Legal Question in Construction Law in Wisconsin
Builder's Responsibility
A new home construction with a bad contract, taking over 10 months and still going (should have been 4)because of the builder's own mistakes. The construction loan is due and we need to convert to avoid penalties. We would like to escrow funds for uncompleted work. The builder says no we have to settle with him first, but we say no until he finishes the work. Also, his costs are not in line with the contract and he refuses to provide receipts.
1. Can/Should we convert the loan without his ok?
2. Can he file a lien for unpaid items if we convert or can we hold the money in escrow until all work is completed?
3. How/can we verify his costs before releasing funds?
4. We had verbal agreements for added work that the builder is now double/triple his costs and refusing to pay agreed closing costs (now that we want to convert the loan). He won't respond to our calls or faxes. We've been advised to close and escrow the monies and refuse to pay for any verbal agreements. This doesn't seem right (in a moral sense) but we refuse to pay his inflated costs. Do we have any recourse?
1 Answer from Attorneys
Re: Builder's Responsibility
You should talk with your lender to arrange a
construction escrow account with a title insurance
company. In that way, funds are only released with
your approval after the builder presents "lien waivers"
from his subcontractors. At the time the escrow is
established, the builder will need to create a breakdown
of the entire job. Inspections are made at each
draw to assure the work being billed was done. The owner
is generally responsible for the cost of this arrangement.
You may want to deal directly with an attorney to
assure all this is done, together with an endorsement
to your title insurance to protect you from contractor
and sub claims.
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