Repair Contractor Woes

I am a board member for a small (23-unit) condo complex in Colorado. Aside from issues of non-payment among owners, we are dealing with problems on a major repair project.

The 2007-2008 winter was hard on the buildings, leaving some exterior damage to already-aging buildings. In spring of 2008, our property manager contact the board and said our insurance company would drop our coverage unless we pursued repairs. With this pressure to get something under way immediately, we settled on a bid from a local contractor to do some general exterior repairs and repainting. While our insurance paid some money toward this end, we were forced to do a relatively large assessment with little notice that has caused lingering problems for a few owners.

While we have been struggling through collection issues, the contractor started work in the fall of 2008, but did not complete before winter set in. Along the way, he has added to the finalized bid of rough $90,000 at least another $30,000 for things he claims to have found and had to repair and replace. Unfortunately, the initial bid and subsequent changes exist as email exchanges rather than a written contract. Checks have been written to him, work has been sporatic, and I feel it's safe to say tempers are worn on both sides. He expresses constant complaints about the original construction and about the HOA dragging its heels on paying for his materials and extra work he's had to do. Owners complain that the work is still not looking close to finished after a year and half even with what's been paid thusfar and that some of the work looks sub-par or has not held up to weathering thusfar.

There now remains $14,000 outstanding on the "total amount owed." The board was under the impression, though not explicitly told, materials were covered by this point and the remaining amount could be paid upon completion (partly because we don't really have much else as leverage to get him to finish). Now he has asked for another $11,500 of that amount for more materials before he continues with work, going so far as to say if he did not receive payment at the end of the week he would postpone work on our buildings until fall and move on to other projects in the meantime.

This, of course, increases owner concerns about being taken for a ride. Is it unreasonable to expect a percentage on a project like this to be paid on completion as opposed to during work? Is there any recourse against this sort of treatment? Is there anything we can do to make sure the work is completed in a timely and satisfactory fashion?

Or, in short, does anyone have any advice? I'm about at wit's end.

Construction projects are tough on both sides. Soooo many problems pop up when you start getting into the job. Yes, some things come up that they have to charge extra for. There is soo much poor construction out there, they may have had to fix many things before they could work on the things you hired them for.

That said... I like to set milestones. I usually give a small deposit to get the work started on a specific date. Then talk with the contractor and I break the project up into small parts. I issue payments when each part is complete. I issue payments quickly to give contractor incentive to return.

1. You could break up the remaining parts of the project into smaller payments upon completion.

2. You could keep bugging the contractor, twice a week if needed, until he finally gets the project done and fix what he messed up. Sometimes you need to keep nagging contractors to finally get the work done. I've been on both sides. Issue him another $1,000 as a small token to get him working again. He may be having money issues and cant get someone over to you.

3. You could talk to him and agree to call it quits. Get an estimate from another contractor to finish. Negotiate a total amount owed with the old contractor based on what still needs to be completed and the work that he did that needs to now be repaired.

I do realize this whole situation could have been avoided with better management and oversight from the get-go. The board made assumptions that the property manager would handle details of things such a a contract, the property manager probably did not realize how serious this was going to be and was too accustomed to overseeing minor and informal jobs, and the contractor arguably should have seen a lot more of what he'd have to do on his initial inspection. I wouldn't say anyone is blameless by a long shot.

Now, I'm just trying to make the best of a bad situation and looking for any angles or alternatives I'm not seeing.

The board had a serious talk directly with the contractor (who has frequently insisted on contact through the property manager previously) a few months ago. He expressed his thoughts and, at the time, sounded confident we could all get through this in a timely fashion. Reassured by that, we agreed to move forward and he resumed some work in the last week since snow had cleared. He didn't seem to be making quick headway, but everything seemed okay as of a few days ago.

This is why the latest request for money - with a deadline of less than a week, and the threat of putting further work off until fall if we don't pay by then - seems abrupt and almost hostile. While I understand he has expenses of his own, it doesn't feel like he's treating us fairly. I'm also concerned that this would leave less than 3% unpaid on the total with a good bit of work yet to be done.

I do appreciate the feedback regardless.

I'm confused about something.

You say there was some kind of contract in place. For XXX work to be completed by XX date for $XX.

Then you say the contractor found all sorts of "other things" that were out of whack and apparently proceeded to "fix" those. . . .

Here's my question:

The PM and the board let this happen without a CHANGE ORDER that was signed by both parties, indicating the exact "other thing" and the exact "additional cost," and the exact "fixin' time"?

I have never worked with any contractor that just took it upon himself, even through an FYI email, to add to the scope and/or parameters of the job without a change order.

I would imagine that were he to try to collect against that, he would be found lacking in backup.

Then again, he could (and probably will) place a mechanics lien -- sounds like a real mess.

I think the first thing you guys need to do at this point is introduce the "CHANGE ORDER REQUIREMENT" into the process.

NOTHING gets done that isn't on the initial contract without it. No matter how "important" it appears to be.

If he can't do his current project without "fixin'" additional "broken things" then you guys need to know exactly what that work entails, what the timeframe for completion and the additional cost. If he can't provide, it may be time to look into securing a contractor who does understand what a change order is and knows how to use it.

Anyway, I agree this is going to be hard to dig out from under.

But someone has to call a time out and set some clear, specific goals and expectations.

Still, Scott, as I'm sure you and your board are learning now, formal, legitimate change orders do NOT work that way.

They protect not only you, but the contractor, as well.

I would hope that going forward your board would insist on a formal change order process.

His claims that he did x, y, or z without charging you are worthless.

Seriously.

Pull everyone into a time out and get this process on the right track before it ends up costing your HOA more than it needs to already.

Don't "suggest" a formal change order process, insist on it and don't allow any "freebies" or anything else unless it is pushed through the legitimate process.

Seems odd, frankly, that your PM would not be aware of this sort of process.

No, it's really not okay. And it was lack of official change orders that got them into this mess.

The process does not have to be drawn out. Any decent contractor or subcontractor wouldn't work without that process.

I hire contractors to fix things in my home. We have a specific contract.

If the contractor runs against any variance, or anything that will impact the conditions of the contract, oila, change order.

I or my husband review it, if we agree that it is necessary, we approve. If we don't, we don't approve and he sticks with the original contract.

It's nothing to fear; it's nothing that takes a lot of red tape. And it's a paper trail that neither party can abuse.

Obviously "email" communication can not, and did not work properly.

Why? Because an email like that is not a legitimate change order and cannot serve to address any changes to the previously agreed upon scope of the project.

We also demand them, as part of the RFP, for any contractors we use for association work.

"repair and replace" are Reserve Fund terms.

Too bad you had to have an additional assessment for some thingthat should have been in your reserve fund. Get an analysis done NOW on all your buildings, etc. so this does not happen again.

No wonder the contractor found more problems, it seems things have been let go for too long.

You should take a good, hard look at the situation and figure out if you think that this guy will finish it or not. The best way to do that is to meet him at the exact place where he's making repairs and have him walk you through how he'll get the remaining part done. Don't forget to ask what the materials cost.

If you conclude that he won't or can't get the job done, no amount of change orders or paperwork will fix that.

I know it's tempting to add change orders, have more meetings, exchange more e-mails, shuffle more paperwork, get contracts signed in blood: to try to do everything through remote control. Maybe you don't care enough to actually meet him on site. But, if you really want it fixed, that's what it will take.

Vague concerns about his fairness and honesty are useless. Stop playing the victim.