Sometimes contractors fail to perform and the first inclination for many is to file suit in a court of law. That’s one avenue of redress, but experts advise that people think about it before they contact a lawyer. The first thing to consider is whether the contractor has any money, because victory often doesn’t equal remuneration. Second, people should plan on the suit lasting a long time and for it to come with significant out-of-pocket expense. Third, it pays to read the contract and understand whether the contractor can file a mechanic’s lien or a counterclaim, because if so things could get even more expensive. For more on this continue reading the following article from JDSupra.
Suppose you decided to have some work done in your house – you planned what you’d like to do, you found a contractor, signed a contract, and the contractor started work.
Then things started to turn in a way you didn’t like. Maybe the contract said your contractor was supposed to be reimbursed for buying materials but he was asking you to pay for them upfront. Maybe he started asking for more money when he hadn’t done much work. Maybe the work he’s done at your house is just bad.
At some point, your contractor just stopped talking to you as much. He wouldn’t answer your calls, he stopped working on your house, and in the few times when you did talk to him the conversations did not go well.
You’re thinking about bringing a lawsuit against your contractor.
At our firm, we talk to a number of people in this situation. Here are a few things to think about when thinking about whether to sue your contractor:
1. Does he have any money?
Sadly, many contractors live close to the bone. You can’t get blood from a stone. Think about what you know about the contractor’s financial condition. If there are no assets there – and no insurance – a lawsuit may not get you what you want.
In the heat of the moment, you may want to bring a suit regardless of whether you’ll be able to recover anything from the contractor. You may be so white hot with anger that you just don’t care if it makes sense financially.
Our best advice – less as lawyers than as people – is to not make decisions about what to do when you’re white hot with anger. A lawsuit will take a long time – longer than you’d like to think. A lawsuit is a bad way to work out your feelings, legitimate though they are.
2. Can you afford to bring a lawsuit?
Lawsuits can be expensive. Very few attorneys take a lawsuit against a contractor on a contingent fee basis. That means that you’ll be on the hook for the legal fees in the case before you collect anything from the contractor.
Sometimes you can collect attorney’s fees if you win. You can do that if the contract you had with the contractor said you can, or if you’re suing him for some violation of the law that lets you get attorney’s fees. Though, again, you’d be able to get back what you spent on legal fees at the end of the case. A lawyer would need to be paid as the work on the lawsuit progresses.
3. Can the contractor sue you back?
Sometimes the contractor will tell you that he thinks you owe him money. If he does, he can bring what’s called a counterclaim – basically he would be suing you back when you sue him. He may say that you owe him money even if you know that what he’s saying is just wrong.
This can be bad for a few reasons. First, it means that if you decide to walk away from the lawsuit you can’t – unless he agrees to. Second, it means you’ll have to fight over what he’s saying too. This takes the focus off of your claims a little bit. Third, there’s a possibility that he can convince someone that he’s right. If that happens, you could end up having to pay him money.
4. Did you agree to arbitration?
Often in a construction contract, there will be a clause that says that the parties agree to arbitrate any dispute under the contract. If the contract you signed has that language, you may be in a hard place if you want to sue.
Arbitration isn’t necessarily a bad thing. Arbitration can be a good way to keep legal fees down and make the process move quickly – or at least quicker than a court would move.
But arbitration may also mean that you go to a panel of people who are more friendly to the contractor than you’d like. Sometimes an arbitration panel is made up of people who work in the construction industry. That may not be so bad – they may be shocked at how your contractor treated you and want to protect the industry’s reputation – or it could be that they see things more from the contractor’s point of view.
5. Has the contractor filed a mechanic's lien on your property?
If the contractor thinks that you owe him money, he can do something in addition to filing a counterclaim: he can file something called a mechanic's lien. A mechanic's lien is a hold on your property based on a contractor's claim that he hasn't been paid. It's recorded in the office of whoever records land records in your area.
Bad things can happen as a result of a mechanic's lien. Sometimes, it can result in foreclosure if the lien isn't paid off or removed. Other times, the lien will prevent the homeowner from refinancing, selling, or borrowing against the property.
Depending on where you live, the process for getting rid of the lien is different. A lawyer cannot only help you navigate this process, but can also try to open up a dialogue to negotiate with the contractor.
So, should you sue? It’s a question only you can answer. If the contractor has assets and you’re ready and able to do what you need to in order to be made whole, a lawsuit may be the best thing to do. Just be prepared for what it involves.
This article was republished with permission from JDSupra.