Legal Question in Construction Law in California

Unless the contract stated that the contractor would be responsible for hidden problems, the contractor is not responsible to do the hidden work for the original quoted price. While some construction contracts try to hold a contractor responsible for hidden conditions, this is rare and even a mildly sophisticated contractor will not agree to such clauses. At the same time, it is true that once hidden conditions are discovered, the contractor has leverage over the owner. There are ways to control the additional costs from hidden conditions so they are reasonable but I suspect no such clauses were in your contract. The alternative is to pay someone to weather proof as best as possible and get other quotes for the additional work, but this causes problems as well - trying to coordinate the new contractor with the old, scheduling, delays, etc. Plus, the old contractor will ask that he not be held responsible for leaks because he is not going to trust the new contractor.

Bottom line is that the HOA will be receiving value from the work performed by the contractor and the law will not ask a contractor to perform work for free that his contract does not cover. I suppose you could always hope for a rogue judgment (a sympathetic jury) that ignores the law, but I would not counsel that choice. The contractor is not "bankrupting" you. He is asking to be paid for work performed. Whether the price is reasonable is another matter. It appears that he was at least willing to negotiate to a lower fee. A special assessment appears to be imminent.