Dealing with a Difficult Contractor: What Kind of Lawyer Do You Need?

The new addition on your home wasn’t supposed to feel like a subtraction. However, due to hiring the wrong contractor, your long-term investment in the value of your home seems to be going in the wrong direction. Now you wonder how much time and money it will take to get back on track. If you’re in this position, you may have legal recourse. The question is: When dealing with a difficult contractor, what kind of lawyer do you need?

Bottom Line

If you want to show a bad contractor that you mean business, hire a litigation attorney with contract experience. Construction contracts are incredibly detailed and confusing, and state laws insulate contractors from certain kinds of lawsuits. A detailed and assertive litigation lawyer is your best bet when you want to hold a bad contractor accountable.

In This Guide:

• Why You Need a Litigation Attorney to Fight a Bad Contractor

• Common Reasons to Sue Bad Contractors

• Laws that Guide Homeowner-Contractor Disputes

• Colorado’s Construction Defect Reform Act (CDARA)

• Economic Loss Rule in Colorado

• Colorado’s Construction Trust Fund Statute

Judgment Against a Bad Contractor

Our client, a property owner, sought help to recover money paid in advance to a contractor who failed to finish the job. As a result of the unfinished work, our client’s property remained in disarray. We filed a lawsuit against the contractor. When the contractor failed to defend against our accusations, we successfully obtained a default judgment against the contractor. Our client was also awarded attorney fees and court costs.

Why You Need a Litigation Attorney to Fight a Bad Contractor

A litigation attorney is your best defense and offense if you’re dealing with a bad contractor.

Incompetent and Obstinate Bad Contractors

While fraud occurs, most “bad contractors” situations are the result of an incompetent construction professional. Incompetence tends to show up in two ways:

• In the work itself, through defects, avoidable delays, code violations, or an inability to meet the property owner’s standards, and

• On the business side, where the contractor underbids projects to earn contracts but lacks the money to do your project correctly or pay their subcontractors on time. Many times, they end up “robbing Peter to pay Paul,” and they cut corners until it catches up with them.

When confronted about their shoddy work, many bad contractors will dig in their heels, delay, or hide to avoid contact with you. Such behavior can stem from taking offense to having their work questioned, or they may not have the funds, resources, or workforce to fix the problems or give you a refund.

Enter the Litigator

The experience and professional posture of the lawyer working your case matters. Litigation attorneys tend to favor a no-nonsense approach that forces adversaries to confront the matter at hand. Litigation attorneys have had previous interactions with bad contractors and their lawyers, and they’ve taken cases to trial.

Bad contractors will string along unsatisfied homeowners with excuses like “I’ll look into that.” They ignore your calls and text messages, claim to be too busy, and try to run out the clock on a homeowner’s hopes of ever getting a problem fixed.

Litigators don’t play that game. They know accommodating an incompetent or dishonest contractor never works. Litigators demand more, forgive less, and impose strict deadlines that bad contractors can’t just ignore.

Litigators vs. Letter Writers

Any lawyer can match the facts of a case with relevant statutes and fire off a demand letter. Entire firms thrive on this practice because the possibility of legal action might be enough to correct a bad contractor’s behavior. However, the internet is changing that.

Today, lawyers can access their counterparts’ trial records online. If an attorney is shown to have a flimsy, or even non-existent history of bringing cases to trial, their demand letters don’t look so intimidating. They are letter-writers, not litigators.

You need a true litigator to make demands on your behalf.

Common Reasons to Sue Bad Contractors

Every situation involving a bad contractor is unique, and there are a wide variety of specific offenses you can sue for. Below you’ll find the most common categories bad contractor lawsuits fall under, but you and your attorney will talk about your specific circumstances to figure out what your claim is.

You can learn even more how to deal with bad contractors when you refer to our primary legal guide on the topic.

Breach of Contract

If your contractor does not perform the work according to the terms of the agreement — even if that agreement is not in writing — you have the right to demand the amount of money lost.

Example: You hire a company to install a new, 40-by-20 lap pool. The contractor digs the hole, puts in the plumbing and wiring for underwater lights, then begins to pour and sculpt the mixture for the pool’s foundation. The problem is, the contractor poured plaster for the pool’s foundation instead of the sturdier, more expensive gunite you paid for. When you tell the contractor to fix it, he becomes exasperated and says he doesn’t want to take out the plaster molding because he has other jobs and doesn’t want to get behind schedule. So, he and his crew walk off your property and leave your pool unfinished. This is a breach of contract.

Shoddy Work

A contractor may try to walk away from a substandard job, but you can hold the contractor responsible for the cost to repair defective, unsafe, or shoddy work and for any damage caused by their poor workmanship.

Example: You hire a contractor to add a larger deck to the back of your home. When the work is complete, you notice that the deck is not level; there is a subtle but noticeable tilt that renders it almost useless – and potentially dangerous. This is shoddy work.

Unreasonable Delays

Construction delays happen. Some are caused by natural forces or other factors out of the contractor’s control. Unreasonable delays occur when a construction professional is entirely responsible for dragging out the project. You can hold a contractor liable for any costs or damages resulting from such delays.

Example: A contractor wins the bid to build an addition onto your house by promising to finish the project in three weeks. Once the project is underway, work stops because the general contractor fails to order key materials on time. Now there’s no way the project will be finished on time. This costs you and your family the opportunity to make use of the new addition as you’d planned.

Civil Theft

If you paid a contractor in good faith, but they failed to disperse necessary funds to subcontractors, you might have a claim for civil theft under the Colorado Construction Trust Fund Statute, which we will discuss in more detail later.

To a litigator, a civil theft case against a bad contractor is like hitting the jackpot on a slot machine. These cases can be easy to win, and they often result in triple damages and attorney’s fees. The bonus: the contractor cannot discharge the damages or fees by filing for bankruptcy.

Example: A contractor charges you $40,000 to complete work on an addition to your home. Your money should have been deposited into a trust fund to pay for materials and hire electricians, plumbers, and other crew. A month after the project’s completion, you start receiving invoices from the electricians and plumbers demanding payment. The contractor was supposed to pay them, but he either kept or mismanaged your money leaving the subcontractors to pursue collection actions against you.

Fraud

Contractors commit fraud by knowingly making false claims to get you to sign a contract with them. They may lie about or exaggerate their skill level, licensure, or ability to complete a job to your satisfaction.

Contractors can also engage in other forms of fraud, such as tacking on suspicious fees or charge for more premium construction materials while using cheaper, flimsier materials to pad their profit margin while diminishing the integrity of the work.

Example: You hire a construction crew to add a ‘man cave’ and game room to your basement. You provide detailed instructions about how the final project should look. The contractor confidently agrees to your specifications, however, the “completed” work bears little resemblance to the layout you requested. In fact, it barely looks completed.

Invalid Mechanic’s Lien

A contractor or subcontractor can file a mechanic’s lien against your house or property if you have not paid them for their work. This is one way state law protects construction professionals from non-payment. Unfortunately, disputes over payments or added costs happen.

Some dishonest contractors resort to filing a mechanic’s lien to squeeze more money out of owners. If a contractor files an improper lien, you can sue for attorney’s fees and costs.

Example: You hired a contractor to build a sauna and private clubhouse next to your swimming pool. Upon completion, you find that neither the sauna nor the clubhouse are built to contractual specifications. So, you withhold payment pending repairs. The contractor tries to collect by filing a lien against your house, threatening to force your home into foreclosure if they don’t get paid.

Laws That Guide Homeowner-Contractor Disputes

An influx of people to Colorado and lots of residential construction projects led to an increase in lawsuits that threatened to hold back professional builders just when the state needed them most.

In response, state lawmakers passed laws to discourage frivolous claims while still responding to homeowners (and homeowners associations) wronged by shady or unskilled contractors.

What follows are concise explanations of three major statutes affecting bad contractor litigation today. Keep in mind, your attorney must consider these legal standards before filing your complaint.

Colorado’s Construction Defect Action Reform Act

The Construction Defect Action Reform Act, known as CDARA, regulates claims and lawsuits resulting from defective construction work. Colorado enacted the law in 2001 and codified it in the statutes at C.R.S. § 13-20-801, et. seq.

“The general assembly hereby finds, declares, and determines that changes in the law are necessary and appropriate concerning actions claiming damages, indemnity, or contribution in connection with alleged construction defects.” — C.R.S. § 13-20-802.

In essence, CDARA creates a legal partition between most shoddy construction lawsuits and other kinds of litigation. It narrows the scope of potential damages you can recover, and it creates a separate claims procedure against contractors and construction professionals.

The CDARA Claim Process

One of CDARA’s top aims was to stem the rising tide of construction-related litigation, so it established a prompt and cost-effective means for parties to avoid litigation, if possible. This process must be followed before any litigation moves forward.

Any plaintiff or “claimant” wishing to sue a bad contractor must first complete these steps:

One: Notice of Claim

You must send a written notice to the last-known address of the construction professional. The claim must describe:

• the nature of the defective work,

• the location and type of construction where the defect was found, and

• any damages caused by the defect.

You cannot pursue a lawsuit against a bad contractor until 75 days after the notice of claim has been sent. If your claim involves commercial property, the waiting period is 90 days.

Two: Contractor Inspection

The contractor, once served notice, must submit a written request to inspect their work and the alleged defect on the claimant’s property. This inspection must take place within 30 days of the contractor receiving the notice of claim.

Three: Offer to Settle

After inspecting their work and the alleged defects, the contractor has 30 days to send the aggrieved property owner an offer to either repair the defect or settle the claim by paying or refunding a specific amount of money.

Four: Claimant Decides

Once the contractor submits their settlement offer, the property owner has 15 days to provide written acceptance of the offer. Otherwise, the offer is considered rejected. If the owner does not accept the contractor’s offer or the contractor never makes an offer, then the claimant may file a lawsuit.

In fact, if the contractor fails to even respond to a Notice of Claim, they could wind up paying treble damages. That is triple the amount of actual damages.

Note: Sometimes it’s clear early on that this CDARA square dance won’t yield a true settlement offer. Follow the steps regardless. Colorado judges will keep your lawsuit on pause until you can show that you made every effort to complete the Notice of Claim process. Colo. Rev. Stat. § 13-20-803.5(9)

However, there are rare exceptions, such as when a construction company tries to use CDARA as protection against a general negligence lawsuit. Let’s examine one such case.

Land-Wells v. Rain Way Sprinkler & Landscape, LLC

Background

Donna Land-Wells, the plaintiff, suffered considerable injuries when she slipped on an icy residential sidewalk. As she lay injured, Land-Wells saw that a pool of water had collected and frozen just where she stepped. She determined landscaping had recently been done but in a negligent way; it allowed water to collect on the sidewalk where she slipped. Land-Wells filed suit against the landscapers, Rain Way Sprinkler & Landscaping, LLC.

Landscapers Prevail at Trial

The landscapers filed a motion for a directed verdict at trial court. The company stated that because this was a construction matter, Land-Wells was required to follow the Notice of Claim process established by CDARA. She had not done so because she was not the property owner and had not hired the landscaping company. The trial court sided with Rain Way on the grounds that the plaintiff had not met evidentiary standards imposed by CDARA. Land-Wells appealed.

Trial Court Reversed on Appeal

The Colorado Court of Appeals saw the trial court ruling for what it was: a strenuous misapplication of the effect and intent of CDARA:

“Although CDARA limits certain types of claims against construction professionals, see § 13-20-804, it does not alter the substantive elements of a plaintiff’s claim. Specifically, as relevant here, it does not require a plaintiff to plead or prove (1) that the plaintiff complied with the notice process, or (2) that the alleged injuries or damages arose from a construction defect.

Because CDARA did not require plaintiff to prove anything more than the elements of her common law negligence claim, the court’s ruling was incorrect.”

Land-Wells v. Rain Way Sprinkler & Landscape, LLC, 187 P.3d 1152, 1154, Colo. App. (App. May 15, 2008)

CDARA Limits Damages and Negligence Claims

Construction professionals in Colorado are not immune to negligence claims, as demonstrated in the case we just discussed, Land-Wells (Colo. App. 2008). However, CDARA prohibits such claims unless a failure to observe codes and standards results in actual injury or a possibility of imminent injury or death. In other words: no harm, no negligence.

Generally, damages sought in a construction defect lawsuit will be the lesser of the following:

• fair market value of the real property

  without

  the alleged defect;

• replacement cost of the real property; or

• reasonable cost to repair the defect, and any relocation costs.

Damages might increase for a variety of reasons, such as when an unlicensed tradesman violates the Colorado Consumer Protection Act, or when a construction professional fails to comply with a settlement arranged through the Notice of Claim requirement process.

However, all damages and attorneys’ fees added up in a lawsuit under the Colorado Consumer Protection Act are capped at $250,000.

Statute of Limitations & Statute of Repose

The CDARA sets the statute of limitations at two years for any actions brought against a construction professional or contractor for an improvement to real property. The statute begins at the time a defect is discovered or should have been discovered by reasonable diligence.

The statute of repose goes into effect after six years. Repose means no legal action can be brought under any circumstances after six years. However, if a defect is discovered near the end of the pre-repose period, in the fifth or sixth year for example, the time will be extended up to two years.

Economic Loss Rule in Colorado

Breach of contract losses can only be breach of contract losses. Even when a case is put forth that some other tort, or harm, led to the breach, only contractual damages can be awarded. The award cannot be duplicated by a separate finding of intentional harm or negligence in the same case, although Colorado might observe an exception in certain cases of fraud or civil theft.

While the Economic Loss Rule is not written in the statutes, it is supposed to be a common-sense doctrine observed by most Colorado jurisdictions, though each applies it in their own way.

An Example of the Economic Loss Rule

You hire a company to build a three-car garage and loft at the end of your driveway. You pay $50,000 in total, however, one of the automatic doors stops sliding all the way down after a couple of weeks. One evening, a trespasser crawls under the opening and steals tool sets and other valuables stored in the garage.

Defective construction and possible negligence contributed to the theft of items valued at just under $2000. Under the Economic Loss Rule, you can send a notice of claim to the construction company for breach of contract or poor workmanship. However, you cannot file a concurrent lawsuit for negligence. You cannot get paid twice for the same contractual shortcoming.

Rationale for the Economic Loss Rule

In short, it’s to differentiate breach of contract cases from personal injury matters.

Under the Economic Loss Rule, the existence of a contract means the two parties have already negotiated terms. This includes all agreements over each party’s rights, obligations, and remedies. If one party could expand its remedies beyond what’s provided in the contract, they could enrich themselves more than was bargained for.

In theory, one party could file a lawsuit over a contract breach and gain a windfall by tacking on as many additional claims and torts as might apply. It would encourage frivolous claims.

Colorado’s Construction Trust Fund Statute

Here’s a scenario: You got a nice check from your insurance company after wind and hail storms ravaged your roof and tore your back deck askew. You hire a contractor to rebuild it. He charges $65,000, explaining that he must order materials, and also pay roofers, electricians, and landscapers to restore your home. You transfer the funds.

However, the contractor never finishes the work, and has absconded with your money without even paying the subcontractors.

This is the kind of nightmare scenario that Colorado’s Construction Trust Fund Statute was enacted to prevent.

Funds Held in Trust

Under the statute, all funds disbursed to a contractor or subcontractor on any building, construction, or remodeling project must be held in trust so that all workers, merchants, and tradesmen can be paid. Also, a general contractor must maintain a separate, detailed record for each project or contract to track monies received and paid. — C.R.S 38-22-127

The CCTFS makes clear that funds paid to a contractor must go toward the project for which they were intended before they can be used elsewhere.

The Colorado General Assembly intended this statute to protect homeowners, tradesmen, laborers, and sellers of construction materials from dishonest or incompetent contractors. If the contractor fails to distribute project funds appropriately, they face serious legal action.

A Statute with Two Aims

Sometimes the CCTFS is referred to as the Mechanic’s Lien Construction Trust Fund Statute. Why? Because the trust fund statute really has two purposes.

The first, of course, is to ensure that the general contractor pays all the subcontractors, laborers, and merchants involved in the project. The second purpose is to arm construction professionals with powerful legal recourse if a homeowner fails to pay what they agreed to under the contract.

Mechanic’s Lien

A construction professional can file a lien on your house if you haven’t paid them for their work. Once a contractor has obtained a lien on your property, they can use it to apply tremendous pressure for six months. In a worst-case scenario, they can even foreclose on your house. This can result in the judicial sale of your home, with proceeds going to pay off the debt owed to the contractor and construction workers.

The Mechanic’s Lien is an intimidating legal power, no doubt. However, they are difficult to enforce without near-perfect adherence to at least a dozen other specific rules. For this reason, a good litigation attorney can probably hold the threat of such a lien at bay.

Red Flags

Of course, bad contractors only need the fear of a Mechanic’s Lien to keep distressed homeowners lying awake all night. No surprise then, that some dishonest contractors file invalid liens to squeeze owners. This can happen especially when there’s been a dispute or if the contractor must replace misappropriated project funds.

If a contractor is corrupt or secretly incompetent, there will be red flags, such as:

• subcontractors billing

  you

  for their work when you know they should have been paid by the contractor from the trust fund.

• the contractor requesting more money due to “additional expenses” that have occurred since work began.

• work delays due to labor shortage, a possible sign the contractor is not paying employees.

Damages for Breaching the Trust Fund Statute

A contractor who violates the Construction Trust Fund Statute can be held personally and criminally liable. Damages can be significant.

Misappropriating funds in trust is civil theft and a lawsuit can be filed under Colo. Rev. Statutes 18-4-405, which states, in part: “… The owner has the right to sue the person who stole the property, as well as anyone in whose possession it is found.”

Under the Civil Theft Statute, the homeowner and unpaid subcontractors could recover treble damages, costs, and attorney fees. None of the money awarded in judgment can be discharged by a bankruptcy. It must be paid. — C.R.S 18-4-405

Criminal Liability

If the amount of theft comes to more than $1,000, the contractor could face fines from $2,000 to $750,000, mandatory parole, and jail time for two to 12 years. — C.R.S 18-4-405

Get a Litigator to Deal With Your Bad Contractor

Dealing with a bad contractor isn’t only expensive, it’s stressful. If you’ve had a bad experience with a contractor you hired to do work on your property, you have a right to fight back. Let our litigators help. Call (720) 961-6749 for your case assessment.