How to Handle Disputes With Home Contractors

Dealing with contractor disputes, in and out of court.

Things are going wrong with your contractor, you can't get any satisfactory response, and you're thinking you might have to sue. What are some of the finer points about how to deal with such issues?

Should I let our contractor settle our dispute by doing more work on my home?

A few months ago, I hired a contractor for $1,000 to redo the kitchen tiling. I asked for a specific blue tile color, and also that the project be completed within three weeks. He promised it would be.

Two months went by before the project was finished, and only then did I discover that he'd used the wrong tile! It's white, and appears to chip easily. I was about to sue him to get my money back, but he offered to fix his work and also do additional small projects around my house at no cost. Should I accept his offer?

Answer

One of the advantages to settling a dispute out of court is that you can craft creative solutions. While a small claims judge could only award money damages, you can negotiate with your contractor for other types of compensation.

The issue, of course, is that you don't have much basis for faith in your contractor. It seems he ignored your oral agreement in three important ways: first, he used lower-quality materials than you expected; second, he installed the wrong color tile; and third, he took about twice as long to finish the job as originally negotiated.

Is this actually someone whom you want to do additional work on your home? What prevents the same types of miscommunications from reoccurring in the future? If you ultimately decide to accept his offer, consider what happens if he fails to perform, and take steps to protect yourself.

Instead of relying on an oral agreement, put pen to paper. Tell your contractor you'll accept the terms, but that he needs to make his promises in writing, with specific details and deadlines.

The contract need not be drafted by an attorney. A simple written document articulating key terms of the deal with a signature from both you and your contractor (and/or your contractor's business entity name) will do.

The key terms should include: total price, schedule of payment, scope of work, any specifics regarding the materials or labor, and the schedule for completion. Also include a clause stating that if the terms of this contract are not met, you reserve all rights to sue for the original failed tiling project, in addition to any additional damage caused.

If my contractor hires undocumented workers, who's liable for their injuries?

We're building a new home. Our general contractor seems to be doing a good job; the project is on time, within our budget, and looks as we thought it would. But where we live, foreign, undocumented workers make up a big part of the workforce, and we've heard stories about them getting hurt on the job and homeowners having to pay. Our contractor is properly licensed, but if he's using undocumented workers, what happens if one of them gets hurt on the job? Are we liable?

Answer

Your liability for an injury to an undocumented worker who is employed by your general contractor depends on whether the worker is covered by workers' compensation or not.

Workers' compensation is an insurance program that provides eligible workers with coverage for work-related injuries regardless of negligence. The program is mandated by virtually every state. The covered employee gives up the right to sue the employer over negligence for a work-related injury in return for the right to receive financial and other benefits from a state compensation pool, which is funded by payments from employers.

As a licensed general contractor, yours is likely to have bought coverage from your state's workers' compensation program, per the law. (Almost all employers are covered by workers' compensation laws. A few states exempt nonprofit employers or employers with fewer than three employers, but, even so, many otherwise exempted employers "opt in" to their states' workers' comp program.)

Workers' compensation laws in most states expressly cover undocumented workers. However, a few states exclude them from coverage, or haven't yet decided one way or the other. In such states, if an undocumented worker employed by a general contractor suffers a work-related injury as a result of the homeowner's negligence, the homeowner may be held liable for any claim for compensation arising from that injury.

If you have reason to believe that your general contractor is employing undocumented workers and you live in a state that does not expressly cover them in its workers' compensation program, check to see if your homeowner's insurance policy covers claims for compensation for work-related injuries to anyone working at your house. If it doesn't, consider buying some form of supplemental insurance to protect you against such claims for the duration of your home building project.

If my state's small claims court allows me to hire a lawyer, should I, to sue a home contractor?

I recently bought an old home, which needed a new exterior paint job. A painting contractor agreed to do it for $1,000 if I paid him 50% ($500) up front. I paid him the $500 and never saw him again. I want to recover my money in small claims court. Should I hire a lawyer to represent me?

Answer

While all 50 states have small claims courts, each has its own rules and procedures. Some allow you to bring an attorney; others allow only certain types of businesses to be represented by counsel; and others don't allow lawyers in small claims court at all. Check with your local county clerk for details.

Then there's the question of whether you should hire an attorney. In your case, with only $500 in dispute, that's the most you could possibly recover; maybe a little more, if the judge believes you suffered additional harm in having to find a replacement contractor.

Most lawyers charge either by the hour (usually several hundred dollars per hour) or on contingency (meaning they keep a percentage, often 20% to 33%, of the amount recovered). For $500, neither option makes much sense. At an hourly rate of even $100, the preparation of the documents and travel alone would quickly exceed $500. Or if your lawyer kept one third of your $500, you would barely have any money left!

With an amount like this at issue, consider representing yourself, which is the norm in small claims court.

I sued my contractor in small claims court, and he counterclaimed! Now what?

My contractor was supposed to keep to a strict work schedule when repairing my home electric system. He was months late in finishing, despite my repeated communications. 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. He says I still owe him money! Is the small claims judge likely to accept his story?

Answer

First off, don't panic. It's not uncommon for a defendant to file a counterclaim. Sometimes it's based on meritorious facts, other times it's merely a strategy; a way to put the plaintiff on the defensive and push toward settling the case.

In legal terms, 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 must prove his claims against you.

Check with your court clerk as to whether the court will allow you to file a document called a "reply," which responds to the allegations within a counterclaim. If you can, then carefully respond to whatever your contractor has alleged. You might, for instance, explain that you did, in fact pay your contractor every penny required 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.

If your court doesn't allow written replies, be ready to address your contractor's allegations before the judge. Consider the evidence you might bring to refute the contractor's claim. If he's saying you never paid, you might bring copies of cancelled checks or bank statements showing exactly how much you did pay. Also bring copies of the original written contract (if you had one), along with any emails or correspondence you have showing the date he breached the contract.

And remember, if you were confident in the facts of your case before you knew about the counterclaim, nothing has changed. Do not be intimidated.

Is it worth trying to enforce a court judgment against my home contractor?

After hiring a contractor to fix my garage roof for $2,000 and paying him 50% up front, he ran off with the money and wouldn't return my calls or emails. So I sued him in small claims court. He never appeared. The judge granted me a default judgment in the amount of $1,000, but now I have to figure out how to make him pay. Is it worth it to chase him down?

Answer

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 websites such as Yelp.

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.

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. (Say, $200/month for five months.) The contractor might appreciate this courtesy, and it could make the large judgment seem manageable.

If your contractor continues to be non-responsive, which sounds likely, given that he never appeared in court and never replied to your negotiation efforts, 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 him to disclose his 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 him 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.

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