The last thing you want during a major project is to get tied down in litigation against a bad contractor. Unfortunately, poor workmanship, unfinished work, a standoff over terms, or some other predicament, can make you wonder: Is it worth it to sue my bad contractor?
You’re hardly alone. Issues between homeowners and contractors consistently rank near the top in customer complaint surveys. A home renovation project should be a good long-term investment, but it can turn into a financial quagmire when things go sideways.
What Do You Hope to Accomplish with a Lawsuit?
You’re angry. We get it. But how much more money are you willing to spend to “get even” with your contractor? That probably depends on what you hope to accomplish with a lawsuit. Do you want to recover money lost in the deal? Or is the principle of the matter your guiding concern?
Recover Damages and Costs
The first thing to consider is whether you have a good case. Let’s assume you do.
Consider the Cost to Pursue a Lawsuit
First, you’ll want to find out if your original agreement with the contractor includes an attorney’s fees provision in the event of a lawsuit. If you have an attorney fee’s provision, you can recover your actual damages plus attorney fees. Even if you don’t have an attorney fees provision, you may be able to recover attorney fees or additional damages based on a statute.
It’s not uncommon to spend between $5,000 and $10,000 in a lawsuit. With that in mind, you’ll have to decide if that’s worth the trouble.
How Much You Can Recover
Colorado law caps construction-related damages awards depending on the jurisdiction of the court. The maximum amount you can recover in small claims court, for example, is $7,500. However, since you don’t need a lawyer for small claims, you can save on attorney’s fees.
In county court, the damages cap is $25,000. However, you could recover attorney’s fees beyond the $25,000 if they are provided for in your contract.
District court lawsuits have no damages cap, due to the complexity of cases brought at that level. You can expect higher attorney fees in district court cases, and possibly more push-back from the other party, but it is because you can sue for an unlimited amount of damages.
When the Contractor Doesn’t Fight Back
If your contractor does not respond to the lawsuit, you can win a default judgment. There may be a hearing on the amount of damages, but you will no longer have to prove liability.
Once the judge orders damages, you can move to enforce collection through garnishment, bank levy, and debtor exams.
When the Contractor Fights Back
A lawsuit can get complex and expensive when the contractor retains counsel and decides to fight back. While contested lawsuits take longer, it is important to remember that this is how you can get compensated for damages caused by the contractor.
Your attorney will be in the fight bringing all claims available so your damages against the contractor increase.
Multiplying the Damages under Trust Fund Statutes
If a contractor’s actions in your case are deemed particularly egregious, you could be awarded considerably more than just actual damages. If your contractor violates the Colorado Construction Trust Fund Statutes by misappropriating or stealing money you paid toward your project, you could be entitled to triple damages, plus attorney’s fees.
You hire a contractor to add an office and library area to your house. The contractor goes over the plans and requests a payment of $12,000 to cover most of the costs. You transfer the funds, only to receive a new bill for $10,000 on top of what you already paid. This is nearly double the amount you originally agreed on. You learn soon after that the contractor used the funds from your first payment to pay workers from a previous job he had underbid.
This is a clear violation of the trust fund statutes. In an eventual lawsuit, you could be awarded three times the original $12,000 ($36,000) in addition to all your attorney fees and legal costs.
Multiplying the Damages under CDARA and CCPA
The same treble damages apply if the construction professional ignores or responds in bad faith to your Notice of Claim under the state’s Construction Defect Action Reform Act (CDARA).
If your lawsuit reveals that the contractor has similarly defrauded others, then the Colorado Consumer Protection Act (CCPA) comes into play. You could recover all attorney fees and legal costs in addition to your actual damages from the lawsuit.
A Matter of Principle
Sometimes it’s not about the money. You’ve looked at your case and how much you can realistically expect to recover and decided you can still teach this bad egg a lesson.
Bad contractors who are familiar with the system get away with their wrongdoings because they know their victims probably can’t afford a costly lawsuit. This is your opportunity to stop such a contractor and show them they finally messed with the wrong person.
Take Emotion Out of It
Think of yourself as the CEO of your family. How will this decision affect your finances? Will your family have to make sacrifices to teach this contractor a lesson?
Remember, legal actions can escalate quickly, especially if the construction professional decides to fight back. If you pursue a bad contractor for $10,000 and it costs you another $10,000 or $15,000 in legal fees, but you never collect any damages, you’re bound to be angry all over again. This is why it’s important to talk with an attorney about your specific situation, so you’ll have a realistic picture of what you can expect from a lawsuit, and what you can recover.
Which brings us to ….
Damages vs. Recoverability
Once you’ve won a judgment or a substantial settlement, you still must collect it. This is a caveat in many kinds of lawsuits, and homeowner-contractor disputes are no exception.
The Value of a Judgment
You’ve heard the horror stories about claimants who win large judgments against a particular defendant, but are then unable to collect. However, in Colorado, a judgment in your favor against a bad contractor gives you considerable leverage, even if the defendant shrugs their shoulders and tries to get out of paying.
Once you’ve won a judgment, you have options and time to keep going after the bad contractor. If they fail to respond, or act in bad faith after you have sent written requests for payment, you can move to either garnish their wages, or file a lien against their property. We have put together a full article on collecting money owed to you in judgments or other common claims.
A monetary judgment in your favor gives you extra time to go after the contractor for what they owe. If you win a judgment in district court, you have 20 years to pursue collection. If you win your judgment in county court, you have six years. — Colorado Revised Statute 13-52-102
You can even get the 20- and 6-year terms extended if necessary. — C.R.S 13-52-102
Even as you pursue collection, your successful judgment hurts the bad contractor in other ways. It stays on their record with the court, and allows you to remind the public, over social media, that this particular contractor lost a judgment to you over their egregious behavior.
Statute of Limitations
You have only a certain amount of time to file a claim over construction defects or breach of contract. Once the period expires, you are barred from bringing a claim against your contractor.
Talk to an Attorney About Your Bad Contractor
Whatever you decide to do, it’s never a bad idea to talk with an attorney to see how the specifics of your case line up. From poor workmanship and unreasonable delays to unlicensed work and breach of contract, our Real Estate Litigation attorneys can help. Call 303-688-0944 to start your free case assessment.