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My Current Remodeling Contractor Went Out of Business, What's Next?

February 27th, 2023 | 4 min read

By Michael Flory

Kitchen undergoing a remodel

Remodeling your home should be an exciting time. But what do you do when your contractor suddenly abandons your project or goes out of business, leaving you with a house under construction and your money seemingly gone?

The frustration and stress of investing time and money into your project that has come to a sudden halt can be overwhelming, but the good news is you don’t have to navigate this alone.

With over 15 years of experience in the remodeling industry, we have managed and constructed hundreds of projects in the mid-Michigan area. We value not only creating beautiful and functional spaces but ensuring that your construction experience is as positive as possible.

Nothing is worse during remodeling than having the professionals you hired stop working on your project. We’re here to lend our expertise and help you get your home and life back on track.

In this article, you’ll learn seven immediate steps you can take in the event that your contractor goes out of business and stops working on your project with no prior communication or warning:

1.  Attempt to contact your contractor 

The first thing you should do when you find out your contractor has stopped working on your project is to try and get in contact with them. Call them on the phone, send them an email, and if those don’t work, go to their office address if they have one. 

In addition to getting your money back, you may be able to get a reasonable explanation as to why your contractor stopped working. In this case, they may be able to recommend an alternative contractor to keep your project on track.

This is a best-case scenario. If you’re not able to get in touch with your general contractor, you’ll need to explore other means of getting your money returned and construction restarted.

2. Contact subcontractors working on your project

In many cases, your contractor won’t be working alone on your project. They may have hired outside specialists (subcontractors) to complete specific parts of your project. 

Subcontractors include plumbers, electricians, painters, etc.

Contacting subcontractors who were working on your project is a good way to gather information. Their relationship with the contractor is different than yours and they might be more aware of what is going on and if/why the contractor went out of business.

They are also likely trying to get in contact with the contractor. If they’re owed money, they will be motivated to connect as well.

Joining forces with a company that has a shared interest with you may be a good option for getting your money back.

3. Consult an attorney

Consulting with an attorney for a breach of your construction contract may become a necessary step for getting your money back. Based on the terms of your contract, a lawyer may be able to sue the now-defunct contractor for damages.

The attorney will advise if suing is a good idea based on the amount of money the contractor took as well as the time and money you’ll need to invest in the legal battle getting it back.

If the amount of money the contractor took is small relative to legal costs, a good attorney may recommend not filing suit because it won’t be cost-effective.

4. File suit in small-claims court

In Michigan, you have the right to file small claims against persons or companies for disputes or disagreements. A contractor you hired to remodel your home who suddenly leaves and takes your money certainly qualifies.

The maximum amount allowed for suit in small-claims court in Michigan is $6,500. 

If your contractor has taken $6,500 or less, or you don’t want to go through the hassle of hiring an attorney to get more, small-claims court may be an option for you.

With a copy of your construction contract and other documentation showing that you hired the contractor to complete work, you have a reasonable chance of success.

To file small claims cases, complete the small-claims form and file with the appropriate district court. The cost to file a small claim is $70 for claims sought between $1,751 and $6,500.

5. File a complaint with oversight organizations 

Contact the Home Builders Association of Michigan (HBA), the Better Business Bureau (BBB), and the Michigan Attorney General to file a complaint about your contractor. This will make governing bodies and other oversight organizations aware of your contractor's practices and make it more difficult for them to get work in the future.

Filing complaints in writing will also help your case in court as you try to get your money back.

6. Change your locks and inform your neighbors of the situation

Before beginning your project, you likely gave your contractor a means to enter your home. Whether it be by key or digital code, it’s a good idea to change your locks to make sure the contractor can’t get inside after they have stopped working.

This is more likely to happen if the contractor or other team members leave tools, building materials, or equipment behind. You don’t want them coming into your home to get those while you’re away.

It’s also not a bad idea to inform your neighbors about the situation. They may empathize with you and help keep an eye out for the contractor if he comes by while you’re gone.

7. Begin searching for a contractor to complete your project

While coming into your project mid-construction does present unique challenges for a new contractor, there are good ones who can help you recover your project and achieve your final design.

Quoting a partially-completed project is difficult because developing an accurate scope of work, construction plan, and material list require a determination of progress completed. Additionally, any potential mistakes the previous contractor made will have to be corrected.

New permits will have to be approved by the building department, new construction plans will have to be drawn up, and updated material lists will need to be calculated.

Not every contractor is willing to take on a job like this, but it is possible to find a contractor who genuinely cares about you and ultimately wants you to have a positive remodeling experience.

Next steps for finding the right contractor

Trying to get your money back while your home is still in a state of mid-construction is frustrating and stressful. Getting your project completed will give you peace of mind, as will knowing that your day-to-day life can return to normal.

This time, you’re probably going to spend more time vetting the right contractor to complete your project. The absolute last thing you’ll want is to increase your distress by choosing the wrong contractor a second time.

As a design-build contractor with 15+ years of industry experience, we’ve helped many clients overcome the bad experiences they’ve had with previous contractors and building projects. We understand just how disruptive this situation can be. Helping you get your project and life back on track is very important to us.

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Now that you know how to act accordingly in the event of your contractor going out of business, let's explore how to hire the best remodeling partner for your design and construction goals:

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Michael Flory

Michael brings over 2 decades of building and remodeling experience to his position as the Owner and Visionary of Custom Built. Michael’s passion to make an impact on the home building industry has led him to serve for over ten years at the local and state Home Builders Association, culminating as President of the HBA of Michigan in 2020.