Article From HouseLogic.com

By: Oliver Marks
Published: January 08, 2010

You have options for recourse if a contractor disappears or does shoddy work, but which action to take depends on the particulars of your situation.

No major home improvement happens without a few glitches. Cost overruns and completion delays are common–to say nothing of the fine layer of dust that takes months to fully eradicate. Occasionally, though, projects turn into unmitigated disasters. Roofs get torn off and left open to the elements; unskilled laborers slap together defective work; you pay hard-earned money for amenities that never get installed.

Maybe the contractor took on more work than he could handle or went belly-up in the middle of a job–or, worst-case scenario, maybe he’s an out-and-out crook (http://www.houselogic.com/articles/top-5-contractor-scams-and-how-avoid-them/). The best way to protect yourself is to choose your contractor (http://www.houselogic.com/articles/five-essential-questions-ask-before-hiring-contractor/) carefully, vet him thoroughly, and have an ironclad contract (http://www.houselogic.com/articles/what-remodeling-contract-should-say/), says Tampa, Fla., attorney George Meyer, chair-elect of the American Bar Association’s Forum on the Construction Industry. But when the worst happens, here’s what you can do to defend yourself.

Fire the contractor

This is an obvious step when things go seriously wrong. But it’s not easy. Your contractor could challenge the firing in court as a breach of contract. So you need to be prepared to show that he breached the agreement first.

To do that, you need to document instances when he didn’t live up to the specifics of the contract, such as substituting inferior materials or failing to stick to the agreed-upon schedule. Then send a return-receipt letter to his business and home addresses stating that unless the problem is rectified within a specified number of days, he’s in breach of his contract and you will be terminating it.

The catch: You can be sure the contractor won’t be refunding any money you’ve already paid, so if you’ve written any checks up front, this tactic can be costly.

Request a dispute resolution hearing

Some construction contracts include a binding arbitration clause, which states that rather than going through the courts, disputes will be resolved by arbitration, a low-cost process in which each side presents its case to an independent authority, who makes a final decision.

But even if your contract has no such provision, you can request a similar hearing. The Better Business Bureau (http://www.bbb.org), a national nonprofit association, offers mediation services for free or for a nominal fee of around $50, says Erin Dufner of the BBB’s Austin, Texas, branch. Neither the homeowner nor the contractor needs to be a member of the organization.

The catch: There are two, actually. One is that you need to get the contractor to agree to mediation, which may be challenging with a truly shady guy. The other is that mediators and arbitrators look to the contract for guidance, so if you have a badly written one, there may not be much they can do to help you.

File a lawsuit

Hire a construction attorney to pursue your case, and you may be able to get more traction. These legal pros know the ins and outs of state statutes and may be able to work around weaknesses in the contract. Also, unlike BBB hearings, the contractor can’t opt out of this process, assuming the guy hasn’t disappeared altogether.

And even if he has, you may be able to collect money from a state contractor recovery fund consisting of contractor licensing fees, or from a bond the contractor posted at the start of your project. The latter is required for residential jobs in some states, Dufner says.

The catch: Attorneys charge $100 to $300 per hour for these cases, which can run into many, many hours, so unless you’re dealing with a very big-ticket project, such as building an entire house, you’ll likely spend more on the attorney than you’re disputing with your contractor.

Take your case to small claims court

In these courts you represent yourself and pay just a few dollars in fees to bring a case. The exact rules depend on your local jurisdiction, but typically, a judge hears from both parties, asks questions, and then, Judge Judy-style, decides how the case will be resolved.

The catch: Small claims are just that. In most places, award limits are in the $3,000 to $7,500 range, with Kentucky coming in at the lowest, $1,500, and parts of Tennessee coming in at the highest, $25,000.

File complaints and bad reviews

There are a host of websites where you can post information about bad contractors, including angieslist.com (http://www.angieslist.com), franklinreport.com (http://www.franklinreport.com), and contractorsfromhell.com (http://www.contractorsfromhell.com). You can also file a complaint with the state contractor licensing board, which collects these reports and, once a certain threshold is reached, makes the information available to the public.

These steps won’t get your botched tile job fixed or bring back a disappeared contractor, but you may take some comfort in knowing that you’ve protected a fellow homeowner from the same fate.

The catch: A contractor could potentially sue you for libel over a bad review. State laws vary, but being 100% accurate in any claims you post gives you a strong defense in court, says Atlanta attorney Alan Begner, president of the First Amendment Lawyers Association, a trade group. Still, a big contractor with deep pockets could choose to bring a case, forcing you to spend tens of thousands in your own defense.

To decide which of these options makes the most sense for your particular circumstances, you may want to consult a construction attorney. Your family attorney can refer you to one of these specialists, or you can find one through the American Bar Association (http://www.abanet.org/lawyerlocator/searchlawyer.html). Explain that you’re not necessarily looking to take your case to trial, just to get an expert review of the situation and your contract and advice on what to do. You’ll pay between $500 and $1,000 for a consultation, but it could save you far more money in the long run.

A former carpenter and newspaper reporter, Oliver Marks has been writing about home improvements for 16 years. He’s currently restoring his second fixer-upper with a mix of big hired projects and small do-it-himself jobs.

Reprinted from HouseLogic (houselogic.com) with permission of the NATIONAL ASSOCIATION OF REALTORS®
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