Documentation for out-of-contract charges

5 years ago

We recently received an unexpected invoice for $21,000 from our out-of-state GC for out-of-contract charges on our new custom build. The invoice contains 27 line items, each having a brief, and usually obscure, description. Ten of the line items are $1,000 or more. Most of the charges relate to site work purportedly done from three to seven months ago, like multiple utilities trenchings, water meters, gravel, concrete, meetings with civil engineer and subcontractors, etc.

Our contract stipulates that:

We need to pre-approve, in writing, out-of-contract charges of $1,000 or more.
Charges less than $1,000 can proceed without written pre-approval but that we will be notified of the charges as soon as possible.
Charges will be at invoice cost.

The GC did not request our written pre-approval for the charges of $1,000 or more. And, in our view, he did not notify us “as soon as possible” for the charges that were less than $1,000. He sent his invoice on December 21, 2018 as he was leaving for vacation, so we could not reach him until January 4, 2019. We verbally asked him to provide supporting documentation for the charges, such as subcontractors’ and vendors’ invoices, and he refused to do so. We also sent him an email asking for supporting documentation, and his response was only that he would “answer our questions to clear up any of our confusion”.

We understand that out-of-contract charges like these are not unusual in a new build. However, we are upset that the GC did not notify us of the charges as they were occurring, as stipulated in the contract. And, worse, we are very concerned that he has refused to supply supporting documentation.

On January 11, the GC notified us that he has stopped work on our house due to what he considers an outstanding payment due on the $21,000 invoice. He started the build in April 2018, and we have made all payments to date on a timely basis.

We have a telephone call scheduled with him on January 16. Any advice on how we should proceed would be greatly appreciated.

Featured Answer

Kristin S

5 years ago

I would tell him that, per the contract, you need documentation before you’re able to discuss the invoice, as without it there isn’t much about which to talk. I would also start the process of finding a good construction lawyer in your area for a consult to help you understand your options and formulate a plan. Even if you never have the attorney represent you in dealing with the general contractor, you’ll be much better able to advocate for yourself if you’re informed about your rights and options. You’ll also be ready should you end up needing more formal representation.

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User
5 years ago
Is your contract a Cost Plus, or Fixed Fee?
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just_janni
5 years ago
It appears he's not working to the contract on 2 out of the 3 stipulations regarding change orders. Unfortunately - he's still kinda holding all the cards with the work stoppage.

How's the relationship been up until this point? First time he's done something this passive-aggressive?

And what's the total contract value? (only because is this a 2% issue or a 10% issue?)

Ultimately- you are going to have to negotiate this - but if you want your house done (well), you are at a serious disadvantage - unless your timeline is flexible and you think you can find someone to take over - then you might hold all the cards...

Sadly - he's looking to make this into a larger fight. Probably a good idea to get a local attorney and run the scenarios past him / her.

BEFORE ANYONE GETS THEIR COLLECTIVE PANTIES IN A BUNCH OVER THIS LAST SENTENCE: DO NOT THREATEN TO SUE - talking to a lawyer DOES NOT MEAN I am advocating for suing anyone - in fact - it's the opposite and unless you get the guidance to use the threat - you can keep the entire lawyer thing a secret! You need advice on getting to a RESOLUTION and often, a discussion with an attorney gives you the information you need to make informed decisions on how to proceed.
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Kristin S
5 years ago
Let me also say - should it get to this point, sometimes a letter from a lawyer is all it takes to incentivize the other person to follow the contract. I wouldn’t start with that, but as an intermediate step, it can be done to not threaten suit but let the other party know that you will stand up for your contractual rights.
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BT
5 years ago
Yes, he did not follow the contract. This is probably a minor breach that he did not ask for approval. Ultimatly you do not want to get build stuck in court for years.

=

I would inform the builder in writing that you requesting supporting invoices pursuant to xx paragraph of the contract. Just tell him, that you are not arguing legitimacy of charges rather executing your right under the contract. State, that the issues, could have been resolves easily months ago had he followed the contract. State that you would like to work with him, but this is a neccessary step to resolve the outof contract invoice.
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Lyndee Lee
5 years ago
The builder might be having a cash flow problem if he is just now getting serious with billing for work done months ago. I can understand why you would be irritated that he dragged his feet on producing the bill and now wants you to jump into action on his schedule.
bot494 thanked Lyndee Lee
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Virgil Carter Fine Art
5 years ago
Well...in my book, $21,000 change order is some serious change.

I'd consult my attorney for some advice and strategy before meeting the builder. You need to know how best to proceed...particularly since you are only beginning the project with this builder.
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bot494
Original Author
5 years ago
Thank you all for your helpful comments. The contract is Fixed Fee and $21,000 is only a small percentage of the contract value. We'd like to work this out amicably with him.
PRO
Virgil Carter Fine Art
5 years ago
Custom home site work and expenses, particularly if a well and/or septic system are involved, can be unpredictable at the outset. Excavations for basements can also be unpredictable if large amounts of subsurface rock and/or engineered fill are required.

For this reason site expenses may often be simply estimated, conducted on a T&M basis, even with a Fixed Fee contract for general construction.

That said, the terms for Change Orders appear quite clear as posted by the OP. From what we are told, it appears the General Contractor did not follow the terms of the contract for Change Orders, which, unfortunately, is not all that uncommon...for some reason or other.

Since the project is only beginning, getting off on the right foot, in accordance with the construction contract is essential.

I continue to suggest that developing a sound strategy with the OP's attorney, in accordance with the construction contract, is a very good idea before meeting with the GC.
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Documentation for out-of-contract charges

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