How to Fire a Contractor

by DoItYourself Staff

Firing a contractor is never an easy thing to do. In fact, it is never easy to fire anyone, let alone someone working on your home. However, certain situations arise which warrant terminating a contract with a builder. Often times, homeowners do not protect themselves when firing a contractor, and the end result are liens, litigation, and lost time.

So, what constitutes firing a contractor. There are numerous situations which will arise that warrant dismissing a builder. The chief culprit is not performing work as described in the contract. It is fairly easy to judge when a job is not being performed to standard. Other possible violations include:

Stealing materials
Not showing up on the job site
Damaging personal property of the homeowner
Physical confrontation on the job
Drug use
Alcohol abuse on the job
Gross negligence or incompetence

These examples represent a few of the problems you could face when working with a contractor. It is important to judge all actions in a fair manner. Contractors often have subcontractors working for them – and some issues may arise with these individual laborers. As with any position, the supervising contractor cannot control the actions of everyone working for them. For example, you may have a General Contractor building your home. He will have a group of 10-15 subcontractors working for him. If the roofer shows up for work with a hang over, firing the General Contractor would be premature (unless he supplied the alcohol on the premises). If this situation arises, discuss the need to remove the subcontractor from the job site. Now, if the General Contractor fails to handle the situation, further action may be required on your part.

So, where do homeowners find trouble in firing contractors? The bulk of the problem revolves around money. Homeowners often pay large deposits upfront to builders to secure their services. This creates a situation where the builder has been paid for work that has not been completed. In essence, they were given money for doing nothing. Some contractors may become relaxed in their work ethic and sense of urgency in performing. In turn, this makes the homeowner frustrated and the situation can escalate. The lesson? Never pay more than 10% upfront to any contractor. Regardless of what they tell you, they do not need 25% or more upfront for material deposits. In fact, all quality builders have construction accounts to “float” materials during their billing cycles. In construction, the only power the homeowner has over the builder are payments. Progress payments, or payments based on a percentage of completion, keeps work progressing and the contractor working diligently for a paycheck. They may complain about this process, but the alternative is giving a large deposit upfront and never hearing from the builder again.

On the other hand, payments should not be used by the homeowner to manipulate the builder. Some homeowners agree to terms with a builder, change plans midstream (falling outside of the original scope of work), and then withhold payment because the contractor raises his fee. Remember, a contractor bids the job based on the initial needs of the client. He must factor in labor, material, and time costs. When a homeowner drastically changes the scope of the project, naturally, their fee is going to change. A homeowner, who withholds payment for work completed risks liens on the property. Liens are a contractors way of protecting themselves from never receiving payment for work completed. A Mechanic’s Lien can bring your project to a halt and prevent you from proceeding with the job until they are resolved. In difficult situations, lien issues can go to court and cost thousands of dollars in court fees. Just as a contractor should be fair when dealing with a client, a homeowners should be fair in disbursing funds.

Firing a contractor is never easy, but in certain situations is necessary. When dismissing a builder, make sure they have been paid for work completed and signed lien waivers relinquishing their lien rights. This protects you from a disgruntled contractor placing a lien on your property. On the other hand, withholding just payments can cause your project to run into serious delays.