If only the world were perfect—all your jobs would go smoothly, come in under budget, on schedule, and the homeowner would sing your praises with 5-star reviews. Well, I hate to break it to you…

The world isn’t perfect. And jobs don’t always run smoothly. Sometimes they never even start. So, what do you do when a client or yourself decides to cancel a construction contract?  We had planned to start a project, but a week before the start date, the client wanted to delay and revisit the budget, which we did. However, it didn’t make sense to proceed, and the client wanted to cancel. 

INITIAL REACTION

My initial reaction was pure panic. Questions stampeded through my mind: What’re my rights? What do I need to do first? I’ve got guys lined up, ready to go. I have materials ordered. Permitting fees are in place. Everything is set to go. So how do I make this project work? Can it be salvaged? Do I cut the cost by thousands of dollars, hoping the client agrees to move forward? 

At first, I was hyperfocused on how to save the job. But that myopic view of the situation could result in more harm than good in the long run. I began to take a step back and consider what moving forward with this client would be like a few weeks or a month down the road. I realized that this might not be a good fit for NS Builders. I tried to think back for any red flags I may have missed in the interview process. And if the client wasn’t happy before we even picked up a hammer, what were the chances of them being satisfied at the end? It came down to this: The client expected to get something that we could not deliver on their revised budget. This project was not going to work for either of us.   

HANDLE IT LIKE A PRO

Costs were mounting. We already had ordered materials and lined up subcontractors. So, the first thing I did was reach out to all our subs to update them on the situation. More importantly, I asked them to let me know if I had incurred any costs to them for this project and that they get that to me as soon as possible. It is essential to treat everyone fairly and not make my problem their problem. My canceled contract is on me—not the sub—and I care immensely about maintaining a good working relationship with these guys. I hope to work with them again on future projects. Being honest, transparent, and fair is simply the right thing to do. 

I also talked with my lawyer to ensure I was not doing anything outside of what my construction contract states. (My lawyer helped me draft a construction contract so that I am protected, as well as the homeowner, in a situation like this.) My contract clearly stated that I would be covered for my costs to date. This is one of those times when you realize how vital construction management software is for entering and tracking all project costs. I had to put together all our expenses to date—permit fees, engineering reports, the time my project managers and I had spent, and anything else it actually cost me up to the date of cancelation. That amount was what I was eligible to bill for. 

But what about the other work I turned down to do this project? Or delayed other projects because of this one? Or hired other people specifically because of this job? I asked my lawyer about this as it all directly relates to costing the company money. The short answer: These costs aren’t covered. 

That information prompted me to consider revising my contract. For example, the closer to construction that a client cancels, the more financial burden they can shoulder, protecting me from those “soft” costs not in a spreadsheet. And the timeframe would be an incentive to the homeowner to think seriously about canceling on short notice. 

In the end, it’s always a tough situation when a contract gets canceled—either by the homeowner or yourself. But you can put a positive spin on it by seeing it as a learning opportunity—adapt, grow, and handle it like a pro.  

It’s time to discover what NS Builders can intentionally craft for you! Contact us today to get started on your custom dream home. Together, we can make it happen. 

—Nick Schiffer