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Are You a Real Estate Investor?
As business owners and investors, we have heard about the earning potential associated with investing in real estate. Whether you are investing in the lucrative but risky commercial real estate or the safe and sound residential rentals, you need to ensure you avoid legal disputes.
Working with private contractors when managing or investing in real estate can be a minefield of legal issues. Fortunately, you can protect yourself with strong forethought, a few legal measures, and the help of an experienced real estate attorney.
Nery Richardson & Konewko LLC can help you protect your current and future investments with a variety of legal services. You can get started with a real estate attorney knowledgeable about real estate, private contractors, and avoiding legal disputes by calling 773-232-6643 today.
What Are Common Causes of Legal Disputes Between Investors and Contractors?
Unfortunately, as a real estate investor, you have a target on your back for shady contractors looking for an easy payday. But with some forethought and a bit of legal legwork, you can rest assured knowing you and your investments are legally protected.
As an investor, you should watch out for the following legal disputes.
Breach of Contract and Incomplete Work
Contractors who fail to deliver on what is outlined in your agreement, or who don’t finish the work for any reason, have breached a contract, and you have legal options. Even minor deviations from the contract’s key terms can escalate into a major legal battle, especially when timelines and budgets are already tight.
If you have found yourself stuck with unfinished projects or work that doesn’t measure up, you should hire a real estate attorney who can help you sue the contractor to recover your losses.
Project Scope and Exceeding the Budget
When starting a project, you must have an accurate explanation of its scope. Vague or loosely defined projects often lead to misunderstandings about what tasks are included in the agreed-upon price. These misunderstandings can lead to contractors demanding additional compensation for the work when they believe you are demanding extras. Working with an attorney who can draft comprehensive contracts and spot potential for disputes in vague descriptions is essential.
Missed Deadlines and Delays
When contractors miss deadlines, that’s money coming straight out of your pocket. Disputes are common when contractors miss agreed-upon milestones without valid justification. If your contract doesn’t have enforceable deadlines or penalties for delays, you could be leaving yourself exposed to the expenses of missing a deadline.
Licensing and Code Compliance
Chicago’s licensing and code compliance laws are strict to ensure the safety of its residents. An unlicensed contractor can spell disaster for investors if their work violates local codes or is missing the necessary permits. Noncompliance with city codes can result in a stop-work order, and the city may demand costly rework. Are you protected from unlicensed workers?
Quality of Craftsmanship and Materials
Cutting corners may save time and money now, but it can lead to legal disasters later. When the completed work doesn’t meet professional standards, or quality materials are substituted with subpar materials without authorization, investors can be left with dangerous and shoddy results. These defects can go unnoticed for months, and when found, the contractor may claim the defect is due to negligence. Disputes can arise over who is responsible for fixing the issue and who should shoulder the cost.
Do You Have a Legally Enforceable Contract?
You’ll notice that these legal issues have one thing in common: they could have been avoided with a solid, well-drafted, legally enforceable contract. The contracts you use with private contractors are too important to be left to something like a template you found online that doesn’t consider your specific circumstances. You need a custom-tailored contract and the backing of an experienced real estate attorney.
Your complete and comprehensive contract should contain the following:
- A detailed scope of work to be completed
- Project timelines and milestones
- Payment terms and schedule
- Change order process
- Contractor licensing and insurance requirements
- Warranties on labor and materials
- Termination clause, including required notice and remedies
- Dispute resolution method, such as mediation, arbitration, or litigation
- Permit responsibility
- Inspection and quality control access
- An indemnification clause to protect the investor from legal liability caused by the contractor’s negligence
- Materials and substitution policy
Failing to present a comprehensive contract or signing a contract that leaves you exposed can be a costly, easily avoidable mistake.
How Should You Handle Disputes?
It is important to avoid confrontation when disputes arise. When a dispute happens, document everything and keep track of all correspondence, something you should be doing anyway. Keep an open line of communication, and keep it professional and on topic.
You can attempt to resolve the issue through calm conversations and meetings. Sometimes, disputes happen because of simple miscommunication. When civil discussion fails, negotiate or enforce according to the terms of the contract.
One of the most important things you should do is call a real estate attorney who can help you settle the dispute or litigate if necessary.
Can Nery Richardson & Konewko LLC Help You?
I have the experience you need to draft a comprehensive contract that addresses your specific circumstances. You won’t find a boilerplate contract here.
If you are already involved in a dispute with a contractor, I can help you figure out your legal options, including taking over the negotiations and using the terms of the contract to enforce your point. When you work with a real estate attorney, you are taking the right step towards protecting yourself and your investments from legal scrutiny.
Call 773-232-6643 to schedule a consultation where you can find out how Nery Richardson & Konewko LLC can help you.
