You should be able to trust your contractor to create the kitchen of your dreams or perform emergency repairs on your office. When a bad contractor performs shoddy work, holds up the project, or never completes the job, you may be able to recover damages.
In This Article
- Know the Different Between the Three Types of Contractors
- Common Issues With Bad Contractors and Your Legal Options
- What Should be Included in My Construction Contract?
- Do I Have Legal Options if I Don’t Have a Written Contract?
Get a Lawyer to Deal With Your Bad Contractor
Let our experienced real estate litigation attorneys take on the bad contractor. Call 303-688-0944 to begin a free case assessment.
Know the Different Between the Three Types of Contractors
Unless you are a master at Do-It-Yourself projects, most major home and business construction involves some kind of contractor.
In Colorado, a contractor is anyone who performs work that requires a building or mechanical permit. A laborer who works under a contractor’s supervision is not considered a contractor. Here are the three different kinds of workers you may encounter if you hire someone to work on your property.
- General contractors supervise a construction site.
- Subcontractors are skilled tradespeople who perform specialized work.
- Handymen perform maintenance or repair work inside and outside a property.
Let’s look at some examples:
Example One: A New Kitchen Space
Let’s say you want an open-concept kitchen and living room. Currently, your kitchen, living room, and dining room are three separate spaces. This project needs different specialists to ensure, for instance, that no load-bearing walls are taken down or any re-wiring is performed to code.
A general contractor will oversee the entire project and:
- assess the plans
- pull permits
- create a project timeline
- hire and manage subcontractors
Example Two: Small Home Repairs
You have a few things around the house that need some attention. The guest bath has a leaky toilet. You’d like a dimmer installed in your dining room. For these jobs, a handyman would be useful. A handyman may also take on larger jobs such as rebuilding a deck or tiling a backsplash.
Common Issues With Bad Contractors and Your Legal Options
Suing your contractor is generally the last thing on your mind when you hire them. Unfortunately, construction projects, big and small, can end in a lawsuit. Let’s examine why.
Breach of Contract
When your contractor deviates from the contract’s terms, they’ve breached the agreement.
Contract breaches happen for many reasons:
- botched craftsmanship
- excessive delays
- exceeding the budget without your approval
If your contractor has failed to live up to the promises they made for the project, you may have a breach of contract claim.
Here’s how you prove the contractor breached the contract:
- establish a contract exists
- demonstrate you held up your obligations in the contract
- prove the contractor/handyman did not meet their duties
- show you sustained damages due to the breach
A breach can be difficult to prove if there isn’t a written contract. And if you breach your duties without justification, you may forfeit rights to a claim.
There’s a breach. How much money can I recover?
The amount of damages you can recover from a bad contractor depends on the nature of the breach. Is it a material breach or a non-material breach? Let’s explore the difference between the two breaches.
Non-material breaches are minor in nature. A non-material breach does not hinder the project’s outcome. If you suspect your contractor committed a non-material breach, you are still obligated to the contract. Here’s an example of a non-material breach.
A plumber installs pipe brand X under your kitchen sink. The contract calls for pipe brand Y. Brands X and Y are made of the same materials and have the same quality.
Material breaches are serious problems. A material breach significantly affects the contract and the project’s outcome. If there’s a material breach, you are not obligated to full your contractual obligations because the other party breached the contract. Consider this scenario:
The contract you signed with your plumber states he must install copper pipes throughout your newly-built home. Instead, he uses PVC pipes. This may be a material breach.
You can recover damages from both kinds of breaches. But before you take matters into your own hands, talk with an attorney about the issue. They’ll be able to assess what kind of breach may have occurred and provide recommendations for next steps.
Most construction projects experience delays. For instance, unexpected situations can create delays beyond your or the contractor’s control.
These setbacks can have significant financial consequences for both parties. As a result, many contracts define what to do in the event a project is delayed.
Common ways to fix delays include:
- contractors and owners get paid for delays (liquidated damages)
- a contractor receives an extension based on delays beyond his control
- the contractor may be required to accelerate work to meet the deadline
- the contract can be terminated for significant inexcusable delays
Most contracts limit the contractor’s liability for certain delays. Excusable delays generally give a contractor more time to finish the project.
Here are some examples of excusable delays:
- acts of God – extreme weather event
- labor issues – unprovoked worker strike
- owner delays – design changes
- other unforeseen issues – sinkholes
A delay created by an avoidable action is considered an inexcusable delay. Most of the time, someone working on the job causes this kind of delay. If this happens to you, you may be entitled to damages. In fact, your contract may even note how you are to be compensated for an inexcusable delay.
Inexcusable delays can include:
- poor planning
- not obtaining proper materials/equipment
- late project start
- quality failures
No Damages for Delay Clauses
Now, if there is a “no damages for delay clause” in your contract, you or your contractor won’t owe money because of the delay. For example, a contract may absolve the contractor of being financially responsible if they create a delay.
Some states have outright banned “no damages for delay” clauses. However, Colorado still enforces this provision in private contracts.
There are some exceptions to enforcing this provision if it’s in your contract. A “no damages for delay” clause cannot be enforced if:
- there is active interference by a party
- there are delays outside of the scope of the contract
- a contractor acts with fraud or bad faith
If you have one of these clauses in your contract and are experiencing a delay, talk to a real estate litigation attorney. They’ll be able to determine whether the “no damages for delay” is unenforceable so you can seek damages. In extreme circumstances, you may be entitled to terminate the contract altogether.
Workmanship is the skill and quality a contractor puts into a project. Whether it’s a toilet installation or simple tile work, the caliber of the work – good or bad – is the workmanship.
A construction contract lays out many elements of the job. Workmanship is not always one of them. Oftentimes, craftsmanship expectations are implied or expressed, instead of written down.
If a contractor skips vital steps, the finished product may lack the quality you expected.
Examples of Poor Workmanship
- loose railing on a deck
- a gap between hardwood flooring and baseboards
- uneven kitchen cabinet doors
If your contract does not address quality, it can be difficult to prove poor workmanship. But that doesn’t mean it’s not impossible.
Poor workmanship can lead to future problems, such as mold, flooding, and electrical issues. If your contractor turned out to be a bad contractor who performed subpar work on your home, a real estate attorney will look into everything about the job and contract. For instance, your attorney will:
- establish the industry standard for the job you hired your contractor to perform
- review the emails between you and your contractor for conversations that imply a standard of workmanship
- demonstrate if sub-standard materials were used instead of premium materials as promised
In Colorado, local municipalities license or register general contractors, including roofers and repairmen. Electricians and plumbers must obtain state licensure before applying for a local license.
Licensing and registration rules vary between municipalities. Some cities require testing, some don’t. In some towns, a contractor must have a current license from another county or city. Some Colorado cities, such as Denver, require additional certificates, like a business license.
If you hire an unlicensed contractor, you’re undertaking most of the risk. You may face:
- little legal recourse against the unlicensed contractor
- liability for any injuries that occur during the course of the project
- a lack of insurance coverage for property damage by the unlicensed contractor
Lawsuits for Deceptive Trade Practices
If multiple people have been affected by the same unlicensed bad contractor, you may be able to file a lawsuit. The Colorado Consumer Protection Act (CCPA) protects you from deceptive trade practices.
An unlicensed tradesman can be sued for violating the CCPA.
To mount a successful Consumer Protection Act claim you must show:
- the contractor’s actions constitute a deceptive trade practice
- the action must have occurred while they worked as a contractor
- there must be a significant effect on actual or potential customers
- an injury of a legally protected interest resulted due to the conduct
- the contractor caused actual damages to the client
If it’s proven your contractor acted in bad faith when they violated the CCPA, you can be awarded three times the amount of the actual damages.
If you give a contractor money upfront in Colorado, state law requires them to put the funds in a trust. If they fail to do this or misuse the funds in the trust, you may be able to sue them for civil theft.
The Colorado Construction Trust Fund Statute requires contractors to pay for project costs before settling their own expenses. For example, the contractor must purchase supplies and pay subcontractors before covering their own overhead.
This law was created to deter contractors from robbing Peter to pay Paul, if you will. Here’s an example:
You hire a contractor to update your bathroom. He asks for a quarter of the project’s cost upfront. Unbeknownst to you, your contractor has not paid subcontractors working on other projects. So he uses your money to satisfy those debts. But then, he can’t pay the subcontractors working on your bathroom. You’re in the dark until subcontractors file a lien on your property for nonpayment.
It’s scary to find out a subcontractor intends to file a mechanic’s lien against your property. But you have legal options, some which are more cost-friendly than others.
Send a Demand Letter to the Bad Contractor
A demand letter is often one of the first steps a litigation attorney takes in a case that involves a potential civil suit. Why? Sometimes a strongly-worded demand letter from a lawyer is all that’s needed to resolve a problem. And it doesn’t involve all the costs that come with filing a lawsuit.
In the case of a bad contractor, all you may need to do to recover your money or get the lien removed from your property is to pay a good real estate attorney to write a hard-hitting demand letter.
Sue the Bad Contractor
Now, if a demand letter doesn’t fix the problem, then you might have to weight the pros and cons of filing a lawsuit.
The good news is if you have a strong case of a bad contractor violating the Colorado Construction Trust Fund Statute, then the court can award three times your actual damages and attorney fees if the contractor violated the Colorado Construction Trust Fund Statute.
State law protects contractors and subcontractors from non-payment. The Colorado Mechanics Lien Law allows contractors to file a lien against real estate — on your house for instance — if they are not paid for their work.
A contractor can enforce the mechanic’s lien and have the house foreclosed to recover money for the unpaid services.
I have a mechanic’s lien. Can I get it removed?
The short answer: yes.
Liens can be rendered invalid if a contractor does not follow the correct filing process. For instance, if the contractor does any of the following, your lien could be deemed invalid:
- Files late. If a contractor supplies only labor, they have two months to file from the last day workers are on the job. If the contractor also provides materials, the deadline is extended to four months.
- Fails to notify you. Contractors must provide the property owner a Notice of Intent to Lien at least 10 days before acting.
- Overstates how much you owe. The amount of the lien must reflect the balance due, and it cannot exceed the price of the contract.
- Makes technical mistakes on the paperwork. The lien must be notarized, include a sufficient property description, and be signed, among other procedures.
- Misses the foreclosure deadline. A lien is only valid for six months. After that, the contractor forfeits their lien rights.
Get a Lien Removed From My Property
If the contractor fails to foreclose, the lien remains on public record, but it is not legally enforceable. That means you may need to have it removed. A quiet title action can do the trick, and your attorney can do this for you.
A quiet title action can remove mechanic’s liens that have expired or a debt that has been paid. In simple terms, a quiet title action challenges a lien’s validity. Confirming the title rights lifts challenges to the property.
What Should be Included in My Construction Contract?
If you hire a contractor or handyman to work on your home or business, you may sign a construction contract.
This contract sets expectations and safeguards both parties involved in the project. Contracts provided by the contractor often include clauses or provisions that benefit them. These obscure passages are often in fine print, on the back side of pages, and written in difficult-to-understand legalese.
It’s always a good idea to have a real estate attorney review the construction contract before you sign it to ensure you know what you’re getting yourself into.
At a minimum, your contract should include:
- scope of work
- start and finish dates
- permit acquisition
- project cost and payment terms
- materials to be used
- contractor’s and owner’s responsibilities
- owner’s right to cancel
- project change policy (“change order”)
- liquidated damages clause
You may be familiar with some contract terms like “scope of work” and “permit acquisition.” Here’s an overview of other terms that may not be as familiar:
Owner’s Right to Cancel
Colorado law lets some homeowners cancel a contract within three days of signing it. Roofing contractors are required to notify a client they can rescind the contract. The homeowner is entitled to a full refund for any deposit.
Project Change Policy
A “change order” occurs when you or the contractor alters an aspect of the project after the contract takes effect. Changes can affect budgets, extend timelines, and increase labor.
Construction contracts often contain a policy about how to handle project changes. Changes may be required to be in writing. Both parties may have to sign off on them.
A policy like this can reduce change order abuse by contractors who attempt to increase costs.
Project Cost and Payment Terms
On the surface, cost and payment terms sound straightforward. But the homeowner can be harmed if they don’t carefully read this section.
Most homeowners enter into a fixed-price agreement. Ideally, this keeps costs down. However, a contractor or handyman may cut corners to stay on budget. A bad contractor could abuse change orders to inflate the price of the work.
Liquidated Damages Clause
The liquidated damages clause limits damages. Many times the clause relates to a project’s deadline. If either party breaches the contract — for instance, creates a delay — there is a pre-set amount paid to remedy the breach.
This provision serves two purposes:
- motivates the contractor and client to stay on track
- compensates either party for potential losses due to delay
There are two sides to the liquidated damages coin. What you get may not equal what you actually lose. Proving actual damages can be difficult and costly in litigation. Here’s an example:
A bed and breakfast owner hires a contractor for a complete remodel. Both parties agree to pay $700 a day if they delay the project. The job’s deadline is five months. Instead, the overhaul continues for four extra weeks.
Contractor Causes Delay
The contractor fails to get a necessary tool. The carelessness delays the bed and breakfast reopening by 28 days. The B&B owner may have lost revenue during that additional closed month. However, it’s difficult to say how many guests they would have served during that time.
The owner is entitled to $19,600 in liquidated damages.
Owner Causes Delay
The bed and breakfast owner changes some remodeling elements which creates a delay. The contractor incurs extra overhead costs and misses out on other work.
The contractor receives $19,600 for the additional expenses.
Mechanics Lien Notice
Contractors who are not paid for their work will often file a lien against the property. The owner cannot sell or refinance the home as long as the lien remains enforceable.
Builders, material suppliers, and architects can also impose a mechanics lien.
There are instances when the lien can be removed. For example, if a contractor places a lien on your home for more than what you actually owe.
Do I Have Legal Options if I Don’t Have a Written Contract?
If you don’t have a contract and you encounter a bad contractor, you will wish you had something in writing. But, not all hope is lost if you don’t.
In Colorado, you do not have to have a written contract to sue a bad contractor or handyman. However, not having a written agreement complicates things.
If you sue, the burden of proof is on you. Without the job’s details in writing, your case is more difficult to prove — and win.
State law allows verbal contracts to be as enforceable as a written contract. If you don’t have a written contract, you can use the following evidence to prove you agreed to the work:
- Text messages and emails can be used as supporting evidence.
- A contract signed only by the homeowner is more proof of intent to enter into an agreement.
- Demonstrating a handyman performed some work is an indicator of an oral contract.
Let Us Fight the Bad Contractor for You
If you believe your contractor strayed from the contract, schedule a free case assessment with Robinson & Henry, P.C. at the link or when you call 303-688-0944. Our contract attorneys can help you figure out whether there is a breach.
Are you concerned your construction contract is not adequate? Is the contract’s language difficult to understand? Our attorneys can assist you with that, too. They can review the contract to ensure it’s fair. If not, our lawyers may be able to help you renegotiate the terms.