I recently completed (in January) a custom kitchen project for a local builder. I am having a problem getting him to take the project. He has seen the completed cabinets and says they are acceptable. I won't deliver until I get final payment. He says he can't pay until he gets payment from the homeowner. Now he has stopped returning my calls. Can I consider the project abandoned and sell them on the open market? Any suggestions?
(Business and Management Forum)
From contributor H:
In recent years I have been in your position a few times. There is more going on than you know. Contact the homeowner directly. Tell them their product is ready to be delivered and installed but the builder will not make payment. If you know the bank they are working with, contact them also. I have had banks pay me directly, by passing the builder, in order to protect their asset (the home loan).
Some builders, not most, over extend or under bid and they get us caught in their web. It may be embarrassing and may make the builder mad, but he will, at some point, get cabinets for this job somewhere. Action on your part to circumvent him will make it harder for him to do this.
P.S. In your contract, state that your payment schedule is not dependent on bank draws.
This stuff is typical here in Oregon. I believe the worst contractors all live here - they talk the talk, but don't walk the walk. These guys make some really decent money, but take too many vacations, buy too many boats, overpriced trucks, toys, toy haulers, quads, you name it. My wife and I are starting to take real estate classes. We're going to slowly change course. I'll still build custom cabinets, but I'll only take the jobs I'm interested in and not deal with the builders in the future. Nice thing about real estate is there are laws on the books that insure that when a house closes, checks are disbursed to all parties. Not so with cabinetmaking - we are always at the mercy of dishonest builders. We need some banking and escrow laws written to protect us and other subcontractors from this reluctant dishonest trade (general contractors).
Used to be in Rogue River, Oregon - now in Montana. You have to weed them out here too.
I've been down that road with contractors before, "I can't pay you because I haven't received payment from the homeowner." No more. Now it's 50% upfront, no exceptions, the remainder upon delivery and the install fee is the only part held until the punch list is done. It's working for me and my cash flow is much better. You cannot be badgered into relenting on this. Those that balk would be the ones that would probably give you trouble in the long run. So you say, "well, that deposit can be a large amount." Yes, it can. I have received 6 figure deposits before and am darn sure glad that I did, otherwise my cash flow would have been negative during the construction phase of the project. Just do it! When they have money invested in the project, they seem to be more able to get things done. Go figure.
"Storage and handling charges will be applied to any and all projects undeliverable for more than 5 days after a delivery date has been set due to delays caused by the real property owner, architects, interior designers, contractors, service people, vendors or any other source not including subcontractors, vendors, and suppliers hired or paid directly by [our company]. Storage charges are assessed at $2.00 per lineal foot, per day, 7 days a week. Handling charges are assessed at $75 per hour. [our company] reserves the right to charge for storage and handling at any point during the fabrication process, beginning upon delivery of raw materials, due to delay by customer/customerís representative. Charges will apply until projects are delivered or fabrication has commenced/recommenced. Rescheduling for delivery or fabrication will be dependent upon [our company]ís workload at that time. Charges will be invoiced monthly and will be due prior to delivery or installation of any projects. Projects delivered to a site and not installed due to delays by others will be subject to full payment minus the cost of installation as determined by [our company] at its sole discretion."
I think it is completely off base to paint all builders with the same brush. There are good builders and bad builders, just as there are good cabinetmakers and bad cabinetmakers. It would be interesting to see if the distribution channels that feed products to cabinetmakers would say the same types of things about cabinetmakers.
Earlier in my life, I was an independent sales representative for a regional hardware distributor, and we had great cabinetmaker customers, and we had many bad cabinetmaker customers. The thing that bothered me the most is when they would say they had not been paid by their builder, and so they could not pay me. In my opinion, a cabinetmaker who does not have the ability to have and manage their own cash flow is not worthy to be in the business. I feel the same way about builders; if they have to get a bank draw to pay me, then we do not work for them (they are the bad builders).
Business skills in our industry are just as much a part of the skill-set needed for success as any of the joinery methods, or any other skill required to manufacture cabinetry.