"Would it correct to expected that if the actual costs exceeded the estimated costs per phase that either the builder would cover the costs until the final payment or request further payment based on proof of costs like invoices?"

Generally speaking, and now knowing your contract, you are required to pay the full amount of the phase whether the bank is giving you that much or not. However, you question implies that you have not been getting all invoices. You should be getting ALL invoices, whether that phase goes over or not.

Regarding the lien, generally speaking, in the states any portion of a contract that violates the law is void. That is why contracts have a clause saying if one clause is voided or illegal the remainder of the contract continues. We don't have a holdback period like that. But if we did, I am pretty sure the courts would interpret it to mean the legal right couldn't be contracted away unless it was explictly detailed in the contract (our state interprets other building related rights this way). However, you are in a "province", which I assume means Canada.

So honestly, I think you should consult a Canadian lawyer. But from the sounds if it the lien period will be up before he gets too far in his lawsuit, so I would be tempted to call his bluff and tell him to go ahead and waste money on lawyers suing for money being held for him anyway. He sounds like a real tool.

Thanks for the response sue36. I realize that it is difficult to understand the whole picture without being familiar with the contract.

I agree about the invoices. It was a cause of major friction between the GC and me. I was frustrated that I had a better grasp of the financial side of things than he did. Several times I had to remind him that it was stipulated in the contract that I would see all invoices prior to payment.

He kept complaining about needing more money but when I asked for invoices he never provided them and dropped the subject so I didn't pay until the next phase. When he wanted money he claimed the subs were banging on his door to be paid but when I needed invoices it took him a while because he had to track them down.

I guess what I wanted to know was if GCs pay for stuff (materials, subs etc.) as they go along and then receive payment from the owner or do they wait until they are paid for each phase to pay the costs associated with each phase.

I suppose it really depends on your contract, but the way that it should work is that the GC pays the subs/vendors as bills are received. After that, the GC gathers all of the receipts and documentation for the homeowner to review. Once the receipts have been reviewed and the work is completed per the homeowner and the banks satisfaction, then the money can be released to the GC. By the contract functioning in this matter, both the GC and the homeowner share the risk (interest, etc). I'm not sure why the GC would have signed a contract that had set payment schedules based on his estimates of construction costs rather than on the real numbers along the way. That is a little bizarre...no wonder he was always wanting more money, as it is not a surprise if he had lowballed initial estimates!!!

I am interested in why you had a CO inspection on October 25th and yet you didn't receive a CO but rather an OK to occupy. Were there code issues/violations? Do you have a CO now? It is strange that he is pushing so hard for his money if you don't yet have a CO...that seems to be at least a minimum requirement. Good luck- I think you may need to obtain some representation; however, the 55 days will be way up before you would probably reach any resolution through legal avenues.

Your GC must have been a delight to work with through this experience...

"I guess what I wanted to know was if GCs pay for stuff (materials, subs etc.) as they go along and then receive payment from the owner or do they wait until they are paid for each phase to pay the costs associated with each phase."

It depends. Not much of an answer, I know. Generally the GCs are given a certain amount of days to pay from suppliers, and subs want to be paid in phases. If a GC does not have an account with a supplier he may pay up front (when we built I found I got the best prices by paying up front and not expecting 30+ days free money, so I did that). Sometimes you can wait to be paid for a phase before you pay a sub. But the subs are not going to wait, so sometimes you have to pay mid-phase. The GC should be paying the suppliers before interest is added in, and should be paying the subs per his agreement with them. Part of the reason you need cash on hand when you GC (or self-GC) is to pay for things as they come up.

It seems like you found one of the GCs who is a lousy business person (but maybe a good builder). I admit, my DH falls into that category.

Thanks dixie and sue for your responses. I appreciate your information. In the end, I paid the interest charges and all the invoices that he has provided. I didn't agree with all of them but we decided it was worth it to just pay and get him out of our lives. The anxiety of having to deal with him just became too much and I need to focus on other things like my family who have lived in 5 different places (3 hotels!!) in the last year. We just need to get settled an move on.

The only outstanding items are the 10% hold back which we will pay when the 55 days is up and the lien is removed. There are a few things that need to be completed on the house but we have arranged to get done. There were 10 outstanding items noted on the Oct 25th inspection but no safety issues so the city inspector allowed us to move in. The items were things like completing the tile tub surround, caulking around the tub, installing a range hood, inspecting the attic and installing a timer on a bathroom fan. We still don't have a CO and he is blaming that on us but it is because the cabinet guys haven't shown up to install a piece that is required before we can install the range hood despite us contacting them every 2 days. Everything else is done but only because we arranged to have it done.

"Your GC must have been a delight to work with through this experience..."

The fact that he cashed the cheque for final payment and then filed a lien against our house 3 hours later because we held back the legally required hold back is a good example of the sort of stuff we were up against.

But to be fair it was a learning experience for us too. I wish I had found this board before we signed the contract. Our last build was easy and not stressful at all so although we did a lot of research we should have focused on different areas. For example, he has built a number of different homes but we discovered after the fact that they were all spec homes that people had bought while he was building. We were the first cost plus contract he has done. Looking back it is so obvious that it was a question that we should have asked but we didn't think of it. We were too focused on the quality of workmanship etc.

Guess we will be smarter and more prepared if we are ever silly enough to build another home. :-) The most important thing is that over all we are happy with our house and in a few months I am sure I will be able to laugh about what an ass he was/is.

I did tell him that I could not and would not budge on the holdback amount and if he wanted to sue me over it he could fill his boots. I pointed out that it would cost him money and the holdback funds would most likely be tied up until the spring due to court scheduling. Until I pointed it out I don't think he even realized that he was arguing about a date that would be long over by the time we went to court. The money would have been sitting in trust all along and the judge would probably ask him why his was wasting his time.

Is the 10% holdback Canadian law or contract between you and the bank ? I have heard of holdback allowances, but its usually a bank procedure (whether defacto for an area or a banks particular procefure). Just trying to clarify whether there really is a legal requirement for the holdback or just something the bank does to protect itself. . .

The holdback is legislated in BC under the Builders Lien Act. It is provincial law so it doesn't apply to all of Canada. The Builders Lien Act requires a 10% holdback on all construction contracts and subcontracts. Owners, contractors and subcontractors are required to holdback 10% of the value of each contract.