FAQs About Disputes With Contractors Performing Home Improvements

You're definitely not the first homeowner who has run into problems or misunderstandings with a repairperson, contractor, or other person working on your home. Here are some experiences others have had, and guidance on how the law might help you resolve the matter.

Should I sue my contractor individually, or just the business?

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.

Answer

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.

Question: I sued my contractor and he responded with a counterclaim! Now what?

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.

Answer

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.

Question: I supplied construction materials, but the contractor isn't paying. What now?

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?

Answer

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.