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

It's deeply frustrating to feel caught in a cycle of excuses, delays, and unfinished work with your contractor. Each passing day brings potential financial losses, but there are solutions available to you. This guide reveals how a litigation attorney will steer you toward your desired resolution.

When you're dealing with a bad contractor, a litigation attorney is your best defense and offense. Their experience and professional posture matter when you're up against an incompetent or fraudulent contractor.

Litigators vs. Letter Writers

There's a difference between a litigator and a letter writer. Any lawyer can match the facts of a case with relevant statutes and fire off a demand letter, but the threat of legal action isn't always enough to resolve the problem. Litigators have a history of bringing cases to trial.

Trial experience is so vital, in fact, that the Colorado Supreme Court underscored its importance in Stern v. County Court of County of Grand, 773 P.2d 1074.

The court noted that while not all lawyers are equipped to litigate cases effectively, trial experience is essential for not only courtroom advocacy but also informed negotiation and case resolution.

Savvy Negotiators

Trial lawyers make excellent negotiators. Their judgment and experience are integral to achieving just outcomes, whether through trial or settlement. Trial experience equips attorneys with a deeper understanding of legal strategies, potential outcomes, and a case's strengths and weaknesses, which is critical in achieving favorable outcomes.

Sound Advisors

Attorneys with courtroom experience are better positioned to predict how courts might view certain proposals, which can guide clients in making informed decisions.

This familiarity with judicial tendencies and discretionary matters, allows attorneys to advise clients on the risks and benefits of settlement versus litigation. Such insights are particularly valuable in mediation, where attorneys help clients understand the potential costs and outcomes of contested litigation.

Every situation involving a bad contractor is unique. Below you’ll find the most common categories bad contractor lawsuits fall under, but you and your attorney will discuss your circumstances to determine your claim.

You can learn even more about 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 pool. The contractor poured plaster for the pool’s foundation instead of the sturdier, more expensive gunite you requested. When you ask the contractor to fix it, he and his crew leave your pool unfinished. This is a breach of contract.

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.

Litigators find civil theft cases against bad contractors to be highly advantageous. These cases can be easy to win and often result in triple damages and attorney’s fees. Note: Contractors 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. 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 legal action 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 adding suspicious fees or charges 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 finish 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.

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 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 planned.

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 how 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 next to your swimming pool. Upon completion, you find it isn't 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 you don't pay them.

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. Keep in mind, your attorney must consider these legal standards before filing your complaint.

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.

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

CDARA aimed 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.

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

Once served notice, the contractor 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: Homeowner 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 respond to a Notice of Claim, they could be ordered to pay triple the actual damages.

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)

CDARA Limits Damages and Negligence Claims

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 various 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, under the Colorado Consumer Protection Act, the total damages and attorneys' fees in a lawsuit are capped at $250,000.

Statute of Limitations & Statute of Repose

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.

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 differently.

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 $2,000 worth of items. 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.

The Economic Loss Rule is meant to differentiate breach of contract cases from personal injury matters.

Here’s a scenario: You receive insurance money to pay for a new roof and deck following a hail storm. The contractor charges $65,000, explaining that he must order materials, and also pay the subcontractors to complete the work. So, you transfer the funds.

Unfortunately, the work is never completed, and the contractor leaves without 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 a 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 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.

Mechanic’s Liens

Sometimes the trust fund statute is referred to as the Mechanic’s Lien Construction Trust Fund Statute because it allows contractors to file a lien against a homeowner to collect an unpaid debt.

In a worst-case scenario, your home can be foreclosed and sold to pay off the debt owed to the contractor and 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.

Bad contractors only need the fear of a mechanic’s lien to keep distressed homeowners up at night. It is 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 funds.

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

• Bills from subcontractors

• Contractor requests more money for “additional expenses”

• Work delays due to labor shortage

Damages for Breaching the Trust Fund Statute

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

Beyond the financial implications, disputes with contractors often cause considerable stress. Protect your property and your investment by exercising your legal rights. Our litigation team is dedicated to helping you achieve justice and recover your losses.