A Reality Check For Homeowner/Contractor Disputes

We’ve recently received a number of calls from homeowners and contractors in homeowner/contractor disputes. These calls indicate that a reality check is needed for both sides. The reality check is that there’s no easy way out once such a situation develops. If lawyers become involved in the dispute, it’ll be difficult to avoid spending money on legal services too. That’s the reality that homeowners and contractors will confront in homeowner/contractor disputes once they begin contacting lawyers.

One aspect of that reality is that lawyers don’t possess a magic wand that can be waved to immediately make problems disappear and achieve 100% success for clients with no time or effort. It doesn’t matter how much homeowners or contractors believe in the correctness of their positions, the strength of their evidence, the unjustness of the claim, or the absurdities of our civil justice system. The opposition has a right to a different opinion and is free to take that dispute into the court system and to trial if the dispute cannot otherwise be resolved between the parties.

For homeowners, this means that they cannot expect to withhold some of a contractor’s agreed payment for perceived delays or improper or unfinished work without exposing themselves to problems, especially if the contractor is allowed to finish the job, then ends up not receiving all of the money that it was expecting to receive. Most of the time, that contractor will demand full or final payment for the work upon completing it. It may agree to make a few minor reductions for “punch list”-type items. But homeowners shouldn’t expect that they can withhold 25%-50% of the contractor’s charges and nothing will happen.

It’s at this stage of the dispute that many homeowners seem to have overestimated or misunderstood their legal rights regarding contractor disputes. There’s plenty of press concerning bad contractors with tips on how homeowners can protect themselves and what they can do if they believe that a contractor’s cheated them. All of that’s true, but that doesn’t mean that “protecting” yourself as a homeowner or exercising legal rights is a guaranteed, inexpensive, or completely satisfying experience. Legal rights go both ways. A contractor may have something to say or do in response to such actions by a homeowner.

That means that a homeowner, upon withholding a contractor’s payment, will likely receive a communication from the contractor or the contractor’s lawyer demanding payment or suit will filed. If the contractor hires a lawyer, now the homeowner has to spend money on a lawyer, unless the homeowner wishes to go up against the contractor’s lawyer and negotiate a resolution without legal representation. It’s very likely that suit will be filed if a resolution is not reached, especially if the contractor has a lawyer. Now the homeowner will really be spending money on attorney fees unless, again, the homeowner wants to defend a civil lawsuit in court without a lawyer.

That situation becomes more serious for the homeowner if the contractor asserts a mechanic’s lien against the property. The mechanic’s lien will encumber the property. It’ll affect the homeowner’s credit, the homeowner’s financing for the property, and the homeowner’s ability to sell the property. If a petition to foreclose the mechanic’s lien is filed and the court orders the homeowner to pay the contractor any money (which can include the contractor’s attorney fees), the homeowner will need to pay that judgment or the contractor can have the home sold at judicial auction to satisfy the judgment.

There are certainly ways for homeowners to protect themselves against such claims. We’ve done it for homeowners, but that’s beyond the scope of this article. The point is that doing so for homeowners usually took time and money, particularly for cases that went to trial. There’s not often a quick, cheap, and easy way out once a homeowner decides that a contractor’s not entitled to full payment. Homeowners that make that choice need to be prepared for a legal fight, no matter how bad they believe the contractor to be and how strong they believe their evidence and arguments are, because that’s how our system works.

For contractors, the best protection is to ensure that proper mechanic’s lien notice provisions are followed to preserve the right to assert a mechanic’s lien in the event of nonpayment. Without a mechanic’s lien, there’s no right to attorney fees unless the contract with the homeowner allows for attorney fees in the event of a dispute. It’s also more difficult to collect on a judgment against a homeowner in the absence of a mechanic’s lien.

Contractors should be prepared for homeowners who dispute some or all of a bill. Homeowners will do that by arguing that the work was not started on time, that the work took too long, that the work wasn’t done right, that the work was incomplete, or that the property was damaged during the work and that money must be deducted from the charges for such things. Homeowners are particularly likely to challenge increased charges (“change orders”) on the grounds that the increased charges or work weren’t agreed to, that the homeowner didn’t request or cause the additional work, that the additional work was overpriced or unnecessary, or that the additional work was actually within the scope of the original contract price and shouldn’t have resulted in extra charges.

Contractors can try to guard against such arguments by giving the best customer service possible and addressing any issues raised by the homeowner as they come up. Those efforts should be documented via email or text message. Photographs might also be useful (almost any homeowner claiming defective or incomplete work will have photographs of the work). Work must also be completed as efficiently as possible because delays that the homeowner perceives as unnecessary are a common genesis of homeowner/contractor disputes. Detailed written change orders must be signed by the homeowner if additional work for additional charges will be undertaken.

In the end, contractors can only do so much to protect themselves from a homeowner that’s bound and determined to avoid paying full price. We've successfully argued for contractors who are unfairly being denied payment. Mechanic’s lien rights will help. But time and money may still be spent on a legal fight with the homeowner over the above arguments no matter how wrong or unfair the contractor may believe the situation to be. That’s reality. That’s the system.

Harley Erbe