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Contract Question for Fire Damaged Building to be Demolished
August 6, 2010
5:12 PM
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August 5, 2010
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Okay , so don't give him a bond. If you excluded it , that means it would be extra $$ so if you price it high enough maybe he won't go for it. Otherwise, you will be bound to him even if he can't pay you, unless you have what is called a "Dual Obligee Rider". If he presses for the bond, ask your Agent about the rider. I would get the mechanics lien in place. Not a big deal. The personal guarantee is fine but it will cost you attorneys' fees to ever execute.

August 6, 2010
1:19 PM
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I have not given him a performance bond.

I can find out the status of the insurance payment and who the carrier is. More than likely the insurance policy is with the previous LLC. Most policies hold back payment or a portion of the payment for clean up costs when a fire is involved.

I was thinking of having an attorney draft a personal payment guarantee contract prior to us starting the project. Would this help?

August 6, 2010
9:03 AM
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Ok, if the project cost is more than what the property is worth, you are not in great shape. Have you given him the performance bond already? If you haven't , do not! Step #2 is to ask him for his proof of fire/property insurance and find out what he's getting. ask him to "assign" it to you. Let me know about your bond.

August 6, 2010
7:05 AM
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Walk away

August 6, 2010
4:46 AM
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Great advice Grace Took the words out of my mouth. You definitely need to find out who the insurance company is. Did you get any upfront money? If not ask for it. Even if its a couple thousand. Then copy the check, so you have the account numbers. These may prove helpful in the future.

August 5, 2010
7:37 PM
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Thanks for your reply, Grace.

I have not started the work yet. When I found out that the LLC was created after the fire and the registered agent for the LLC was an attorney, it started to throw up some red flags. I will be starting in the next 2 weeks.

The project is located in Iowa. The cost of the project is more than what the property is worth.

In hindsight, I should have stipulated that the funds for the demolition be paid to an escrow agent, prior to starting.

I have called around and have found out that the owner is a little on the slippery side and am trying to cover myself before I get started on the work. There may be no problem at all here and I might get paid promptly after I am completed.

Thanks again.

August 5, 2010
6:42 PM
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Hi Clansing! It may take you awhile to collect your $$ but you should be okay. Your best bet is to file a mechanic's lien on the property(ASAP). You don't say what State you are in but this can be a $10 filing at the County Clerk's office. If your bill is small in comparison to the value of the property, they will be anxious to settle with you at some point. One thing I learned to do on fire jobs is ask for an insurance cert, see who the insurer was and ask the Owner and insurer to assign a portion of the fire insurance proceeds to us. This is late now but if there was a documented fire there , the local fire department knows who the insurer is and you may want to contact them and tell them you have a valid lien against the property, related to the fire. How long has it been since you did this work and what state are you in?

August 5, 2010
6:11 PM
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I've entered into a contract to demolish a fire damaged commercial building. The owner had me submit the bid to an LLC company which he and his wife owns. I went online to find out who the owners of this LLC were, etc. I find out that the LLC was created 2 weeks after the building fire. The building had commercial rental on the 1st floor and multiple apartments on the 2nd floor. I have been told that there are several claims filed against the owners of the building for the fire damage by the numerous tenants of the building.

In my bid proposal, which the owner accepted, I stated that the owners of the building, "Jack and Julie" would personally guarantee payment for the work. I did not want to get into a situation where the LLC goes bankrupt, etc. and I am left holding the bag.

My question is this - Is there anything else I can do to protect myself against non-payment.

I thought of having an attorney draft a Personal Guarantee contract and have the owners sign it. The owners have the money to pay for this demolition, but I am trying to make sure all my bases are covered.

The owner also insisted on a Performance Bond. I was very specific in my bid proposal as to what my scope of work is and what I don't have (exclusions).

I should have had an attorney review this before entering into a contract, but I can't change this now.

Any advice would be appreciated. Thanks in advance.

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