Avoiding Legal Disputes in Residential Construction
By Barry Kahn
I have been representing residential and commercial property owners, contractors, general and landscape architects, engineers of all types and interior designers since opening my law offices in 1981. I understand both sides of residential construction disputes and transactions, and I take pride in the fact I’ve settled all of my cases involving such disputes without having to go to trial.
In today’s economy, going to court to litigate a residential construction dispute is simply too expensive for most people—and for most contractors. When lawsuits are filed, legal and expert fees incurred by both sides can often exceed the amount in dispute. This is why many attorneys encourage clients to try mediation to resolve a dispute. All lawyers who resolve disputes through litigation, arbitration or mediation—especially lawyers who handle construction cases—frequently hear clients complain, “The only winners were the lawyers!” However, there are certain steps that both sides can take and tips they can consider during construction to minimize the risk of a costly legal dispute.
What makes residential construction projects unique is that owners are usually very attached to their homes and have spent a lot of time thinking about, planning and saving for the project. All projects should start with a good architect and a good set of plans. But frequently, disputes arise because the plans and specifications weren’t clear or detailed enough, which a contractor can take as license to build the way he or she wants. This problem can be compounded when homeowners neglect to have their architect inspect the project during construction and approve the invoices submitted by the contractor.
Architects’ fees can be very expensive, but this isn’t the place to cut corners. Architects are worth their weight in gold when they produce a design that the homeowner understands and approves, get the project approved by the local planning and building department, help the owner select a good general contractor, and supervise the project from start to finish. Most residential construction disputes arise during the work phase, so having an architect supervise the work will go a long way toward avoiding problems.
Selecting a reputable and experienced contractor and having your contract reviewed by a lawyer before it’s signed are also important steps to take. Don’t choose a contractor without personally visiting prior projects and talking to former customers. If a contractor is afraid or unwilling to let you see prior jobs and meet their former clients, then he or she may be hiding something. A referral from a friend may be good, but just because the contractor did one job well doesn’t mean there haven’t been problems on other jobs. Taking the time to do your due diligence about the contractor is an ounce of protection that’s worth a pound of cure.
After a homeowner is satisfied with the contractor’s experience and prior work, have a lawyer experienced in residential construction law review the contract. A contractor isn’t an attorney, and contracts are complicated and important legal documents that nobody should sign without understanding. An experienced lawyer can explain the contract and make changes and modifications to protect both the homeowner and the contractor.
Defective or incomplete work by the general contractor can often cost a homeowner more to “fix and finish” than what the project was originally supposed to cost. In disputes where the homeowner refuses to make payments—especially the final payment— it can cost the contractor more to collect than the amount actually due. The collective legal fees and expert costs to litigate such disputes can easily approach $100,000 for each party. Here are some tips for anyone involved in a construction project:
Tips for contractors
• Don’t start any project without a written contract.
• Have your contract drafted by a lawyer who has experience in drafting construction contracts.
• Make sure your written contract contains all of the required statements, disclosures and statutory requirements. It needs to be in the correct size font, as required by the Contractors State License Board.
• Don’t use a one-page contract that you bought at the stationery store.
• Don’t provide any additional labor or materials without a written change order signed by both you and the homeowner.
• Avoid homeowners who are only interested in the lowest price but expect materials that cost more.
Tips for homeowners
• With each billing statement from the contractor, ask for all back-up documentation including proof of payment to subcontractors.
• Don’t pay for anything in advance, except deposits on large or special order items (for example, specialty plumbing fixtures like Jacuzzi tubs.)
• Don’t assume the job is progressing smoothly or in accordance with your plans. Have your architect visit the site weekly or as needed to inspect the work. You can also hire an independent project manager to inspect the project for you.
• Make sure the contractor is paying his subcontractors by calling them and/or putting both names on your checks.
• Don’t ask the contractor to do extra work until you have a written change order prepared by the contractor and signed by you.
Most contractors are reputable, and most homeowners end up with completed projects without disputes or problems. But having an architect plan and supervise your project and a lawyer help you with your contract and questions as they arise will go a long way toward avoiding costly legal disputes.
Barry A. Kahn, Esq., is principal of Law Offices of Barry A. Kahn, 26 El Portal in Sausalito, CA 94965. Contact him at email@example.com or (415) 331-3505.
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