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Question DetailsAsked on 1/8/2017

does a builder have to show the customer the invoices?

I work as a personal assistant to a disabled man. He bought a piece of land to have a house built to suit his specific needs. The real estate agent recommended a builder and he signed a contract with this man. the contractor has received 2 draws totalling $58k. One for deposit, one for materials. After months of delay, before he even broke ground, he asked for an additional 12k for "unforeseen costs". Upon researching him further we found that he's been charged and convicted for ripping people off before... so my client asked to see invoices for the materials purchased so far. He is flat out refusing. He's not attempting to only pay the builder's cost for supplies, He is attempting to ascertain if he purchased materials with the money allotted for that or if he hasn't purchased anything and is trying to get the additional money now to buy the materials. He can even black out the prices he paid. I don't care. I just want to see it.In this situation, should be show the invoices?

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3 Answers


We just went through the home building process last year. It depends on the contract. If it is cost-plus the builder should show the invoices. If it is a fixed price contract (as many are), the builder does not have to. I would be concerned if the builder refused, regardless of contract type. He may likely be hiding something he does not want you to see. Sadly, we had many issues with our builder and we were "on top of " things the entire time. I wish you the best.

Anna in SC

Answered 3 years ago by annabanana


A nasty situation it sounds like, especially considering the pre-existing disability issue.

As other comment rightly said - for the original contract, assuming it was a fixed-price job ("firm bid") rather than just an "estimate" which would normally be expected to run within 10-15% of the final price, he would not have to justify the cost at all - he bids a certain price which the homeowner accepted, and that is how much he gets paid regardless of whether he made money or not. If it was based on and spells out the cost is "estimated", then depending on whether the "estimated" items were for specific things like appliances or fixtures to be selected later (and hence the price adjusted per terms to the final cost of them), or the entire contract amoutn was an "estimated amount", which is bad news because that is seen as a blank check to many vendors.

Now to your case specifically - he claims unforeseen costs, presumably for change of conditions or additional work - which should have been covered by a negotiated fixed price change order to the contract AT THE TIME HE FIRST KNEW of the change of conditions or scope - and it is hard to imagine these came about before he even started work. The homeowner could then accept, negotiate, or reject the contractor-proposed change order. He cannot come back and ask for additional money without justification - in the form of a change order, and that justification might need to include proof that the change order is actually for additional work, not just overruns over his original bid or estimate, so the documentation might include a complete review of his original bid as well as his anticipated overruns.

Change of contract pricing due to added work requested / approved by the homeowner, or an actual change of site conditions like say unknown rot or termite damage or unexpected poor foundation conditions or such, is legitimate during-construction event, but negotiated between both parties - not just presented as a fait-accompli by the contractor, and the homeowner does NOT have to approve of it, though that might cause termination of the job if the change is something that is not avoidable. Or instance, if due to poor foundation conditions increasing foundation or septic cost say, failing to arrive at a mutually acceptable price might mean termination of his contract, and having to pay fair price for everything done to date. Refusing a change order for increased window supplier cost say, might mean choosing different windows.

A claim for "unforeseen costs", on a firm price job, would generally only be allowable if it were for conditions truly unforeseeable by any reasonable contractor (not just unforeseen by your contractor) or a change of conditions during the work - situations he should not have been expected to nor could reasonably anticipate. Common things include unsuspected subsoil problems, rot or decay in the framing, changes in government charges (permit fees, taxes, etc), depending on risk assignment in the contract maybe act-of-god site damage or delays like flooding or unusually frequent rains or tornado/fire/hurricane/flooding or such, in some cases changes in pricing by suppliers for custom or special order items versus what they originally quoted (though normally they should stick with original quote if bought in a reasonable timeframe from the quote date). Things the contractor failed to foresee, but which a normally competent contractor would have included in his bid and work plan, are NOT justification for additional funds from the homeowner.

Hate to say it, but especially since you say this contractor has been convicted before for ripping people off (which begs the question of why this contractor was selected in the first place - 20-20 hindisght on the references and research on his reviews, I guess), sounds like well past time to contact an attorney specializing in building construction contracts and disputes. And probably (you or the attorney) contact the local consumer protection/.consumer fraud agency and police to see if other fraud claims are pending against this contractor.

in actuality, given the 20-20 hindisght thing, if there were months of delay past contract performance period before he even got started, he should have been terminated for cause at that time and another contractor found to do the job - but 20-20 hindsight is a wonderful but not real useful thing.

Hopefully bringing an attorney in might kick the contractor into finishing the job for the agreed-upon amount, or the attorney can help make sense of the costs and payments and assist in filing a claim with the contrator's bonding company to have them get another contractor to finish the job for the original contract amount. If fraud is involved, the contractor's liability insurance might also be available to help cover any diverted funds loss (he is licensed and bonded and insured, right ?). In a few states, there are also state protection funds to indemnify homeowners against contractor fraud, if that is the case here. And of course, last recourse unless the guy has blown allthe money and is worth nothing, is suing him for recovery of the funds.

BTW - blacking out the prices would be meaningless if you are trying to see if what was given was used to pay for the materials - you need to compare the payment with the amounts paid (taking into account any contract designated markup on materials cost). Also, you need to be sure not only that he bought them - but also, unless paid for on the spot, that if they were invoiced that he did not fail to pay the bill, in which case they wouldnot actually be "paid for". Plus, unless the materials are on-site (and secured so the contractor can't take them away again) even if they are "paid for" by the contractor that does not mean the homeowner will ever see them - they could be (or already have been) used on another job, or be/been returned for credit to the store (which he pocketed) or resold on the black market or whatever. If not "in hand" you do not know either if they have been bought and paid for or actually exist - either originally or at this time. Certainly, if not on-site, one would probably assume if a substantial amount was paid, they probably do not exist because it is awful rare on a residential new build for a significant amount of materials to be stored off-site. Sometimes higher-value things like appliances and wiring and such, and insect or freeze or heat-sensitive items like paints or carpeting are stored offsite at contractor's shop or in a storage unit until the building is dried-in and lockable, but usually materials are bought and delivered as their need approaches and are stored on-site - in the house or in a locked storage container next to it. Ditto to long lead-tiome items like imported and custom-build items which might arrive before the site is ready for their installation - tile and windows and cabinets commonly fall in this category.

One other thing - a large deposit (as opposed to a small "hold the date" or "earnest money" deposit) normally IS for materials purchase - so sounds like with the two draws totalling $58,000 he should be nearly fully supplied with at least the house shell materials plus have a substantial portion of the labor and subs and such paid for by this time. Course, I don't know what the payment terms in the contract were - what has been paid should certainly conform to progress under the contract and the payment terms, and should not greatly exceed the progress to date and materials delivered to date.

One other thing - in addition to recovery of funds or completion of the job one way or another, the homeowner (or attorney) will need to be sure to get lien releases from the contractor AND from all significant suppliers, because if he has not paid his subcontractors or suppliers with the monies provided to date, they can come back and file mechanic's liens on the property - which not only means it cannot be sold without paying those liens off, but also can wreck havoc on a perons's credit rating and cause acceleration-of-payment demands from any other persons he has loans from - mortgage, car loan, student loans, etc. Can become a real mess, which is obviously one more thing he does not need in his condition.

Good Luck to him, and kudos to you for helping him through this, because I doubt this is part of your normal scope of work as a personal assistant.

Oh - one other thing on that - in many areas fraud like this (if that is what this is) is handled by a special unit at the district attorney's office or such if the victim is elderly. If home is being VA or FHA or similar government agency financed, they also pursue contractor fraud cases. Also, if this house is being built with borrowed funds, the lending bank may be willing to put some pressure on the contractor, because in that case they are probably releasing funds based on progress.

Answered 3 years ago by LCD



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Answered 3 years ago by Member Services

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