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dreamojean

Can a contractor charge a processing fee?

13 years ago

Can a contractor charge a "processing fee" for change orders? (if they are not mentioned in the contract) My contractor wants $1100 or so as a processing fee for change orders before proceeding with work he contracted to do for me. Is this above-board?

In this case he's contracted to do a window-door conversion in my kitchen, and I had to give him around $1100 on ordering the custom door. I did that 2 weeks ago, he said he ordered it a week ago, turns out he didn't (I caught him in a lie inadvertently, I was at the lumber company and asked when the door he ordered would be in and they said, uh, they just had a quote) and now is insisting that I write a new check directly to the lumber company for $2k (the price of the door) and eat the $1100 I already gave him as a "processing fee" before he will order the door.

I think what's behind this is that I pulled a lot of the contracted work from him because I wasn't happy so the scope got reduced by 25-30% or more and his profit margin probably got reduced to boot. So he's either trying to make it back off the contract or trying to get me to walk away and he keeps the $1100 without having to buy the door or do the work.

Thoughts? I'm really inclined to say, I'll buy the door myself directly, and find someone else to do the conversion (based on various estimates, it's probably a $2k-$3k job for labor, it's brick and brownstone and trim and weatherproofing etc.). He was going to get $2600 beyond the price of the door, more or less. This is the last big piece of the job but if I terminate the contract (fire him) I'll probably be out at least $1-2K for other work he hasn't done. It was a $46K contract and as reduced turned to $40K, and without the conversion more like $35K (and without his finishing electrical probably more like $34K or so, including BS extra charges I was going to let go of and excluding a few hundred to fix a bad flooring job, per a separate post) and I've paid him $35.5 so far. And I wouldn't hold my breath that he would send his electrician to finish what I paid for to even things out.

So I guess this is also a post about, should I give my contractor the boot?

Comments (16)

  • 13 years ago

    If you get someone else, you will not get back the money for the work he didn't actually do? Why does he get paid for work he did not do or complete?

    I don't follow the numbers you describe but he does not get to keep $1100 for nothing, just because you gave it to him already.

    This guy is a real creep, the both of them. I would not trust him with the work. I can't stand being lied to either, it's a terribly disrespectful way to treat someone. These people are treating you very poorly. It is painful to watch.

  • 13 years ago

    Snookums trust me it's more painful to experience. This being NYC people can be crazy and not to stereotype but I do worry for my safety if I push back too much, given the people involved. Trust me I want to let loose on the Angie's Lists of the world but I think it's safer for now if I just perhaps go to small claims court (for the first time in my life, and I'm in my 40's, hoped to avoid ever having to ...) quietly and present my case. Even that seems risky.

    I'm more likely to quietly go away, get the job done, and let things calm down then go to court later and/or anonymously (and deservedly) blast him online. Irony here is, I was psyched to recommend him and get him more business if he came through. Ha.

    This seems to just reinforce my adage not to ignore one's instincts about people, jobs, etc. My instincts were, hmm, not sure about this guy, it'll either go great or, well, could go badly. But he was mid-range in price, willing to work with my dream steel guy for a deck (which is the big reason I hired him, it was a timing/hiring thing and the steel part turned out AMAZING), every other possible contractor had a fatal flaw that didn't involve my instincts on red-flag alert (price, experience, demeanor, timing etc.) and I checked a lot of references, and they checked out, I googled the guy, asked around, also relied on the architect who loves the guy. That's the unfortunate part, the architect is NOT shady. Misguided perhaps and not helpful enough but he means well. I just think he has his limitations. And I got caught up in that. I wouldn't use him again of course. But the contractor is about 3 levels worse, and yes he's treating me badly. My husband wants to just pay up. I said no way.

  • 13 years ago

    I'm not sure I understand what the change order refers to:
    You gave him 1100 to order the door, presumably he has to pay half to order the door and half when it's delivered.
    He didn't order the door.
    Now you are supposed to pay 2K directly to the door company to order the door.
    So, what's the 1100 for?

  • 13 years ago

    No, your contractor cannot just tell you that money you have paid him for services is being applied to "processing fees." What in the world?????

    You gave him a deposit of $1,100 to order a new door. You did not give him $1,100 for a "processing fee." Since he has not fulfilled the terms of the change order, he would have to give you back that money. He has not ordered the door, and he hasn't done the work to install it. So really, the only "processing" he has done is take your money and put it in his wallet. From what I understand from your post, his actions amount to nothing less than theft.

  • 13 years ago

    The $1100 processing fee is for change orders supposedly. Complete BS. I know it's not legit but figured I should ask in case I'm missing something in the contractor world. I think what I'm missing is an ethical contractor and have already begun interviewing people to finish the work and will go after him if/when it seem right. If nothing else for the unfinished electric work and the door deposit that he didn't use for the door.

  • 13 years ago

    Change orders DO have fees associated with them above and beyond just the change in dollar value for the labor or materials. It could be termed a "processing fee" to create the documents that amend the original contract. Typically, that fee is a couple of hundred dollars for every time you change your mind, plus the price difference in the materials and labor.

    $1100 is beyond excessive for such a fee. If the change order process isn't well documented in your contract, then you've got to use the "reasonable person" standard. No reasonable person would pay $1100 plus the additional charge for materials and labor to change their mind.

    Now, if that $1100 includes an upgraded door from what was originally in the contract, plus a more difficult labor for the install, that IS a reasonable fee to be expected to be charged for the product and price difference for such a project.

    Really though, this guy doesn't sound as though he knows how to even read a construction contract, much less create one. You may have to pay money to get rid of him or he may put a mechanic's lien on the home for any money that he can say that you owe him for the job.

  • 13 years ago

    I have to respectfully disagree with live_oak_ wire. I do not think it is "typical" for contractors to charge a fee of a couple of hundred dollars every time a customer changes their mind, plus the price difference in materials and labor.

    We are contractors and we would never think of charging our customers a fee solely for changing their minds. Nor have we ever been charged such a fee by any of the contractors that we have done business with. Any costs incurred for writing up a change order are included in our overhead, and are never billed as a separate charge to the customer. The cost for extra time and materials to do the actual work ... sure, that is reasonable and to be expected. People are going to change their mind during the construction process and any contractor should EXPECT that is going to happen, often more than once. Charging a customer "a couple of hundred dollars" every time they change their mind is greedy.

  • 13 years ago

    I would tell him you will pay the door company the remaining $900 and then ask to see where it stipulates in the contract that he can charge "processing fees." This is not a change order--the $1100 was for him to order the door, which he did not do. He needs to give that $1l00 to the door company.

  • 13 years ago

    Our contract (written by my husband) specifically states "no change order fees." This would lead me to believe that unless otherwise stated, change order fees are the norm. I agree that $1,100 sounds ridiculous.

  • 13 years ago

    Even if something is a "norm" in the business, that doesn't mean it can be left out of a contract and added in later. If the contract does not specifically allow for a processing fee to be charged for a change order, it cannot be charged.

  • 13 years ago

    Wow. You need to send a letter by certified mail. Tell him that you understand he has not yet ordered the door, using the DEPOSIT of $1100 that you gave him. (A contractor makes 15 percent or whatever on the work and materials-- he doesn't get to arbitrarily charge a fee that isn't included in the contract price.) Ask him to please go ahead and order the door as verbally agreed. He will understand that you're creating a paper trail and hopefully will come through.

    People do rash things. Give him a chance to fix his error, but if he doesn't, yes, use small claims court or alternative dispute resolution.

    It must be said that I am telling you this having decided to let go of my own issues with my contractor rather than pursue things, but from the outside looking in, that's what I'd do.

  • 13 years ago

    Thanks all. Since it rained inside my house tonight because of shoddy HVAC work he did, I think I'm done paying this clown. I'd rather pay someone else to fix his bad work and let him find someone else's house to mess up. If I'm out money, I might sue him. But I'm going to prioritize getting the job done, and right, next. Then I can spread the word that people should avoid him, and push to get money back from him, after we're out of the danger zone with the job.

    I'm seriously thinking of telling his friend the architect that I need a break on any fees he thinks he wants to charge me for trying to work things out with the contractor he recommended who is so terrible. I'm honest but this is absurd.

  • 13 years ago

    I have never heard of processing fees for change orders, but what concerns me more is that you fear for your safety. For this reason, you need to end this amicably. Hold off on threats of suing, online reviews and even bad mouthing. Your goal at this point should be to get away from this contractor.
    He may have cash flow problems if he didn't order the door and now wants you to pay for door directly.

    You say that about $34k work has been done and you've paid $35.5k. Not sure whether this includes the $1,100 deposit on the door, but in your situation, where you fear from reprisal if this ends badly, I would eat the $1,500 or even the $2,600 to end this now. I would try to meet with GC when is crew is not there and try to sweet talk him out the door.

    Good luck.

  • 13 years ago

    Document, document, document!! Pictures, certified letters, emails. Do your best to avoid setting up "he said, she said" situations. Have proof.

    That you are afraid of him is serious, and I would speak to a police officer or an attorney as well as that architect if you have a solid, legitimate reason for your fear (other than stereotyping as you mentioned) such as something that he has said or done. In fact, have an attorney send him that certified letter detailing his failure to perform the terms of the contract.

    The further shame of it is that he will get away with this only to do the same to someone else because you are understandably exhausted as well as fearful.

  • 13 years ago

    More and more I'm not so afraid for my safety. I'm beginning to realize that the guy has cash flow issues so he fabricated these fees to finish the job without going out of pocket. It won't work. I also sense that he's not making a profit on my job since I reduced the scope (which I'm permitted to do under the contract, by change order - we have no change orders signed but he did credit me for work removed from the scope already), and instead of asking for more money and explaining the situation (which I'd totally respect) he's cheaping out on labor or making up fees. I want him to make a reasonable profit on our job, I don't want him to do things poorly or in an underhanded way.

    I could be really wrong but I sense that if he thinks he won't get money from me, he is likely to disappear and move on to someone more into paying him. Meanwhile the architect hasn't returned my call/emails from Friday - I guess I needn't be surprised.

    I don't think I'm letting this guy back in my house, ultimately. I've been setting up appointments for a roofer, plumber, electrician and flooring person to pick up where they left off. I've emailed him proof of deficient or incomplete work so it's documented. Whatever I pay to new contractors I'll document, let him know that neither he nor his electrician were responsive on finishing up so I got my guy as permitted under the contract, and spent x amount. Same with flooring person. I have less of a leg to stand on with a plumber or roofer but yes I'm tired and want it done.

    As for a roofer, our contractor vented bathroom fans through the roof. And a dryer exhaust cable. In theory good but rain is getting in through the flat roof somehow. Today a roofer I brought in to look, said it's because the vents are unsealed tin, so when I hear rain through the roof in the walls and it sounds like it's in the ducts, it's really just the sound of the rain hitting the tin from the top floor. But there's still water getting into the third floor pipes area somehow, and the roofer said the duct work to the roof isn't quality and is pricing out for us on building a little mini-roof to protect them from direct rain; a plumber said he would do caps of some sort but then you would still hear rain loudly on the tin.

    My focus now is on protecting my home, and getting 2nd opinions. And 2nd, getting the job done and problem work fixed as needed, hopefully without the problem contractor's involvement anymore. And my 3rd priority is making sure the contractor doesn't defraud me and/or put a lien on my house for non-payment (even if he's ahead of the game and I'm getting a bit of a shaft). And 4th priority is possibly going after the contractor for anything he legitimately owes me in the end. And lastly, moving on. That's my current game plan anyway.

  • 13 years ago

    I'm not a fan of bad-mouthing unless you've made a constructive approach first. It is amazing how many companies come through if approached correctly. If they don't come through, of course....let the bad-mouthing begin.

    But you should start the paper trail now. Certified, return receipt.

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