Construction Dispute Lawyer

[MoneyMoth]

I've already reached out to a few construction dispute lawyers but I wanted to get some advice online as well

I entered into an agreement with a builder to build a new home in the Spring of 2019. The agreed to price was $1.5M and the agreed to completion date was Summer 2020. This was not in the builder contract. We do have a budget sheet and numerous emails defining those terms.

It is now December 2020 and the price is anticipated to be closer to $1.7M with a targeted completion date of Spring 2021. Many of the added expenditures were conducted without my signature or consent. The builder is becoming increasingly difficult to get a hold of.

I'm assuming I have legal recourse, no? I'm looking to have a lawyer speak on my behalf as I no longer want to deal with the builder. I want the house completed (even if it has to be in barebones fashion for the remainder of the project) at the agreed to price of $1.5M as quickly as possible. At which point, I plan to sell it and no longer want to live in it. Am I being unreasonable? Was I naive for not pursuing legal action sooner?

Thanks

[CordMcNally]

I'm certainly not a lawyer but how come the price and projected completion date wasn't in the contract. That seems like two major things you'd want in the contract.

[billy]

I dont think you can hold construction to a completion date during this year- supply, materials, labor all were affected by COVID.

[MoneyMoth]

I dont think you can hold construction to a completion date during this year- supply, materials, labor all were affected by COVID.

i understand that and i also understand that a 10% overage when building a home is almost expected

what i didn’t appreciate was how the charges were sprung on me two months before anticipated completion

we have been asking for budget updates continuously and were reassured continuously that everything was on budget

and then out of the blue, we are short $200k with no signatures from us to authorize these increases in spending

i guess that’s not actionable though?

[MoneyMoth]

I'm certainly not a lawyer but how come the price and projected completion date wasn't in the contract. That seems like two major things you'd want in the contract.

i don’t know

we had an attorney review the boilerplate contract and he said it was fine

in retrospect we should have asked for an anticipated final price and completion date to be included

[billy]

i understand that and i also understand that a 10% overage when building a home is almost expected

what i didn’t appreciate was how the charges were sprung on me two months before anticipated completion

we have been asking for budget updates continuously and were reassured continuously that everything was on budget

and then out of the blue, we are short $200k with no signatures from us to authorize these increases in spending

i guess that’s not actionable though?

Not sure about the price/spending difference, but the completion date argument will likely be a lost cause. Disclaimer- not an attorney.

[Anne]

Didn’t you say in another post that you are selling it for $4 million plus? If that’s the case I would let it go and close the deal on the sale rather than waste time and money trying to fight what I think is most likely a lost cause.

[MoneyMoth]

Didn’t you say in another post that you are selling it for $4 million plus? If that’s the case I would let it go and close the deal on the sale rather than waste time and money trying to fight what I think is most likely a lost cause.

yes that is the plan

i still can’t shake the feeling i’m being taken advantage of

i do understand sometimes it is better (mentally) to just let it go

[Tim]

You can probably hold them to the price (depends on the wording of the contract). Where there are allowances for "lighting fixtures", the come back is you went over.
Likely you have some overages. That is an example, the allowances. You can win on the core house if he went over. The cost to get to accurate numbers would depend on how the contractor responds. If you don't have some documentation backing up the contract amount, well, good luck.

[Anne]

yes that is the plan

i still can’t shake the feeling i’m being taken advantage of

i do understand sometimes it is better (mentally) to just let it go

I had a friend who got a giant custom build house for super cheap during the GFC. The seller had done similar to you, was upset at the contractor, wasted time trying to go after the contractor while the market was going up, the bottom fell out, never had success with the contractor and was stuck with a big fancy house while the market was crashing. The bright spot is my friend got a fantastic deal. Just an anecdote, but I wouldn’t waste too much time if you have a $4 million offer on a house you spent 1.7 to build.

[Kamban]

Lumbar prices have shot up 35% this year and some have even risen 100%.

You should be happy that you went only 200K over budget. As far as time delays, mine was supposed to be completed in 9 months but took over 2 years. With us doing most of the purchases like tiles, cabinets, appliances, fixtures, doors and what not. And visiting the house almost every day or every other day.

Our builder also became incognito at 1 year mark. Luckily we had a sub builder written into the contract. He took over and worked with us. We paid him and when the original builder did not pay the sub builder we paid out of our pocket and some more at the end as a bonus.Well worth it, as we moved in just as the COVID epidemic started

[EntrepreneurMD]

I don't see where you have a case against the builder honestly. Keep in mind COVID will probably be viewed as a very legitimate cause of significant delays due to worker safety, supply chain disruptions and if you ask the builders this has led to significant material cost inflation during COVID, state specific construction site COVID rules, and a hot housing market means the builder can easily have difficulty finding affordable labor and may have even seen employee turnover. You should probably give the benefit of the doubt unless you've seen something egregious.

For practical purposes, the builder is subject to delays due to subcontractors, inspections, the weather, supply shortages, material theft which is not uncommon on construction sites, etc. which are not in his control. Builders don't like delays. It raises costs and doesn't allow the crew to start the next job.

Generally the agreement with the builder, especially on a custom house, includes allowances based on typical percentages of the home price for things like kitchen cabinetry, flooring, roofing, etc. and the price is going to change depending on what you choose and other upgrades and options. Sometimes the inspectors surprise them\ builder with an unexpected change requirement. Regardless, supply and labor costs change even within the course of a construction project. Too many variables.

If it makes you feel better, we completed our home for a few hundred thousand dollars above where we started based on what we wanted. We were very happy with the final product. It's not good to let your relationship with the builder deteriorate during the construction. The costs are going to be the costs, hopefully you have an honest builder and work with them on the remainder of the project, explaining cost restraints but understanding some extra cost will be inevitable to complete the project. It's stressful to build a custom home, focus on the years of enjoyment you will get out of the home and avoid being irritated with what is not in your control, and probably not the builders in this unusual environment for everyone.

I wouldn't call the difference between $1.5M and $1.7M as being taken advantage of. If I were you I'd be very thankful if you can still sell the property for over a 100% gain (unless the land was very expensive). I'd be thankful if I had any immediate equity - building is expensive.

If you think homebuilding is tough, try building commercial! Not for the faint of heart.

[Shant]

I don't know what your legal rights might be but I would focus on the big picture and getting the best possible outcome available to you now. The main issue is getting a finished house, I would focus on that rather than whether they went over budget by a fairly common amount. If you are able to sell it at a profit then what would be your damages? There also might be some kind of quantum meruit thing since you will own the more expensive construction. What you don't want is to end up with an unfinished unlivable unsaleable house that will cost you even more than the extra $200k to finish or that will have a builder's lien slapped on it so it can't be sold.

[Tim]

I built my house with a fixed cost, allowances and draw schedule and a completion date. Additional liquidated damages or back charge of any of MY additional costs, at my discretion. I back charged him about $25k for true costs, 3 months late. When we went over the allowances and added in estimates of changes, I gave back about $5k.
This was not a hostile situation. The contract needs to be reasonable. I would not have accepted a charge for the lumber increase. I might have given some as a "tip".
Time is the GC's responsibility. He chose the completion date and set the cushion.

[MoneyMoth]

thank you everyone for your input

sometimes it’s hard to tell when one is overreacting, i find it helpful to have this forum to bring me off the ledge 🙂