In my October 2009 column, “Let the seller beware,” I shared the story of Steve, a buyer who contracted with my company to build a 7,000 sq. ft. custom home on his lot. At the column’s conclusion, Steve and I were in settlement talks. I had prepared my lawsuit to begin foreclosing on his home based on the construction liens I had secured to defend my monetary rights.
The saga concludes as follows: Settlement talks stalled because Steve was negotiating for time so I would lose my legal window to initiate a lawsuit to foreclose on his home. I filed the suit in late October. Steve resumed talking settlement again in earnest. After agreeing on an amount, he offered a two-payment plan: half up front and half in the form of a secured note.
I rejected that because regardless of the security of the note, Steve could not be trusted to deliver and I would remain entangled with him. I discounted the settlement amount further and then received payment in full on the day the settlement documents were signed. The release Steve signed stipulated that all warranties for work provided were null and void. He expressly gave up his right to claim any defects with the home.
Case closed. Settlement signed. Steve is permanently out of my business life!
There was a moment midway during the building of his home when I should have stopped the job and demanded that Steve provide all funding per our agreement. Next time I will. If you want to benefit from my trials and tribulations, remain cognizant of the following concepts:
- When a prospect or client repeatedly displays a lack of willingness or ability to trust you, consider yourself notified that this person also cannot be trusted. A zebra does not change its stripes and a client who reveals a pattern of behavior will repeat it, so expect that his past behavior is a reasonable predictor of how he’ll handle future problems; then act accordingly.
- When a client knowingly attempts to dramatically deviate from the agreed-upon business terms contained in your agreement and attempts to force or persuade you to unilaterally concede anything without a fair quid pro quo negotiation, draw the line and commence immediately all fair and legal hardball tactics to retain all of your building, financial and contractual rights.
- If a client is getting funding from a lender, require that funding is released directly to your company.
- Although there is an innate desire to complete all required steps to obtain a certificate of occupancy for your project, it is prudent to withhold critical paperwork from the building department until you feel 100 percent secure that your final payment is either imminent or in hand. Specifically, New Jersey requires a proof of registration that a new home warranty has been obtained, and that in the future the document will stay in my office until the client has made all funding available for my final payment.
- Maintain an ongoing dialogue with your client at all times. Long after it was evident that I had a problem, I continued to speak directly with Steve and maintained civility. This tactic ultimately allowed me to negotiate with him directly until the day we signed a settlement. I saved thousands in legal fees and countless months of negotiating through expensive lawyer letters and documents.
- Hiring the right lawyer makes a tremendous difference in your legal fees and the speed with which your case is resolved. My original lawyer was intent on elongating the process, which benefited only his billable time. After firing him, I interviewed four more lawyers. The one who assisted me most efficiently and economically was first a specialist in this line of work, and secondly was happy to work toward closure and settlement.