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Dealing with Contractors

Brad Vauter, Attorney
Legal Hotline for Michigan Seniors

Last month, we provided tips and ideas for consumers considering home improvements, home repairs or home additions. The point was to help you be careful, cautious and clear, BEFORE signing a contract. But what if you just develop a case of “cold feet” and don’t even want to go forward? Or what if you see trouble brewing while the work is underway? What can you do when the contractor pulls off the job and/or claims to be done when you think the job is far from complete? What if sub-contractors bill you even though you have already paid the contractor? As a consumer, you have some rights and remedies available in these situations, depending on the circumstances.

Keep in mind that most remedies are not self-executing—they won’t happen automatically. You will need to take action or at least learn if taking action is worthwhile. Some of these suggestions you can do on your own--others will probably require a lawyer. It’s smart to consult with a lawyer to determine how (or if) to proceed, especially if you have a lot at stake. The private bar, legal services agencies, the Legal Hotline for Michigan Seniors, and others are places to whom you might turn. What follows is a quick survey of some possible remedies and suggestions—we cannot cover every possibility in one article.

Don’t delay if you are unsatisfied. Some remedies are very tightly constrained, meaning a person must act in days or hours or within a few weeks in order to meet deadlines. Other remedies give consumers more time to act—in some cases a year or longer. In approximate order of timelines, here are various suggested actions or remedies to consider if things go badly and/or you want to end the agreement:
Home improvement contracts you sign which also involve an installment contract may be canceled if you immediately, meaning not later than 5 pm on the business day following, provide a written notice of cancellation to the contractor or his agent at the place of business given in the contract or by mailing the notice of cancellation to the contractor to his place of business by a properly addressed certified letter in a US Post Office or mail box. (Michigan’s Home Improvement Finance Act.)

Another quick (three business days) way to back out of a contract can be found under Michigan’s Home Solicitation Sales Act (much like a similar federal law, often called the “Cooling Off” rule). These laws don’t apply to every contract however they do cover non-emergency situations where:

• The sale was solicited by the seller by way of a personal, written, or telephone contact;
• The solicitation was received by you at your home (this includes mail or telephone calls, but not newspaper ads);
• Your agreement to purchase (contract) was given to the salesperson at your home, AND
• The goods or services purchased are worth more than $25.
• The law does not apply to sales that begin as retail transactions at a business establishment, but completed with the signing of a contract in your home. (For instance, ordering carpet at a store but signing the contract when someone comes to your home to measure floor space.)

Contractors, builders and sellers should give you proper notice when the law applies and even cancellation forms. Sometimes they do not. Regardless, if you think the law applies, and want to cancel a deal, sign and date the cancellation form and/or write a note canceling the contract and mail or deliver a copy to the address given for cancellation anytime before midnight of the third business day after the date of the contract. You need not give a reason to cancel the contract if this law applies and you cancel within the time limit. Keep a copy for your records and since proof of the date you acted may be important later, it’s best to use certified mail from the post office, return receipt requested. If you made a deposit or payment the seller/contractor must return any payment made within ten business days after getting the notice. If the contractor or seller leaves goods or materials behind you must stand ready to return those goods or materials. If you follow the rules and the seller does nothing, you can contact the Michigan Attorney General, Consumer Protection Division, at P.O. Box 30213, Lansing, MI 48909 or telephone 1-877-765-8388 (toll free) or an attorney in your area.

What if you have concerns further down the road into the contract? There is always a possibility of resolving a problem through negotiation. As a consumer you should first try a resolution directly with the contractor before making the final payment. Try a phone call or talking with him or her on site. But don’t count on simple chat unless you see real action following. Instead, you may want to note simply, in writing (save a copy for yourself) your concerns. Make sure the contractor gets your letter. List your concerns, and suggested remedies, in a business-like manner. It’s possible that such simple prompting will get action. Why a letter? Letters are harder to deny or avoid than phone calls or hurried conversations in your driveway or on your porch, and if push comes to shove they might help prove your case later. If a reasonable time goes by and you don’t reach a resolution or the contractor never gets back to you, you might also try calling the local building inspector, provided your concerns touch upon resolving workmanship and code violations. If you do reach an agreement or get action, keep notes. If the arrangement you reach is quite a bit different than your original agreement or contract or involves more money, you will be very well served by writing down the new contract or amendments to the old contract or agreement to make sure everyone is clear what is expected. Sometimes these modifications are called “change orders.” Remember that companies and individuals are generally bound by the terms of signed agreements or contracts.

If you suspect outright fraud or deceit, if your instincts tell you this contractor just took your money and ran, or you suspect now that the builder has little or no intent on doing the job, you can also make a report to local police. Although it may seem like a civil matter (and most contracts and building and remodeling contracts are civil matters) any contractor who set out to defraud you might be violating various criminal laws, so file a complaint with the police and also alert the Michigan Bureau of Commercial Services, Enforcement Division, at (517) 241-9202. (You should also alert the Bureau if the contractor turns out to be unlicensed and is offering to do work in a field or area requiring licensing covered in last month’s article.) If problems continue on your job, and you see matters deteriorating, you may be able to make use of the Bureau of Commercial Services, Enforcement Division, to help reach a resolution. If you think that a licensed firm or an individual may have violated the provisions of the occupational code, other licensing laws, or is not serving you in a fair and honest manner, you may file a complaint. Their jurisdiction covers complaints against residential builders and/or maintenance and alteration contractors. Remember that this potential remedy focuses on making sure licensed professionals do their work appropriately—the Bureau does not get involved in fee disputes and they won’t take your complaint on unlicensed individuals or companies.

You may download the complaint forms from their website or request the forms by contacting the office by telephone or in writing at: Department of Labor & Economic Growth, Bureau of Commercial Services/Enforcement Division, P.O. Box 30018, Lansing MI 48909, (517) 241-9202. They will encourage you to include copies of various documents like estimates, contracts, notes and photos, etc.
Keep a copy of all documents sent to the department. You should receive a confirmation of receipt of your complaint within 30 days. Your complaint will then be reviewed. If the complaint is within their jurisdiction, a file will be set up for additional review. Sometimes they make use of mediation but if they cannot, or an agreement is not reached, the department will conduct an investigation. If the investigation determines that the law or rules may have been violated, the enforcement division will file formal charges, called a formal complaint, against the contractor. At this point the department becomes the complainant.

When filing a complaint against a builder you must request a signed building inspection report from the local building code enforcement official to verify poor workmanship or building code violations, otherwise your complaint will not be processed. If the complaint is against a residential builder or maintenance and alteration contractor, it must be filed within 18 months of completion, occupancy, or purchase, whichever occurs later.

An outline of the stages of a complaint is on their website or they will send it to you if requested. Be patient; the process can take many months.

If your complaint is against an electrician, mechanical contractor, plumber, or state approved premanufacturer, a similar process is used, but a different state office is involved, and it is called the Office of Local Government and Consumer Services (OLGCS). They also want all complaints in writing with information like your name, information about the contract and the contractor, nature of the job, etc. Mail this information to: Bureau of Construction Codes & Fire Safety, Office of Local Government and Consumer Services, P.O. Box 30222, Lansing, MI 48909. Upon receipt, bureau staff will review your documentation to determine if an investigation should be initiated or if additional information is required. Like the earlier agency mentioned, the Bureau of Construction Codes & Fire Safety does not have the authority to intervene in issues which are solely monetary or contractual disputes.

Sometimes contractors or companies providing materials for a job will protect themselves with liens. If they follow the law, this is ok. But contractors sometimes threaten to place a lien when unwarranted, and many consumers don’t know that Michigan law has some protection for property owners regarding liens—for instance many liens, unless actually being litigated, “drop off” after a year’s time. Liens can cloud your title and are complex. Discussing lien issues with a lawyer is necessary for your protection.

Michigan law provides some help to consumers dealing with licensed contractors when the consumer has paid for their work. If you have actually paid your contractor and the liens are not released or if subcontractors or building supply places keep liens filed against your property you should learn more about The Michigan Homeowner Construction Lien Recovery Fund (Fund). It provides protection when the homeowner has in good faith, paid their licensed contractor for materials and labor and the contractor (sometimes called a general contractor) has failed to pay others e.g. materialmen, subcontractors, and/or laborers. To learn more contact the Homeowner Construction Lien Recovery Fund, part of the Michigan Department of Labor and Economic Growth at P.O. Box 30018, Lansing, MI 48909 or call them at (517) 241-9241. Or go to their web site at: www.michigan.gov/constructionlienfund

If you are not getting satisfaction from the contractor and you are being reasonable and they are not performing as agreed in your contract, don’t pay the final installment or installments. This can be nerve-wracking and stressful and you may want to see a lawyer first, but not paying in full until the work is completed to your satisfaction is still the best leverage over a contractor who has performed incomplete or shoddy work. Such action on your part could lead to threats of litigation or actual law suits, but remember that most individuals would rather negotiate than litigate—and this includes contractors and builders.

Threats by unlicensed contractors or builders, in work requiring licensing will ring hollow—Michigan law denies unlicensed contractors use of the courts for collection if the work is more than $600.00. You yourself can sue contractors in small claims courts for amounts up to $3,000 (however anyone who is sued in Small Claims Court can remove the case to the regular District Court usually resulting in the need for the person suing to hire a lawyer). Or you can see an attorney about your probabilities bringing a case or countersuit or defending yourself in a case if real litigation ensues. Naturally using the courts is a last resort and many practical issues arise like the costs involved, the chances you could actually collect a judgment from a builder (if the builder is broke a lawsuit might not do much good) and so on. Most contract related lawsuits would have to be brought within 6 years time. There are offices in all counties for mediation services and this is often worth trying as an alternate to litigation. It’s less stressful, quicker and much cheaper than a law suit. Both parties have to agree to mediation. To access mediation services for your county, call (800) 873-7658.

Lawyers at the Legal Hotline have helped hundreds of seniors with problems with contractors and may be able to help you by analyzing your problem, answering your questions and suggesting some options. You can call the Hotline weekdays, from 9 to 5, at (800) 347-5297.