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I signed a construction loan with Brickstreet construction…

I signed a construction...

I signed a construction loan with Brickstreet construction back in 2016. The contract stated that house would be complete approx. 6 month from permit. Well is be almost a year. Can I get out of my contract with them? What legal right due I have?

Lawyer's Assistant: Because real estate law varies from place to place, can you tell me what state this is in?

Clearbrook VA

Lawyer's Assistant: Has any paperwork been filed?

Not yet. We are trying to set up a meeting again with them in two weeks. There are a lot of quality issue here that they havn't fix.

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Answered in 32 minutes by:
1/18/2018
DamienJD
DamienJD, Lawyer
Category: Real Estate Law
Satisfied Customers: 5,408
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Hello: My name is ***** ***** I am an attorney. Please give me a moment to review your question. I may ask some questions to clarify issues.

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In the construction loan agreement, does it have a clause for remedies if a party breaches the contract?

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Customer reply replied 6 months ago
NO, it a few lose contract but in the scope of work it has early termination of contract clause that states if the contract is terminated by the client with 50% or more of the scope of work completed a 25% withdrawal fee will apply. Additionally all materials purchased must be paid in full. The withdrawal fee will be based on the contract total.

Okay. So, how much work has been done?

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Customer reply replied 6 months ago
They are on the drywall. There are 8 drawls and we are on 5th drawl. The 5th drawl is for the drywall work. We gave them a drawl #4 and with the understanding they would fix the problems with the fascia, sidding, windows, door not hung to manufacturing instructions, drip edge, and many more. We got the county to come out and write them up a correction notice. They still have not fixed any of them.

Hold, please.

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Okay. You can attempt to claim breach of contract due to failure to fulfill services. The contract stated that the project was to be completed in approximately 6 months. Now it is almost a year. A court could hold that that is an unreasonable amount of a delay and consequently a breach of the contract. On the other hand, you have to be careful because the contractor probably will want to defend itself and then state that it is entitled to the withdrawal fee. So, you have to determine the cost and benefits of it from a business perspective also. So, you could get out of the contract claiming the contractor breached the contract with the knowledge that the contractor will argue for the withdrawal fee. You can argue against the withdrawal fee stating the contractor's breached makes the withdrawal fee clause voided.

I know the news is not that great but it is better to know what could happen. We can continue our discussion.

If you need further assistance, just let me know.

If not, please remember to rate my answer between 3 to 5 stars without any additional costs to you if you are satisfied with the service I am providing. That is how I get credit for answering your question. Best regards.

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Customer reply replied 6 months ago
This also a construction loan that we had to extend out that will be up on Feb 11 2018. Is this a breech in the contract?

If you are saying that the contractor provided the loan to you so you could pay for the work, then it has failed to fulfill the work, then the loan would be included in the breach of contract action, meaning that the amount owed could be reduced or nullified on the damages you suffered. It becomes a bit more complicated with the loan involvement.

If you need further assistance, just let me know.

If not, please remember to rate my answer between 3 to 5 stars without any additional costs to you if you are satisfied with the service I am providing. That is how I get credit for answering your question. Best regards.

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Hello again:

Checking in to see if you need further help. Your satisfaction is my goal. If you need further help, just let me know. I want to make sure you are satisfied with the service I provided to you.

If you are satisfied with my services, please provide a positive rating between 3 and 5 stars on this question at no extra charge to you. That's how I get credit for the services I provided to you. Again, you can always ask a follow-up question if you need to do so.

Best regards.

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Customer reply replied 6 months ago
No, we have a construction loan with a bank and contract with Brickstreet construction. The construction loan come due Feb 11 and we have extended it once before to get this date. If they don’t complete the house by that date do I have any options?

Thank you for the clarification. In these cases, we always have to refer to the language of the contracts first. So, does the loan agreement provide any language about what happens if the construction is not completed on time or never finished and what happens in that situation? Also, did you already pay the full amount of the construction with the loan proceeds? In other words, you would be owed that money back from the contractor if you pre-paid for services never rendered to pay the help pay the loan balance.

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Customer reply replied 6 months ago
No, we are only on draw 4 and the contractor wants draw 5. Yesterday after our conversation I arranged to have a meeting with the bank, Brickstreet, and myself to discuss. Not sure if I should get a lawyer to be present or not. I would like to fire the builder. The builder stated if he dosn’t get his money he will stop working. I believe this might be a breach of contract. I Didn’t see anything in contract that states anything about complete date other than approx 6 months to complete project.

Thanks for the additional information. It is always good to have a private attorney counsel you on the matter. It probably is not necessary at the moment for the meeting you are going to have with the bank in order to determine the bank's position on it. It is rather straightforward with banks: if they loan you money, they want to be paid back with interest. If you don't pay back what they lent you, they will sue you.

With the contractor, there is a saying as you know that it is never a good idea to throw good money after bad money. So, you would have to determine the risks involved (of being sued verses throwing good money after bad money hoping it will resolve). Recall, you have a viable claim also for breach of contract.

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