How to Fire a Contractor
Firing a contractor is never an easy thing to do. In fact, it's never easy to fire anyone, let alone someone working on your own home. However, certain situations arise that warrant terminating a contract with a builder. Oftentimes, homeowners do not protect themselves when firing a contractor, and the end result are liens, litigations, and lost time.
Situations That Warrant Firing a Contractor
There are numerous situations in which firing a contractor is admissible. The chief culprit is when a contractor is not performing work as described in the contract. Although it's hard to tell a good contractor from a bad one, 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 the homeowner’s personal property, drug or alcohol use, and gross negligence or incompetence. These examples represent just a few of the problems you could face when working with a contractor.
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 hangover, firing the general contractor would be premature (unless he supplied the alcohol on the premises). If such a situation arises, discuss the need to remove the subcontractor from the job site with the general contractor. If the general contractor fails to handle the situation, further action may be required on your part.
Why Paying in Full is Risky
The bulk of the problems around firing contractors 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 yet been completed. Some contractors may become relaxed in their work ethic and sense of urgency in performing after being paid. Therefore, it’s safe to say that you should never pay more than 10 percent upfront to any contractor.
Regardless of what they tell you, they do not need 25 percent 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 the contractor working diligently for a paycheck. They may complain about this process, but the alternative could be giving a large deposit upfront and never hearing from the builder again.
Why Manipulating Builders With Pay Risks Liens
On the other hand, the homeowner should not manipulate the builder with payments. 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. A homeowner who withholds payment for work completed risks liens on the property. Liens are a contractor’s 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 homeowner should be fair in disbursing funds.
Laying off a contractor is never easy, but in certain situations it is necessary. When dismissing a builder, make sure they have been paid for work completed and that they sign lien waivers relinquishing their lien rights. Keeping a contractor checklist can also help. Following these steps protects you from a disgruntled contractor placing a lien on your property or delaying your home building projects.