That's a great attitude and practice that I'm sure has and will serve you well.
BTW, most of my clients are my friends and became friends sort of because we're all smart asses. If I get all serious on them, that's when they think I'm trying to rip them off. :-)
quotes TELL them you're getting 3. Toss high and low. Gets rid of gougers and low-ballers.
-------------------------------- Once had a buyer who indicated he would put a job out to bid and the low 5 bidders got to rebid.
This was a 6 digit job that was low balled going in.
There was nothing left for another bid; however, buyer was told that he was truly serious, he would have gotten the "real" price.
Good thing buyer didn't follow up, but it was fun watching buyer's expression as the blood rushed to the face.
Lew
Get a cup of coffee... this is a long one.
A couple of thoughts....
All valid points in the post Karl, as are the points preceding. On my master contract (going from memory - not at my own computer) I have another caveat that is somewhere in this neighborhood:
"While this Change Order affects the original scope of work and its cost, it does not affect the Terms and Conditions of the original Contract. All Terms and Conditions of the original Contract, unless otherwise specified within this Change Order will be observed and in effect as agreed to by both parties as if no modifications had been made to the original Contract."
My contract delineates that "The Scope of Work to be Performed" has all the details, including time needed to perform the work. It includes the cost of work to be performed as well as materials needed to perform the work.
When I built anything of substance, I kept a book of finish selections and spelled out where each paint color went, each tile selection, each bit of wallpaper, carpet, wood floor, deck stain, counter tops, etc. This book of finishes became part of the contract by reference to "see finish selections". My paint suppliers are required by me (now they are printed automatically) to write the paint number on each can received to match up with the book. Same with wallpaper, etc. I made a copy for the client, but kept the original with their initials and date under each selection under every selection.
My biggest problem when building a house (only built 5) was the people changing their minds about finishes and colors. (I ran back screaming to commercial my first chance to get away from houses.)
The Terms and Conditions part of my contract specify where to pay, when to pay, and *a lot* of language warning the client that under no circumstances will they screw around with me or our agreement. It has the standard exculpatory language to protect me, but it also sets for that if I have to hire any kind of help for payment, they will pay not only the amount invoiced, but all related fees required to collect including MY time.
(As a sidebar, I have tested this clause. I can recover the amount needed to collect such as attorney's fees, etc. I was not allowed to collect money for my time in that particular case because it wasn't an exorbitant amount and the judge decided that should be part of my cost of doing business.)
I found it necessary to add the "from memory clause" above into my contract as an attorney friend of mine reviewed my contract and told me that would be a good idea since **technically** I had changed the contract without limiting the scope of change.
Think about it.... yes, we agreed to the add on, and its cost. Yes, we agreed it increased the price. We further spelled out the time needed to complete the specified work.
But... did we agree to the same exculpatory language? Did we spell out the exact method and time of payment and what would happen if those tenets weren't observed? In the case of any overlapping work touched on by the contract, was/is it reasonable for the client to assume that the new work would be treated differently in any way other than specified in the contract? Will you have to listen to the dreaded "oh... I didn't understand that... I thought this was separate". Since it is more money, how will it affect the pay schedule? You need to make sure the additional work and additional money are completely protected.
You get the drift.
Over the years I have seen so damn many of my contracting amigos take it in the shorts because they didn't have the legal experience to fight off an unruly client. One of them in particular had trouble with a client that paid the contract amount for work just fine, but since the terms and conditions of payment for the change orders weren't spelled out, the judge chastised him in small claims court for not spelling out the terms of payment. That judge considered the change order (careful to point out this out here; it was an ADD ON, NOT a modification like a paint color change) to be a completely different issue, and a completely different contract. Sadly, one with no teeth for my amigo. The judge told my amigo that he thought the change order resembled an invoice, not a component of a larger contract.
While every attorney will look at any contract and tell you they can break it easily, I haven't had one of mine broken yet. I am diligent, and I have been tested.
But the amount of paper work and contractual expertise we have to have these days to do the smallest thing is amazing to me.
One thing I have found out though; if you have a client that is going to screw you, no amount of paperwork and legal blather will save you. Nothing will. You will get screwed.
All a good contract does is to keep everyone on the same page, remind them of what was agreed to, and to provide reference for how the job is to be handled.
There is an attorney here in town that has something like 14 liens against his home.... and he has another group of judgments as well. He is legendary, and he does well until he has someone like me that files a mechanic's lien against the house BEFORE I start a major remodel, and modify it along the project time line.
When he finds someone like me (he hasn't found me, though!) he is screwed. But there are plenty of guys ready to jump into the briar patch with him.
I still remember when I did 99% of my business on a handshake. Man, does that seem like a eon ago now.
Robert
What did you charge for the handshake? ;)
On of the only times I got screwed was on a handshake. It was pretty weird as I was working as a subcontractor for a guy who had always been my subcontractor and we had never had any sort of problem. I didn't realize that handshakes were directional!
Good post. One question. I didn't know that a mechanic's lien could be recorded prior to work being done. How is that and where are you?
R
That's a new one on me also ... being constantly required to obtain releases, I'm pretty familiar with Chapter 53 of the Texas Property Code and it seems on the surface that the notice requirements would preclude that.
Then again, I'm not a lawyer, I just play one on the keyboard, and since it was surely written by the breed, there are undoubtedly trapdoors, intended or otherwise.
I forget to add that I do recall a provision that when working with a retainage, a lien can be filed at inception on the retainage, but I was under the impression that it also took some type of notice and agreement of all parties ... then again, it seems a pretty antagonistic thing to do a client, but the guy in Robert's example sounds like he deserves it.
:)
Wouldn't touch the guy with a backhoe, no matter how potentially lucrative the project or what protective clauses were in the contract. The guy should be disbarred, and I'm sure eventually will be.
R
Wouldn't touch the guy with a backhoe, no matter how potentially lucrative the project or what protective clauses were in the contract. The guy should be disbarred, and I'm sure eventually will be.
R
Now that sir, is sad. I have had different folks screw me, and some got away with it. Realistically, how do you collect a $350 repair when the folks don't want to pay it? How much is your time worth, especially knowing the court system it could be a year and a half before you come up in small claims court.
I have been working here so long that with my subs it isn't at all unusual for me to contract for $7 - $10K on a handshake. Many will start on a job for me (like my roofing subs) without knowing anything about the job but when and where to show up. We *never* talk about money until the job is finished. In fact, I help some of them bid the jobs they do for me (and others) as I want to make sure they make money and stay in business for our future endeavors.
They know if they do what they are supposed to do, I will treat them fairly. I have a tendency to pay just a little bit more than the market price for services to my favorite guys, so they respond by taking good care of me.
Thankfully, the only big ticket item I ever got screwed on was when a group of doctors filed for bankruptcy just as I finished their office finish out. I was hit for a little over $16K, and I thought I would never drink that one off.
But as far as a fellow contractor trying to put the drill to me..... I literally grew up in construction. I know how to handle those things for the most part. No lawyer needed.
I ONLY do this when it is a big ticket contract and folks I don't know. I like for my clients to know that we are playing on a level field and they will nt be hiding behind any legal maneuvering or shenanigans.
I am in Texas and spent a great deal of time in finance here, so I learned from some very knowledgeable people.
I managed the construction/remodel portfolio of Norwest Banks when they were here. As a matter of course, we filed a lien against the property before allowing any work to start, because in Texas the oldest liens (first filed) are considered superior to any subsequent liens.
In the case of the liens being addressed (paid), each lien is completely satisfied before going to the next inferior lien.
When at Norwest, we executed some fairly sophisticated liens structures for their time, and modified them after each draw. Each draw required 1) an invoice for a certain dollar amount from a contractor 2) a description of the work performed requiring a draw 3) a partial release of lien signed by the contractor detailing the percentage of completion. If the contractor used subs for work instead of all employees, we required releases from them as well.
The master lien held by Norwest was modified (reduced) at the end of each billing cycle to reflect the new outstanding amount of the lien, as well as the new loan balance accrued by the payout(s).
At the end of the project, the master lien was released after all monies were paid out and all mechanic's lien waivers had been collected with an attachment that acknowledged that the contractor(s) had been fully paid.
The final release of lien and the loan documents were then given to the permanent financing organization (bank, mortgage company, etc.) and a permanent loan was established.
In the case of remodeling, many folks go to the bank for a second lien these days. This is another opportunity for disaster if you don't know what you are doing. Usually, the client still has a first lien (mortgage). The bank they go to for he second will INSIST on being in second position, superior to any contractor ( "mechanic an workman's" ) liens. That means that the contractor is in the last position.
If for any reason the property is foreclosed upon, (medical problems, divorce, loss of ability to pay, etc.) the mortgage company will foreclose. In Texas, since the mortgage company is almost always the superior lien, they will be completely satisfied, even if they have to take some money out of the second lien position. What is left after the first is satisfied is the bank's position, and after that the poor contractor.
So imagine this; clients start a new large room addition. The main earner loses a job. The house is foreclosed upon. When sold on the courthouse steps, it is under the market price because it is not only a slow market now, but because the work wasn't completed since the people quit paying their bills. Since they have a bunch of unfinished work to contend with, bids are low and not much money is generated at the foreclosure sale.
The mortgage company will most certainly be satisfied. The bank is a little shakier, but they are great at protecting their own ASSets. But that that poor contractor waits to see if there is any money left after the banks pick the loan clean....
If the superior lien holders take all the money, the contractor gets nothing. In this economy with falling real estate prices, it happens all the time.
He is off to civil court to try to go after the client personally. Good luck with that one.
Texas has some strong (and strange) real estate laws. New construction is different than remodel, and you need to get a good title company (or a law firm that specializes in real estate liens) to make sure you have the proper liens filed the correct way.
Lonnnnng ago I found that it is more important to be a good business man than it is to be a good contractor. You can lose your whole company in one poorly structured deal. You can be a pretty good contractor and still stay in business. But if you don't know the legal aspects of what you are doing, the right customer (or their attorney) can skin you alive if they want.
It's a jungle out there.
Robert
f Norwest Banks when
A different kettle of fish though, eh? ... a Lender has an entire legal pallette of liens that a mechanic/contractor/materialman (unless I'm missing something in the Texas Property Code) does not have access to, from Deeds of Trust, to the liens of which you speak?
Then again, as every lawyer who I've tried to talk into suing a bank for me has noted: In law school, if the question involves a bank, the answer is automatically "the bank wins".
I can't get away with that. :)
And it's a lawyer's game and you can't win, even if you prevail.
IME, and it often happens that, the more contractual diarrhea used in trying to protect yourself against all eventualities, the more you expose your intent to adverse interpretation in a court of law.
I've learned to do everything I can to keep it simple, or I walk away ... Bill Clinton's meaning of "is", notwithstanding.
Its a _contract_, silly.. At least $250 of that is for the lawyer to review the language.
-------------------------------- Mention Youngstown, Ohio and Ed Debartolo in the same breath, you will get a broad range of wry smiles about tales not told.
Some say those tales might include the "Family".
Had a customer who did some crane work on a shopping center project DeBartolo was developing.
When the outstanding invoices hit $750K, guy dropped the crane across the entrance at the start of the day and shut the job site down.
Story is guy has his $750K by noon and construction resumed.
Would I liked to have been a fly on the wall?
What do you think?
Lew
I must confess that I don't remember the exact name of the lien type that was filed. In the case of the Lender action, Norwest filed a lien equal to the amount of construction as a second position to the lot or land loan.
In some cases, the lot/land equity was actually deeded over to Norwest as a down payment in lieu of cash. These transactions were handled differently since Norwest held title to the real estate itself, and it held the only position of interest against the real estate. With that in mind, the Norwest would pay off the outstanding balance of a lot/ land, assuming the superior position. The master lien would be modified (increased) as the construction continued until finished.
Since Norwest's loan was not on a house, they had to file the lien as a lien against real property with proposed improvements (as you know). At the end of the process we took the clear title and flipped the construction loan including the lot and recast it as a permanent "real estate" loan.
I had a few of my remodeling cohorts that (when they were still in business... this economy finished them off) that filed a M&W lien against a project before it started. Only prudent when you are doing $80 - $250K additions.
Their liens were not considered valid for the full amount of the project as while **in process** they had not performed the full amount of work. The strategy there was to have the lien in place to protect their position in the line of creditors, and if/when it went to court the judge would modify the lien to reflect actual monies owed.
Texas real estate law is set up to protect the homeowner and in many ways leaves everyone else (except the banks) out in the cold. Since only the superior lien holder can force foreclosure, and only for the reason of non-payment (not only the note, but insurance and taxes if collected by them in escrow) a contractor that is in second position has little power.
You can file all the liens you want and they will just sit in the system. No harm will come to the deadbeat client.
That is why the banks and lenders have entire legal firms that specialize in Texas real estate law constantly review, update, and implement new documentation and strategies.
Truer word were never spoken. The banks know the legal system/real estate law so well that they can create a Gordian knot that can't be unraveled by anyone but them. And one little hickey in your paperwork... on small mistake... it can render your paperwork invalid in some instances.
Can I get an AMEN on that one, brother? Not possible. Even if you "win", you are lucky to be made whole, and if you are made whole, how much goes to your attorney? And there is a lot of back and forth on how much of your attorney's fee are "reasonable" and how much you should allow as a normal cost of doing business for collections.
I agree. With plethora of unrealistic legal shows on TV, many now think they are junior lawyers. I hear things like "I'm not sure I'm comfortable with the language you used here" and other such drivel. Some don't even understand what they are reading in the first place. I think some believe it is a game, and the more aspects you provide for them to consider, the more challenged they feel.
We are certainly on the same path. I only do work for one attorney, and he is such a great guy you would never know he was one. Others are too argumentative, and LOVE to split hairs and interpret every aspect of a project or repair. My current contract has the basic legal caveats and verbiage in it, and no more. It is a simple two page contract, with no tiny writing on it.
While this may sound arrogant, it isn't. I look at my meeting with my proposed client as a mutual interview. I want to see if we are a good fit for each other. If I smell trouble or there is an overly aggressive know-it-all in the mix, I simply tell them "I don't think we can help you" and leave.
Life is too short. The legal system is a long and winding road with no end. Who needs the aggravation?
Robert
Where there is ambiguity in a contract, the ambiguity must be resolved against the interest of the author of the contract.
Apprectiated this thread -- as a contractor and as an occasional lurker.
Ken in Calgary.
I suspect a 'cookie-cutter' developer, with the admin fee designed to cover the costs of riding herd on the 'deviation' from the "standard plan". In that scenario, there is a 'production' issue of "pay attention, this is *DIFFERENT* on _this_ job". if there were a a whole group of modifications bundled to gether, a single instance of the admin fee makes sense. If there was _only_ the -one- change that was something other than a selection between 'standard' options, it make sense to waive the fee.
I'll give a contractor the opportunity to re-bid, _when_ it is obvious they have 'missed something' on the submission. Doesn't happen very often, but I do want 'apples-to-apples' comparison of what they believe is needed. Usually, when I got something 'out-of-line' low, it was that bidder wasn't including something that the others -were-. Discussion would usually establish that they didn't believe that -that- item needed work/replacement, whereupon I'd ask for a quote as an 'add-on' in case I wanted it done 'anyway'.
Had a really funny situation in this respect a number of years ago -- Needed to replace 'a furnace' in the house, it had failed during an extremely cold spell in the winter. Now, as it happened, the house had two complete heating/cooling systems, one each for two separate 'zones' (an artifact of a _major_ add-on, some years previous).
Did have to make it clear to the companies that this was _NOT_ an 'emergency' situation, that we were soliciting competing bids, _and_ that they could/should schedule this job _after_ any 'emergency' calls. (We figured out, 'after the fact', that the furnace in question had probably died a good two weeks before we placed the initial service call. Took a while to 'penetrate consciousness' that the 'other furnace' was running almost constantly.)
Got quotes from several reputable firms, sat down to review them, and 'make a decision' -- ended up calling *all* the bidders back and asking "why are quoting a unit over 2-1/2 times the size of the one that is being replaced?"" None of the estimators had noticed the 'other furnace' on the other side of the basement, _or_ checked the 'plate' on the dead unit. "Assumed" it did the whole house, and sized by eyeball, accordingly. (The estimators were =good=, the units they quoted were very close to the combined capacity of both the existing units.)
Second round of bids came in with _much_ lower numbers.
Turned out they _couldn't_ quote the 'same size 'unit as the one being replaced -- *nobody* made one that _small_ any more -- but could get something rated only about 20% larger.
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