Can a contractor charge a processing fee?

No such thing as perfect… and I can prove that but would prefer not to… You’re still the customer and so generally deserve the benefit of any doubts. You also seem to still be in a pickle as far as finishing up? At the risk of sounding opportunistic, if you need some further help, give a ring. My contact info is on my site if you wish to reach out. Matt R www.nyc-hs.com

Thanks Matt. Yes there are two sides to the story and my contractor finally shared his last week. He feels like i gypped him out of important parts of the job and thus I guess felt entitled to overcharge for new items I’d added that were left and to try for the processing fee. I was tolerating the overcharges until the new fee came along and then I drew the line. And we parted ways. I’ve since learned that in addition to the $600 to fix the flooring it will cost over $1000 to finish the electrical that his guy did poorly if at all. And since they broke some stuff and didn’t fix it I’m guessing that the total price to get to where we would have ended together will be $2500 or more. So if it were really about the money I’d have sucked it up and stuck with him new fee aside. But it was too stressful. I’d rather get it done right and call it a lesson. My instincts were that there was something about this guy that was a problem and I ignored my instinct so serves me right to pay thousands more when all is said and done and have lots more stress. So yes I wasn’t a perfect customer and made mistakes and upset my contactor. I didn’t have a heart to heart about all the problems but just reduced the scope on him. Big mistake. So many lessons leaned. Pricey ones.

WOW, and I thought the question was about a processing fee… A quick recap of the obvious: “if they are not mentioned in the contract” “Is this above-board?” “turns out he didn’t (I caught him in a lie inadvertently,” “because I wasn’t happy so the scope got reduced by” “So he’s either trying to ” “I’m really inclined to say” “find someone else to do the ” “including BS extra charges I was going to let go of ” “a few hundred to fix a bad flooring job” “I wouldn’t hold my breath that ” “So I guess this is also a post about,” “give my contractor the boot or suck it up” I didnt say these things, you did… any questions? You are the customer and it does not sound like you are being treated as such. That said, while there are contractors who try and take advantage of customers, the reverse can also be true and there are two sides to every story, yada, yada, yada. Since your side is the one being presented for consideration and response, it would seem that the biggest error on your part was letting out more money than completed work. If you are not tied to this person and not dependent on them for final sign off etc, part company and name names. When private pressure does not work, a more “open discussion” of who you have been working with, provided said “open discussion” on this or some other board is done in a constructive responsible manner, may “encourage” a person to step up. Some of the other comments you’ve received on this and other posts are really well thought out and some come from what seems like really qualified people in the industry. There is a limit though. Too much info and feedback and maybe you’ve lost sight of what your own instincts are telling you. The above quotes from your own post seem telling to me. Best of luck. Matt R www.nyc-hs.com

Generally, I am in agreement with Sean, and rather than limit my contract language to the DCA contract, I include all of it in my own longer document, which I hope is binding, but even it is not, I expect my customers know, and I know, what we are doing. For many home owners (many of my clients happen to be lawyers) this works. My jobs are often too small for an architect and more often are included on a monthly report of “ordinary plumbing” than filed with alt 2 permits. Yet they are still more complex than any home owner and contractor can reasonably agree upon, without a descriptive written contract and sometimes detailed shop drawings. My contract language combined with the required DCA language has never been challenged, but the AIA language without the DCA language is clearly not binding on the client. With or without a signed DCA contract, that language is what is binding on an HIC. So, why would I sign a contract binding on me, but not on my client? When I testified in a NYC Council hearing, DCA Committee on Home Improvement Contractors, these ambiguities were left unresolved. So committed were the DCA staff to continue doing what they do – license for ethics with punishment by fines, vehicle seizure and imprisonment, but without requiring technical knowledge or experience – they left without listening to anybody else’s testimony. After the DCA walked out of their own hearing, the tone changed. Chairman Daniel Garodnick stopped asking for dry statistics. Member Julissa Ferreras testified about rampant wage theft by contractors from her constituents. Racist hiring practices came up. I only recall members from relatively affluent districts expressing any interest in consumer protections. No council member seemed to even agree to keep the HIC license authority at the DCA. A suggestion to move it “back” to the DOB, was not rejected. Still, how could the DOB inspect enough job sites of HIC’s to impact code compliance? How could home owners begin to cover the cost of worker protection when consumers regard protection of workers and even payroll taxes as a cost they are not willing to bear (given the going rates)? Today’s NY Times article http://www.nytimes.com/2013/07/21/sunday-review/being-legal-doesnt-end-poverty.html?pagewanted=all&_r=0 reports “unreported income” nationally to be “$2 trillion.” If a client does not want to pay in cash, the contractor can easily cash a home owner’s check made out to a business to pay workers in cash. This way, there is no enforcement of quality, ethics or code. On this list, Dave from Bed Stuy often advises not to let the DOB inspector in. One time my contract ran 35 pages detailing exactly what the customer would pay for, exactly as the DCA says it should, but the customer didn’t read it. So, I can see why an architect representing a client on a larger project would want standardized AIA language, but I still can’t understand why a contractor should sign it. Some HIC’s are also registered GC’s, but many jobs discussed on Brownstoner are performed by contractors who are neither registered GC’s with the DOB, nor licensed HIC’s with the DCA. The DCA says they only have 1,400 licensed contractors, and accepting $200 or more for Home Improvements requires a license. How many are working without licenses? 10,000? 50,000? 100,000? Even if only 2,800 are unlicensed, the DCA has substantially failed. Would the next Mayor and City Council please move the Home Improvement Contractor licensing staff and function out of the DCA, not to the DOB, but to Small Business Services. Rather than punish contractors who have no chance to follow the law as currently written, lets task an agency to develop new legal practices and develop jobs. Currently we train more people for new construction jobs than are needed, while we don’t train for (or even count) Home Improvement work. We (NYS) impose the most expensive insurance rates on renovators, often double the rate for particular interior trades, which is in effect a subsidy from small HIC’s to new construction developers. Home owners may have to pay more up front for longer-lasting, satisfactory work, with insurance and payroll taxes, but the contacts would be binding. Workers would be well paid for good work. An an incentive to correct the long-absent worker protections would suddenly appear. Comments welcome. Green Mountain Aaron@gmcandd.com

The model contract offered by the DCA is a pretty weak agreement. While it attempts to ‘protect’ the consumer, it offers little guidance on the construction ‘process’. There are many AIA agreements depending on the complexity of the project. Another problem with the DCA model contract is that it assumes an Architect or Engineer is not involved. This is a mistake because the design professional can help the consumer during the construction process. The DCA allows the use of any contract as long as it meets their checklist of the ten or so items they require. The reason the DCA is involved in the first place is because contractors are not truly licensed, rather, they are registered to do business ‘as’ a contractor. Just because they have a home improvement license does not mean they are trained to be a contractor, it simply means they have insurance and passed a 30-question test that has nothing to do with construction. Because there is no body-of-knowledge they are tested for, 95% of general contractors have no idea what they are doing. The only way to get true consumer protection is for the city to ensure contractors can read drawings, understand materials and methods, and have an understanding of construction management. Sean so-architecture.com 646.704.0405

I have seen the AIA contract and it is not as consumer protective as the contract required by the NYC Dept of Consumer Affairs. Thus, using the AIA contract is a violation of the license terms of your home improvement contractor. It is the “industry standard,” because it protects the industry from consumers.

is this the same contractor who dicked up your floor and said it couldn’t be avoided? if so – take him to task for the 1100 and kick him off your projects altogether. As to the rest – the processing fees and such CAN be legitimate – for all the aforementioned reasons… however in his case – he did no work to deserve to claim a fee on it, nor has an order been changed from it’s original spec for him to have to re-quote.

A couple of suggestions… First, it is always a good idea to work with AIA contracts since they are the standard in the industry. The AIA (American Institute of Architects) offers Owner-Contractor agreements that deal with the issues in your post. Typically for a change order, the contractor is entitled to the cost of materials and a reasonable profit. This should be in writing before any work is performed. I have never heard of a processing fee. If the contractor spent time ordering the door, they are entitled to a fee for placing the order. If nothing is in writing, then the prevailing hourly wage governs. Reducing the scope of Work during construction is allowed by the Owner. If all the Work types are itemized in the contract, this is generally not a problem. There should not be a penalty on the Owner for reducing the scope. Finally, I strongly suggest that you work out your differences with your Contractor. It does not sound like there is enough work left to justify changing General Contractors (GC). The project will get delayed and future contractors may not want the project for liability reasons. More-than-likely, it will cost you more money to replace the current GC than sticking with them. Sean so-architecture.com 646.704.0405

Yes, a contractor can charge a change order fee. He can call it a “processing fee” if he likes, but most just call it a change order fee. If site conditions create the need to modify the original contract, or the customer changes their mind about the scope of the project, there are always costs associated with that that must be documented. If you signed the original contract with the scope of the work being greater, then that’s what you owe him, less the materials, if you decide to not go through with that work. That easily could be $1100\. In fact, it sounds as though you will end up owing him quite a bit of money for work you’ve changed your mind about. That’s one of the dangers of going into a project underfunded. If he’s agreeable to do the work in the original contract at a later time, that would possibly be one compromise that you could explore. Or, if you are dissatisfied with his work and wish to go your separate ways, you need to make sure you sever the relationship properly and DOCUMENT the fact that he’s going to settle for a certain amount as full payment for the remainder of the work to be done. Otherwise, you’re on the hook for the full amount.