With Caronavirus came lots of folks staying at home. With nothing to do.
So they all decided to get on with all those jobs they’ve been putting off for years. There has been a reported spike in renovation and alteration work. And I don’t need to tell anyone how hard it is to get into Bunnings on a Saturday morning! There’s a lot of residential work going on that is for sure.
And with it comes the very special type of payment dispute: the one where your client turns feral. Usually right before the last payment and just after you complete.
Welcome to domestic building.
These are the saddest stories because they all start out so well. The parties like each other, the relations are good, the work seems to go well, everybody is happy.
Let’s take a closer look at how this all goes wrong.
This is perhaps the root cause of most of your problems. You have allowed the relationship to get too close. You must remember that Mrs Jones in your client. She is not your friend. You have been engaged to carry out a defined scope of work for a defined price or rate. You are not doing someone a favour, or helping a friend. By letting the relationship cross the line into friendship you inevitably invite poor practices into your work that will cause a payment dispute.
Keep the relationship friendly, but business-like at all times. But many times payment for work is abandoned because the contractor ‘feels bad’ about chasing it. This happens because the contractor has allowed the relationship to become personal. You must insist on payment no matter what. You’re running a business.
Scope of work
Another typical cause of dispute is the agreed scope. Too many contractors use quotes that only vaguely describe the work they have agreed to undertake for the agreed price. This leads to your client insisting that a whole pile of work that was not in your scope, MUST be in your scope. Because your quote was vague you feel you need to accommodate the client and do the extra work; and lose yourself money. Avoid the issue by:
- Scoping your work in detail. Refer to plans, measures, site locations, materials etc. It must be easy to see exactly what it is you are offering to do for the price.
- If there are any exclusions, then list them in detail.
- If there are inclusions, then list them in detail.
In this situation you must insist that any additional request is a variation, and do not do it unless a variation is agreed.
Because Mrs Jones is so nice, you have allowed your documentation to slip. You have not made site diary notes, not issued contract notices, not done reconciliations, not adhered to the contract, not had variations signed off etc.
This is the cause of so many problems that we need not name them all: Because this is a problem in itself. Payment disputes thrive on the big empty space where there is no documentation. The dispute becomes a ‘he said, she said, and they are very hard to win. This is especially true in tribunals where these disputes are so often heard. Unless you can prove something with documentation, you are on the back foot.
Pull out your pen and write it down, or type it up.
The most common resistance you’ll get to payment is that the work is somehow defective. The best way to counter this is to offer to have an independent inspector or expert look at the work, and write a report. Offer that immediately. And make that offer in writing. Many clients will reject the offer and this immediately undermines their credibility. Make the offer again in writing. Call the Department of Fair Trading and have the work inspected. They offer this device for consumer disputes.
This is a powerful strategy for the following reasons;
- First it immediately removes defects as a threat. Clients assume you will be scared by the threat of defects. So don’t be. Hit it head on. Show them you are not afraid of it.
- Second, if there are defects then they are documented, valued, and defined. This means that your client cannot argue later that the $3000 worth of defects are now $125 000. So it blocks the issue from escalating.
- Third, in any future proceedings that report will be great evidence to show what was really defective and what it was worth. It also shows that you were open and proactive about defects straight up. This adds great credibility to your position in any formal proceedings.
- If there are defects, then it is easy for you to rectify them and document that they are rectified. Have your client sign of that they are rectified. If he client refuses then get the inspector back to sign off that they are rectified. Now the problem has vanished.
So when it comes to domestic building work tread carefully with Mrs Jones. Keep things formal and business like, and keep it all on paper. Document the work thoroughly and don’t give freebies and silly discounts. Mrs Jones may seem nice, but a remorseless angel of vengeance lurks just below the surface.