Contractor Gone Bust? Here’s What Comes Next
Cape Coral homeowners have watched what happens when a builder closes its doors for good. If you find yourself in that situation, it helps to understand your options before things get worse.
When a contractor becomes insolvent or simply walks away from a job, litigation may be the path to recovering the cost of finishing the work, fixing defective construction, and covering other losses. The cost
of litigation can feel like a lot to take on when you’re already dealing with a contractor who didn’t hold up their end of the bargain, but depending on your contract language and the claims involved, attorney’s fees may be recoverable.
Bankruptcy changes the picture. Once a contractor files, the bankruptcy court typically places an automatic stay on any litigation against them. Your claim doesn’t disappear, but active lawsuits get put on hold while the bankruptcy case works its way through the system. At that point, you become a potential creditor and have to work within the bankruptcy court’s process to make sure your claim gets addressed.
There may be other avenues for recovery, too. Depending on the circumstances, insurance, bonds, or Florida’s Homeowners’ Construction Recovery Fund can offer additional paths to recovery beyond whatever assets the contractor has left.
But don’t overlook the subcontractors while you’re focused on the general contractor. Under Florida’s construction lien law, subs and suppliers can still record a lien against your property for unpaid work even if you paid the general contractor in full. A bankruptcy filing by the contractor doesn’t relieve the homeowner of potential liability to subcontractors and suppliers. Request payment affidavits and confirm which
subs and suppliers were actually paid before the contractor filed for bankruptcy. If liens start showing up, an attorney can help you sort out which are valid and how to clear them so you can move forward with finishing the project.
The takeaway from every failed builder is the same: Don’t wait until the contractor is gone to find out what youroptions are.
By Robson D.C. Powers, Esq.
Red Flags: Is Your Contractor In Trouble?
A number of local builders have gone under in recent years. The collapse of Beattie Development was one of the most visible bankruptcies in the area’s construction industry, but plenty of other contractors have folded and left homeowners scrambling, including Delta Build Services, Marco Custom Builders, and Metro Home Builders of Naples.
Homeowners often see trouble coming before a bankruptcy filing ever becomes public. Repeated delays, poor communication, and Notices to Owner or liens from subcontractors are early warning signs that a contractor may be in financial distress. Even so, many homeowners wait until the situation turns dire before doing anything about it, sometimes to preserve the relationship, sometimes because they simply don’t know what steps to take.
If you’re in this position, here’s where to start. Start with your contract. If the contractor has stopped work, fallen significantly behind, failed to pay subcontractors, or demanded payments that outpace the actual progress on the job, your contract may spell out procedures for declaring a default and terminating the relationship. Document everything along the way: payments, photographs, communications, delays, and any Notices to Owner or liens.
Know the pre-suit requirements. If you have concerns about defective work, Florida’s Chapter 558 generally requires you to give the contractor written notice of the defects before filing suit. This process lets the contractor inspect the alleged problems and potentially offer repairs or a settlement. Get it moving quickly so it doesn’t slow down your legal options later.
Talk to an attorney sooner rather than later. You don’t have to jump straight to a lawsuit. An attorney can walk you through your pre-suit options and help you figure out the right next step. Litigation isn’t always necessary, but small problems tend to grow if they’re left unaddressed, and getting an attorney involved early can spare you a lot of grief down the road.
By Kara B. Rogers, Esq.
Disclaimer: Nothing contained herein should be construed as legal advice. You should always consult an attorney for any legal questions. This article was originally published in the August Edition of the Cape Coral Sun and can be read in its original form at here.