Michael Stone: Wrapping Up a Difficult Project

It’s great to see a business turn around and become more profitable, following practices we talk about in Markup & Profit Revisited and in our intensive class. But projects that were started earlier still need to be finished. That’s the situation a contractor described in this note to us.

First, I want to say thank you for everything you do. I have bought your books and attended your 2-day class. I have learned so much and now my company is starting to become profitable and is turning in the right direction.

I am dealing with a situation that is from before I learned so much in your class and books.

I built a house for someone (I probably shouldn’t have) and for a price (I know I shouldn’t have) with a weak contract (3 for 3). This house nearly drove me into bankruptcy, and I did everything I could to get it finished. We finished in April and the never-ending punch list was completed while they were moved in, we have done everything on the punch list, but little things keep popping up after the original punch list. Now we have had some problem with the stained floors (due to some bad advice at the get go) and are going to be going in and refinishing. They still owe me the final payment, but this is really a warranty issue. Would I be wrong in demanding payment before we move forward? Also, what are my options if they refuse payment. I am going to attach my contract to see what my options are.

I want to do what is right and finish, but they are the people that everyone warns about. It seems there is always something as to why they haven’t paid (its only $4,000) on a $520,000 contract.

I received an email from him this weekend with the statement “I am sending this email as documentation”, which to me sounds like documentation in case of legal proceedings.

My thoughts in replying would be to say that we will take care of it, but in order to move forward we need to make final payment and move into warranty time. I am planning on offering a moving company to move all personal items out for liability and having the floors redone then the moving company will move everything back in. I just don’t want to put any more money into it before receiving my final payment (which will most likely go into fixing the floor).

Any advice you can give would help. I already have a plan. I just want to make sure I am making the right decision.

It can a challenge to finish a project, especially when it was priced too low for a difficult client and with a weak contract. Fortunately, this contractor’s plan should put him on the right track to finish the job and move on.

He’s right not to do any warranty work until final payment is made. The warranty begins after the final payment has cleared, not before.

He needs to write an additional work order that specifies the final punch list and the time frame to get it done. It needs to specify that when that punch list is complete, the job is complete and final payment is expected. Use the punch list procedure that’s outlined in our two-day class and stick to it. If he doesn’t, this will drag on forever.

In this situation, I’d also write an additional work order for the warranty work before it’s started. An additional work order isn’t normally required on warranty work but it would be a wise step. This additional work order should specify exactly what will and won’t be done and the time frame.

During both the punch list and the warranty work, he should take pics of everything, with date and time stamps, so there can’t be any disagreement about what got done, when and if it was done as agreed.

These are difficult lessons to learn, but we’ve all had difficult learning experiences and we usually come out of them wiser and stronger.

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Catherine Wynn
January 20, 2021 6:07 pm

Unfortunately, the $4000.00 is the clients security so he probably feels in a worse case scenario (regardless of your good faith thus far), in the event the repair work isn’t completed he has the funds to have it done. Homeowners want to know the job they paid for is complete with quality. If any of your work compromises the Business and Professions code where you maintain your license, then they can take you to court and this could drag out even longer (when someone says for documentation that is never a good sign). Even though it is warranty work and… Read more »

Paul Choate
January 20, 2021 8:26 am

Ugh. The never-ending punch list. The good news is it does eventually end. The bad news is it feels like it goes on forever. I’d submit the invoice for the final payment as the project is complete (or substantially complete per contract). Assure him that you will take care of the punchlist items but the final payment must be taken care of. If he/she has a problem with it find out what their concerens are and then remind them of how you’ve taken care of everything thus far and will continue to do so…Assure him/her that there is no reason… Read more »

January 20, 2021 5:13 am

I believe that the contractor is correct, this is a warranty item. I would get final payment before I would start any warranty work. The customer is trying to hold back the $4000 as leverage. I would send back an email using the same wording. ” I am sending this email as documentation that the final punch list has been completed and final payment is due”. Not sure how the contract was written but hopefully there is a late payment clause. This will escalate things but the contractor risks doing the warranty work and never getting the final payment. I… Read more »

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