Document all change orders

I once had clients back-charge me $500 for the electricity we used to run our saws and compressors on the job. They also tacked on a charge for the water we used to clean our paint brushes. Now I have clauses in my contract to prevent this. I also had a client refuse to pay me the last draw because of “… the stress we caused her when her dog escaped” and eventually was found. It happened while my guys were carrying drywall into the house. Now I have clauses in my contract to deflect responsibility for this, too.

To be a successful remodeler, you must be a people person, but even the most savvy, experienced remodeler will accept a job that becomes filled with unexpected legal problems. Seemingly normal clients at the beginning of a job can suddenly become irrational when a minor problem makes them mad. You see it as a minor bump, a fixable issue, but they don’t see it that way. You are supposed to be the construction expert, so how could you let it happen?

Typically, things go sideways at the 90 to 95 percent complete stage. No matter how you try to please clients, they don’t trust you anymore and find fault with everything you do. They ignore all the beautiful work you did, and everything you did right.

 

Importance of contracts

As an attorney and a remodeler, I get called on to help fellow remodelers dig out from these difficult situations before they advance to arbitration or worse, trial. The courtroom is never a good place for remodelers, even if you are completely in the right. The best course is to work out a settlement before you get that far. That settlement will be much gentler on you financially and emotionally if you have a good contract to stand on.

Few people read a remodeling contract in detail at the beginning of the project. However, if conflict arises (and especially if lawyers get involved), every word is scrutinized. A well-organized, comprehensive contract can protect the remodeler from all sorts of hazards during the remodeling process. The trick is to cover your backside without the contract being so long it scares the client to death.

This article — which concludes online — explores common problems remodelers encounter, and how well-written contracts can keep remodelers out of the legal fire.

 

Change orders: Case study 1

John Sampson took on a big job. It was larger than his normal design-build projects, and he was excited about it. The clients were well-off with a seemingly unlimited budget; they added work at a rapid rate. Once the job began, John relaxed procedures and got verbal OKs on many of the 100 change orders. After all, these big draw payments were rolling in and the client seemed to say “yes” to everything. In fact, with their busy lives, they weren’t on the job that often. Added work was noted on sticky notes, but not signed off by the client.

At the 85 percent complete mark, the client demanded job accounting. John sent the information concerning all work items that had been added. The client was shocked and angry, and stopped payments for any further work. As John reminded them of conversations he had with both spouses, things became worse. It turned into a he-said-she-said nightmare with a minefield of marital decision-making dynamics. The clients refused to pay for much of the added work, saying they never authorized it, even though they watched it being installed in their home and had given verbal approval.

John was owed more than $80,000 at this point, not counting the work yet to be completed. Work stopped, and lawyers were involved. Clients accused John of fraud and abandoning the job. John claimed breach of contract and rightful termination of work. Two years of hostilities, lawyer fees and plenty of stomach acid ensued. Nobody won.

Change orders are the most fertile ground for conflicts between remodelers and clients, mainly because remodelers don’t keep up with them. Procedures must be established and adhered to during the course of the work or you can expect trouble.

 

Dan Bawden is president of Legal Eagle Contractors based in Houston.

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