Q: We built a custom home. Builder did not follow installation guidelines for siding, roof or paver driveway. We are withholding last payment which puts us in violation of OC. No ice shield, missing drip edge, wavy roof. The lists are long. Incorrect installation voids the manufacturer’s warranty. We don’t want builder’s incompetent workers to “fix” issues. How do we move forward? We have had 4 roofers say that whole roof needs to be replaced before winter. – D.M.
A: Sorry to hear about your new home – sounds like a very tough situation.
There are never easy solutions to these types of problems. I believe that, whenever possible, it is better to negotiate a compromise than to enter into a legal dispute. My reasons are twofold:
- First, a negotiated solution is almost always quicker and cheaper than starting a formal dispute process, such as arbitration or litigation. You don’t get everything you want, but you can cut your losses and do it quickly. This saves money, time, and the stress of a protracted battle.
- Second, you have more control of the outcome. Once you initiate a formal dispute process, you don’t know how the other party is going to react. Are they going to countersue, file a lien? Even if you “win” in a lawsuit, after paying a lawyer $20,000 to $30,000 or more, and expending huge amounts of time and effort, you will rarely come out ahead.
Whatever you do, act strategically, not emotionally. Choose the approach that will get the best outcome for the least money and effort. Most people sue because they are angry and feel they have been mistreated. However, people who sue rarely get the satisfaction they are after. It’s better to view a lawsuit as a business decision and go down that path only if it makes financial sense.
That said, there are times when the only recourse is to terminate with the contractor you have hired and complete the job with another. Sounds like this might be the case here. It is good that you have withheld the last payment. This gives you significant leverage in negotiations. Hopefully, the funds are large enough to cover most of the cost of having the roof redone.
In most construction contracts, you have the right to terminate “for cause” if the contractor significantly fails to comply with the terms of the contract, which includes following the plans, using proper building techniques, and meeting reasonable quality standards. The breach of contract must be significant for courts to support termination.
There are proper procedures for terminating a construction contract, but these vary somewhat from state to state. Also, the contract you signed my limit your course of action. For example, it may include specific reasons for termination, notification procedures, and a time period for the contractor to remedy the problem. It may mandate arbitration rather than litigation for resolving disputes. For example, see the Termination Clause in our model contract.
Also, termination requires that the contractor be paid in full for all work completed. This is usually the most contentious issue, especially for work completed that the owner believes to be defective. Once you put a price tag on completing the job correctly with another contractor you will need to negotiate a settlement with the contractor. He may want to be paid in full for the work that you consider defective; you probably want to pay nothing for it. Short of a lawsuit, you will need to negotiate a compromise.
If you have exhausted all other efforts to get the job done right, and feel it is necessary to terminate, I would strongly encourage you to speak first with a lawyer. They can advise you on the best way to withhold payment and terminate that contact that will not expose you to liens or other legal action on the part of the contractor. Also sometimes a lawyer’s letter is all it takes to motivate a contractor to do the right thing. Most contractors do not want a full-blown construction dispute any more than you do.
That’s why the vast majority of lawsuits are settled before going to court. Lawsuits are mostly just an expensive negotiating tool. Maybe you can negotiate the same outcome without the threat of a lawsuit.
The best outcome, I think, would be to get the contractor to agree to terminate the contract and allow you to keep enough money to redo the roof and other defective work, although you will likely have to absorb some of the cost. The lawyer could help you draft an appropriate letter of termination and a termination agreement, if necessary.
Finally, make sure you document every problem with photos, dated notes of events and conversation, and any written correspondence. This will strengthen your position in negotiations and will be invaluable if the dispute ever goes to court or arbitration.
Best of luck in finding a workable resolution!