee." Different government bodies have different definitions, which you'll have to familiarize yourself with in order to follow the appropriate laws. For example:
The more control you exercise over the worker, the more likely it is that you'll be considered the "employer" by any of these agencies. If you hire the person to work certain hours, direct what the person does and how it's done, and the person works only for you, you're probably an employer. For example, a nanny you hire to watch your children each day will more than likely be considered your employee.
On the other hand, if the person offers services to the general public, furnishes the needed equipment or tools, and controls how and when work is done, the person is more likely an independent contractor. Gardeners or trained professionals like electricians are commonly independent contractors. (To learn more about who qualifies as an employee, read Employees vs. Independent Contractors.)
If a worker is an independent contractor, your federal tax responsibilities are few. In fact, you don't even need to fill out the IRS form (1099-MISC) usually required when hiring independent contractors, because an exception excludes household workers.
But it's a different story if you are the worker's employer. Here are some of your responsibilities:
Get an employer identification number. For starters, you'll need to let the IRS know you're an employer and get an employer identification number (EIN), which you can do via the IRS website at www.irs.gov.
Check immigration documents. Also, you'll have to verify that the worker is legally authorized to work in the United States by having them fill out U.S. Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification and present documentary proof of eligibility to work. You won't have to submit the I-9 to anyone, but you will have to keep it on hand in case you're audited or investigated.
Pay taxes. If you pay a worker $2,700 per year or more in 2024 (the amount changes each year), you and the employee must each pay 6.2% of the employee's wages in Social Security taxes. You and the employee must also pay 1.45% each for Medicare taxes. In addition to your half, you're responsible for withholding the employee's share of these taxes. And you'll have to check with your state tax agency to find out its withholding requirements.
If you pay the employee $1,500 or more in any calendar quarter (any three-month period), you'll also have to pay federal unemployment (FUTA) taxes. The rate varies from state to state, but is usually 6% of the first $7,000 of annual wages paid to an employee.
Also, you'll have to file IRS Form W-2 at the end of the year. Some people choose to hire a payroll service to handle these tasks.
What happens if the person you've hired is injured on the job? Usually, employers are responsible for paying for workplace injuries, and state law requires employers to have workers' compensation insurance to cover them. Whether you'll need it or not depends on the state you're in. Some states exclude domestic employees entirely, while others limit it to employees who work a certain amount or to employers of a minimum size.
If you're required to purchase workers' compensation insurance, you might be able to obtain the coverage through your homeowners' insurance policy. Though coverage for workers is generally excluded, you can potentially buy a rider or endorsement, depending in part on your state's laws.
Also, you'll probably have to pay for state unemployment insurance for your domestic worker. This provides income replacement and other work placement services to the worker if you end the employment relationship and the person is unemployed. The cost of this insurance varies by state.
One of the best reasons to hire contractors as an intermediary is that they're probably required by state law to provide workers' compensation insurance to employees. Virtually all employees of profit-making businesses, and most employees of nonprofit organizations are covered. These state-run programs are funded by employers, and provide medical coverage and other compensation to workers who are injured on the job, regardless of whether they or their employers' actions leading to the injury were negligent.
Some states provide limited exemptions allowing certain employers (such as sole proprietors) to opt out of the workers' comp system. In most states you can assume, however, that anyone working on your house is (if employed by a licensed general contractor or subcontractor) is covered by workers' compensation.
If you hire a domestic employee, you will have to comply with state and federal laws regarding paying that employee. For example, you must pay the employee at least the minimum wage in your state. As a practical matter, you might have to pay much more than the minimum wage, because it can be hard to find someone willing to work for any less.
You might also have to pay overtime, though federal law doesn't require it for a household employee who lives in your home or for caregivers. (To learn more about the relevant rules, read Overtime Pay: Your Rights as an Employee.)
To learn more about the rules for hiring independent contractors, see Consultant & Independent Contractor Agreements, by Stephen Fishman, J.D..
]]>Small claims courts are generally a good mechanism for dealing with these types of disputes. For the most part, such courts allow litigants like you to pursue legal claims against businesses or individuals without needing to hire an attorney. Litigation in small claims court is also typically faster than litigation in the state’s regular court of general jurisdiction. How should you pursue such claims against your contractor in Small Claims Court in the Lone Star State?
In a dispute with a contractor, running to court is rarely the best first step. More likely, you should begin by speaking personally with your contractor about the issue at hand. After reminding your contractor what he promised (ideally with reference to the written contract, assuming you have one), provide an opportunity for the contractor to explain the underlying issue. Is the job more expensive or complicated than was anticipated? Does the need more time, and if so, exactly how much? Is there an issue that the two of you can work out?
If this softer strategy gets you nowhere, put your concerns in writing. A letter to the contractor explaining what he promised (again, with reference to any written contract) and what actually transpired is likely to carry more weight than an oral complaint. Be sure to include a sentence at the end of your letter stating that you reserve all your legal rights and remedies.
Sending such a letter has a dual purpose: If you eventually litigate, it will serve as evidence, showing that you did your best to avoid going to court. Sometimes called a “good faith letter,” it demonstrates to a busy small claims court judge that you made reasonable efforts to resolve the dispute amicably before burdening the justice system. In other words, it can make you appear as the “good guy.” You wouldn’t want the contractor to gain the judge's sympathy by protesting that your lawsuit was the first he'd ever heard that there was a problem.
While many – maybe most – disputes with contractors can be solved through negotiation, not all can. Sometimes you’ll have no viable choice other than filing suit. People can represent themselves in Texas small claims courts without bringing a lawyer along. Also, no jury will be present in the courtroom. Instead, your case will be heard by a “magistrate” – most likely a lawyer from the community, appointed to resolve lawsuits for money damages not exceeding $20,000. There are a few important things to keep in mind when you preparing your lawsuit.
One of the most significant limitations on Small Claims Court is that your claims cannot exceed $20,000. This is one of the highest monetary limits of any state. However, the primary relief requested must be monetary – that is, you must be seeking money, rather than some other form of relief, like a court order that your contractor must do further work on your home. If you seek to recover more than $20,000 from your contractor you must consider another court, and in most cases, the assistance of an attorney.
Texas also has statutes of limitations on when you can file suit. The two most common causes of action against contractors are breach of contract (four-year limit under Tex. Civ. Prac. & Rem. Code § 16.004(a)(3)) and property damage (two-year limit under Tex. Civ. Prac. & Rem. Code § 16.003(a)). Before filing, make sure that the contractor’s error or breach occurred within that period.
To formally begin your case, you can file a Complaint in the clerk’s office for the appropriate Texas county. Note that each county uses a slightly different form for its Complaint; Denton County's form is a good example, showing the information you would be required to provide. The appropriate county could be where the defendant contractor is based, or (more commonly) where your home is located, since that’s where the harm occurred.
Your Complaint should include a sworn statement setting out the facts of your case. It's a good idea to frame it as a story, beginning from the moment you and your contractor first agreed to the scope of work and reviewing all that occurred after that. Don't try to sound like a lawyer! You don't need to add legal jargon, or even citations to statutes and legal treatises. In Small Claims Court, it's the judge’s job to know the details of the law; your job is to present the facts of your case in a clear and convincing manner.
After you've filed the Complaint, the clerk will send a copy to the defendant contractor, along with a summons to appear in court on a specified date. That will be the date when each of you orally present your case to a judge.
Filing a lawsuit in Small Claims Court is not free. Texas’s counties are decentralized, in terms of how they charge filing fees. Contact your county’s clerk to ask about the appropriate filing fee.
When you appear in court for your trial date, it is crucial to be prepared. Court can be a stressful environment, and it’s normal to be nervous when speaking to a judge–especially in this situation, with the contractor right next to you. Practice is key. To rehearse, it's good to ask a friend or family member to listen to your presentation, trying to get it down to roughly one or two minutes. Have the person ask questions and tell you what parts seemed less convincing or clear.
Keep your exposition simple and direct. Small claims court judges have large caseloads and see dozens of litigants every single day. Avoiding irrelevant facts will make the judge’s job easier and could lead to a better result.
A second important aspect of convincing a judge to rule in favor of your claim will be the evidence you present. The last thing you want is a he-said/she-said situation, where you and your contractor simply disagree on whether or not he properly performed his duties.
The best evidence will likely include: 1) Any written contracts between you and the contractor outlining the work he promised to perform, the timeline for his performance, and the payment agreed upon; 2) Any proof of payments you've already made to the contractor; 3) Any correspondence (emails or letters) between you and the contractor describing or related to the dispute; 4) Photographs of your home before and after the construction work, especially photos that show shoddy workmanship. In some situations, you might also bring witnesses with you to court to describe elements of the story to the judge.
One frustrating aspect of small claims court is that even if you “win” your case, all you really get is a piece of paper (called a judgment). Honorable contractors will see that they’ve lost in court and will pay you the amount that the judge ordered without you having to take extra steps; especially if the contractor is local, and knows that its reputation is important for gaining future customers and maintaining good relationships with local banks and lenders. But not all contractors are so upright in their behavior. In the end, you'll have to be the one to enforce the court's judgment if the contractor doesn’t willingly pay. Enforcing a judgment can be time-consuming and costly.
The Texas Bar Association provides helpful resources on collecting judgments. If the contractor fails to pay you, you will need to return to court to file additional paperwork. The judge might set a schedule for payment that will be reasonable for the contractor (for example, if cash flow is an issue). Alternatively, the judge might order that the contractor’s bank accounts be garnished.
]]>Most home contractors ask, in negotiating the contract for work, for some amount of money to be paid up front. Progress payments are an accepted and important "best practice" for mitigating the risk of sinking time and money into the job for zero reward.
Such payments could be structured in a number of ways. If, for example, the project will take about one month to complete, you could divide the cost and ask the homeowner to pay in equal installments on four consecutive Fridays. Another option would be to base your payment on hitting certain construction goals (for example, when you install the tiling in a new kitchen, you’ll receive a certain percentage).
Alternatively, you could ask for 50% of the cost up front, before you do any work at all, and then the remaining 50% upon completion. Or you could adjust those percentages in a way that accommodates both of your risk tolerances.
If this is your first project as a contractor, the homeowner might want to hold 75% until completion; if the homeowner seems likely to default, you might demand 75% up-front.
Progress payments like these are helpful to contracting operations of all sizes, but especially smaller businesses, so as to minimize the potential for a homeowner to refuse to pay after work has been done at your expense.
If the homeowners have paid you nothing, or still owe you a balance at the end of the job, you need to speak with them to clarify the matter. Are they withholding payment because they’re simply trying to negotiate a better deal for themselves after the job is complete? Are they withholding payment because they’re alleging you did something wrong? Are they withholding payment because a subcontractor or supplier is claiming nonpayment?
If it’s the first situation (simple dishonesty and negotiation tactics) consider whether you can afford to be paid less than 100% of the contract fee. It might be less expensive to “take a haircut” and accept a portion of what they promised to pay, rather than hiring a lawyer to fight over the precise balance. But see below for other possibilities.
If it's the second situation (an allegation that you did something wrong) take the high road. Most often, homeowners will withhold payment when they perceive that you didn't do what you promised, took longer than you said you would, used inferior materials, or somehow failed to meet expectations. Offer to visit the home and inspect the situation. If you really did make an error, see if you can correct it without expending a great deal of additional resources, or perhaps compensate by doing other handy work around the house. Good word of mouth from a consumer who sees your good faith effort to correct the situation will surely pay dividends for your business.
If it’s the situation of an unpaid supplier or subcontractor, put yourself in the homeowner’s shoes. A homeowner hires a contractor to handle a job. Whether that’s a kitchen remodeling or a garage renovation, homeowners generally do not want to be annoyed with managing different down-chain employees. However, these same folks can cause problems for the homeowner if they’re unpaid, notably by filing a lien on the home. Generally, it’s your responsibility to manage and pay any down-chain subcontractors or suppliers that you’ve retained.
While sometimes you’ll be able to correct whatever the homeowner’s complaint is, other times, their feelings or expectations, or the amount they're withholding, will be unreasonable. Sometimes you’ll have no control over subcontractors and suppliers who are annoying the homeowner.
In these situations, the remedy for contractors is generally to file a lien against the home. A lien (sometimes called a “mechanics lien”) is an official filing with the county records office that puts the world on notice of your claim against the homeowner. It shows your "security interest" in the home.
Liens are a significant annoyance to homeowners, because it makes it extremely difficult for them to sell or refinance their property, since buyers and lenders typically require clear title. Often, merely filing a lien will be enough to incentivize the homeowner to settle with you (sometimes called “satisfying the lien”). If they still refuse to settle, you can foreclose on the lien; that is, sue the homeowner for the amount you are owed.
Although liens tend to be simple forms to file, county clerks are often meticulous about their formatting requirements. You’ll probably need to specify your dates of work, amount of money claimed, and any other contractors on the project. An error in the formatting of the lien document can render it unenforceable. Check with your local county clerk’s office to see whether it has a set form for mechanics lien filings.
Even without a lien, a contractor can in many situations sue a homeowner for simple breach of contract. This lawsuit can be brought in regular civil court or in small claims court, depending on the amount in dispute (disputes that are for less than a few thousand dollars will usually be directed to a dedicated small claims judge).
To prevail on your lawsuit, you’ll need to establish that the homeowner violated the terms of the contract despite your having performed the agreed-upon work. Key pieces of evidence might include:
These sorts of documents would help to establish that the homeowner breached the contract between you.
]]>When you hire a contractor, you can expect an "estimate" of the total cost. But that's simply the contractor’s best professional assessment, including the cost of hiring any subcontractors, the price of materials, and any other labor involved. What happens if after the work is done, the total bill is far beyond what you expected, and you see indications that the contractor didn't follow some of your instructions?
Getting an estimate from a contractor is different from getting a quote. A quote is an offer to enter into a contract. It should be the exact amount that a particular task will cost, without much “wiggle room.” Ideally, both quotes and estimates should be put into writing, although some contractors will intentionally avoid doing so.
Unfortunately, if you do not receive a precise quote, but only an estimate, you cannot really hold the contractor to the amount initially suggested. Moreover, if your contractor did not put anything on paper, even proving that the estimate was a certain amount could become your word against his.
None of the above necessarily means that you should write your contractor an check for an amount that seems inappropriate. Estimates, generally, must be professionally reasonable. A 10-20% overage might be considered reasonable, especially if the contractor discovered issues along the way that he couldn’t have been aware of initially (for example, mold or past flooding).
A contractor who does discover problems in the course of work would normally notify the homeowner and explain the possible budgetary ramifications. A change order, explaining the costs and changes involved, should be agreed upon.
But without a formal change order, a contractor should not spend money on, say, nicer flooring and lighting than what you discussed.
To follow up, begin with a non-hostile phone conversation. Ask the contractor to explain why the price rose so dramatically from the initial estimate. He will likely say something about unexpectedly high expensive labor and materials.
Request an itemized invoice, explaining that you do not feel comfortable remitting any payment until you can further examine this issue. This invoice should include a list of many suppliers, subcontractors, or workers on the project, and a listing of all materials purchased.
Examine that invoice closely for areas where you believe your contractor spent more than was discussed. Next, if appropriate, draft a brief letter, or hire an attorney to draft a brief letter, explaining why you feel that you should not have to pay for these materials and the associated labor. Explain that you made clear that you were looking for basic work, nothing ornate, and that this was clearly communicated from the outset. You might offer to pay the amount of the original estimate immediately.
Your contractor might object, and demand something closer higher. After all, the contractor might have subcontractors or suppliers who are pestering for payment, so in this sense, you have leverage to withhold it. Continue negotiating until you arrive at a fair number in the middle.
Keep in mind, a home contractor might become frustrated and file a lien. A lien is essentially a cloud on title, filed with the county clerk, by a contractor who did work on a piece of property. This can be an impediment if you’re looking to sell your home.
Your contractor could also file a lawsuit. This would allege that you breached your contract to pay for the fair and reasonable value of the goods and services. Should your contractor sue you for your nonpayment, you would certainly have defenses to the claims, given the lack of notice of the increased costs and intentional overspending. It is unlikely, however, that your contractor would sue you for a relatively small sum of money, such as a few thousand dollars; the cost of the lawsuit alone would make it more advantageous for the contractor to attempt to negotiate with you and collect as much money as quickly as possible.
]]>But what happens if you realize the contractor has been negligent in a variety of ways? Perhaps the tiles are not what you'd wanted; the workers are unprofessional; and/or the progress has been slower than initially discussed. Should you take the contractor to small claims court to recover the amount you've paid already? Here are some considerations regarding whether to file suit, and where to do so.
Sometimes, contractors fail to fulfill promises because of circumstances outside of their control, such as a lack of available supplies or a negligent subcontractor who has caused delays. Hopefully you can keep the communication lines open, and find out about such issues.
Other times, though, the contractor really is to blame, perhaps because of having hired unqualified workers or made needless errors in ordering supplies. In some situations, you might want to hire another professional to give you a "second opinion" about the work that's been done so far.
In any case, running to court should not be your first step. A simple but serious conversation might ultimately more productive. Politely but firmly remind the contractor what was promised. Ask that your contractor explain, from their perspective, what the problem is. Is the job more expensive or complicated than anticipated? Is it because the appliances or supplies you want aren’t available? See whether you can work out the delay or problem.
As a second step, assuming you do not want to hire an attorney, try writing a letter to the contractor. Clearly set forth what was promised (quoting the contract, if a written contract exists) and explain what is actually occurring. Is the work three months behind schedule? Did the contractor install maroon tiles instead of blue?
Sometimes, a written statement outlining your concerns can get more traction than a conversation. This is particularly true if you include a line at the end of your letter stating that you reserve all your legal rights and remedies.
If the above avenues get you nowhere, you might need to sue the contractor to truly get some attention. Small claims court might or might not be the appropriate venue. They typically have limited jurisdiction, meaning that the judges' hands are somewhat tied regarding what they can do for you.
For starters, small claims courts usually can only award money damages. This means that the judge cannot, for example, order that your contractor actually complete the work on your house. For this type of order, which is sometimes referred to as “equitable relief,” you would need to file your lawsuit in a general trial court.
What's more, small claims courts usually have a monetary limit on damage awards: for example, no more than $5,000. This means that you cannot sue for an amount more than the limit set by your state.
Broadly speaking, a person should not file a lawsuit in small claims court unless it's an absolute must. As a practical matter, the work on your home will no doubt come to a halt pending the court hearing and decision.
It might be a more efficient use of your time and money to see whether your contractor could complete the job quickly for a bit more compensation. This might seem unfair, since the contractor probably agreed to a budget and schedule at the beginning, but you must weigh this against your alternative of protracted litigation.
Having said that, a benefit to small claims court is that you normally do not need to hire an attorney. The paperwork is fairly straightforward and is designed for an unrepresented litigant. This saves you money. And the filing of the lawsuit alone might scare your contractor into compliance with your original contract. So, if your contractor owes you less than the jurisdictional limit for a small claims lawsuit, and you would rather have the money than a court order compelling the contractor to complete the job, a small claims action might be your best solution.
It can be frustrating to win a lawsuit only to realize that you still need to chase after the deadbeat contractor. Most established businesses will pay their judgments after losing in court, because they want to maintain favorable relationships with banks and lenders, and avoid one-star reviews on various websites.
For some smaller businesses, sole proprietorships, or individuals, though, this isn't necessarily the case. Perhaps they simply don't have the cash on hand to pay the judgment. Or they're hoping you will eventually give up on pursuing them. You might hear nothing from them, even after attempted contact.
If your contractor finally picks up the phone or shows other signs of being responsive, you might try working out a payment plan, whereby the contractor agrees to pay the judgment over a series of months. The contractor might appreciate this courtesy, and it could make the large judgment seem manageable.
If your contractor continues to be non-responsive, your calculus is more difficult.
You can return to your county clerk and ask about your state's judgment-enforcement process. In most states, this involves either filling out a garnishment application or sending an informational subpoena to your contractor forcing them to disclose their assets. This will require at least one additional notice to your contractor saying that you really intend to collect on your judgment; this alone might scare them into paying.
If the contractor still doesn't pay up, and assuming the court ultimately approves your request to garnish or "attach" certain bank accounts or property, you'll likely need to retain a third-party collections company to pursue those assets. Such companies typically charge fees; either flat fees, or a certain percentage of whatever they collect. This will be in addition to court fees (usually not too onerous) that you'll pay for the filing of the garnishment application.
Also consider your time and effort in filling out these documents and communicating with the court and the collections company. All of this is time-consuming. Think carefully about whether the amount of your judgment is really worth all of that time and energy. In this example, for $1,000, you might answer that question in the negative. But if you have a judgment for $5,000, perhaps you might feel that the time and fees are worthwhile. You might, after all, be ultimately successful.
]]>Building permits are written authorizations issued by a city or county to construct a project. They are required for most construction or remodeling projects. Their purpose is to ensure the safety of the work and its compliance with building, construction, and zoning codes, for both the homeowners' personal safety and public safety, along with broader considerations.
Not all construction requires a building permit. Whether your project needs a permit depends on what is required by your local building code. Each municipality is governed by its own code, which has its own permitting requirements. Codes tend to reflect regional issues. For example, in Florida, building codes often focus on safety considerations caused by humidity and heat. In rural regions prone to forest fires, the building code might include strict fireproofing requirements.
The projects most likely to require a permit are those that change the structure or use of a building or have the potential to create unsafe working conditions. For example, you will likely need a building permit to:
Projects that don’t usually need a permit include:
In addition to obtaining a building permit, depending on the scope of your project, you might need to obtain special system permits, such as electrical, plumbing, or mechanical permits. For example, you might need to obtain a plumbing permit if you plan to install an underground lawn sprinkler. Or, you might need a mechanical permit to install a central air conditioning unit.
The only way to determine whether your project needs a permit is to consult your city building and permit office (online or directly). They are accustomed to addressing questions by phone and in-person, so don’t hesitate to reach out to find the answers you need.
The typical steps to obtaining a building permit are:
The exact process varies by location.
If you hired a contractor for your project, it is customary for the contractor to arrange for; or, in contractor lingo, “pull” the permit. This is a good idea because typically the person who pulls the permit is responsible for construction following the code.
If you pull the permit, you will be considered the contractor (at least in the eyes of the city) and liable if there is a construction problem. Contractors are also often familiar with the process and the city’s inspectors. The contractor's preexisting relationship with the city can work to your benefit.
On the other hand, if your contractor is charging by the hour, you might save money by completing the permit paperwork and submitting it yourself. The scope and complexity of your project will help you decide the best way to work with the city and obtain a permit.
If your project requires a permit, get a permit. If you are working with a contractor who suggests skipping this step, consider moving on to another contractor.
As cumbersome as the process can be, it will be better than dealing with the city if it finds out you should, but don’t have a permit. The city might force you to obtain a permit and could double or triple the permitting fees. It could also shut down your project or require you to tear down your work (for example, remove a wall to see what’s behind it) if there is a question as to whether the work was done according to code.
The worst thing would be if this were to happen when you're in the middle of trying to sell your house, which is when such issues often come to light. Unpermitted construction can lower your home's value, and you might even need to bring it up to code as a condition of the sale.
In short, it is not worth the risk. See Discovering Unpermitted Construction When Selling Your Home for more information on obtaining a permit after construction is complete.
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