Never pay in full until all repairs are done


August 29, 2004|By Jonathan A. Azrael

An unhappy homebuyer says that "in February of this year, my wife and I fell in love with a six-bedroom single-family home." An investor owned the home and was doing major rehab work.

The couple contracted to buy the property for $145,000 and secured a Federal Housing Administration-insured loan to finance the purchase. The rehabilitation was not complete by the scheduled settlement date. Rather than delay settlement, the buyer and seller agreed on a written addendum by which the seller promised to complete specified work within 15 days.

"Once the deal was done, so were the workers," the buyer reports. "Several calls were made to the [seller] asking for completion of the home. Each time we received empty promises or we were blown off."

The buyers obtained estimates to complete work on the exterior of the home. They were told that repairs to the existing aluminum siding are not feasible because the siding is no longer being manufactured and cannot be matched. Replacing the siding will cost $22,000.

The buyer asks, "Do we have a case, and if so would a lawsuit of this magnitude be handled in Small Claims [Court]? Also, who would be named in the lawsuit as responsible for these actions?"

As the buyer has discovered, it's often a mistake to pay a contractor in full before all the work is completed. He could have chosen to delay settlement until the rehab work was finished, or insisted that some of the purchase price be held in escrow until the repairs were made.

Now, he may face a time-consuming and expensive lawsuit to recover damages to pay for what the buyer was promised in the contract addendum.

If the seller did not perform the work stated in the addendum, the buyer has a legal action for breach of contract and related claims. The person or entity that signed the contract would be the named defendant. The contractor who performed faulty work may also be a defendant.

A case of this magnitude cannot be filed as a small claim. The limit for small claim actions in the District Court of Maryland is $5,000. Lawsuits for $25,000 or less may also be filed in District Court, but if the buyer wants a jury trial or is suing for more than $25,000, his lawsuit should be filed in Circuit Court in the jurisdiction where the home is located.

The buyer probably will need a contractor to testify as to the nature and extent of the deficiencies in the promised repairs and the cost of finishing them.

Once a lawyer has reviewed the contract and analyzed the facts, he or she can give the buyer an estimate of litigation costs and prospects for success.

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