Occasionally we see trouble coming from the outset of a project,
but that’s rare. More often, the project starts with enthusiasm on
all sides and usually finishes with a happy, satisfied customer and
a profit for your firm. Occasionally, however, something will occur
that causes the relationship between you and your customer to go
sideways. When this happens, you need to be prepared to deal with
This month, we will look at potential and actual disputes, as
well as ways to avoid them, diffuse them when they arise and manage
them when they escalate.
It’s always better to avoid
a dispute rather than having to resolve one, and clear
communication with clients can help you do so.
The first step involves the design process itself. It is here
that there is a lot of conversation about dreams and possibilities,
many of which do not wind up as part of the final project. For this
reason, clarity is key and the accuracy of the agreed-upon plans
and specs cannot be overstated.
Almost all of us have experienced a situation where a client
says, “But I told my designer that I wanted that.” This statement
is often followed by a claim that the client did not really
understand your specifications and thought the item, feature, etc.
There are several steps that can be taken to stem this
situation, including statements from your designers to their
clients that the specifications and plans are the controlling
The plans and specs should be reviewed line by line and page by
page at the time the contract is signed, with the client initialing
and dating each page during this review. If the designer is aware
of items that were part of the original “dream” and were removed
for budgetary reasons, this is a good time to note such items are
no longer part of the project.
Next, it’s important to have a statement in the contract,
preferably directly above the client’s signature, that states:
“This is a complete and exclusive final agreement of the parties
hereto, with respect to the work and products indicated, and
supersedes any prior contemporaneous oral, written or implied
agreements with respect thereto.” While such a statement would seem
to be pretty clear, if the client does not really focus on the
meaning of it, you will still wind up with a misunderstanding and a
potentially unhappy client.
Finally, we try to get this same point across at our
pre-construction meetings by asking the clients if they have had a
chance to review the plans and specs since the time the contract
was signed to make sure that they are complete and accurate. We
stress that materials are ordered and work is done from these
documents, so it’s important to make sure they are correct before
work actually begins.
Job schedule and progress is another area where conflicts can
arise. We will not go deeply into the scheduling process, except to
say that, again, communication is the key to avoiding conflicts.
Remodeling is a bit like triage in an emergency room, and each day
brings new tasks to work into your schedule. We have found that if
our clients are informed of what is, or is not, going to happen on
a weekly (or sometimes daily) basis, they are much more
understanding than when left in the dark.
Sometimes, in spite of
our best efforts, conflicts still arise. When they do, there are
two rules to note. First, these conflicts will either grow into a
full-blown dispute with your client, or they will be resolved
amicably. Second, if they are not resolved amicably, you and your
firm will be the losers.
What this means is that it’s essential to address conflicts at
the very first sign of trouble. When you get that voicemail
complaining about the actions of one of your employees, the finish
on the cabinets or the failure to clean up a job site, don’t kid
yourself that it will just go away.
The correct response is to contact the client immediately,
apologize for the misunderstanding and assure them of your
Next, follow up and correct the problem. Here, there is a
tendency to stand your ground on “principle,” when the cost of
giving the customer something for nothing is really
It’s usually a better, and easier, solution to factor into your
job cost a certain amount of contingency money to allow you to
provide a few free favors to your clients. There will be times when
you feel that you are being taken advantage of, but that is
something you just have to live with.
However, there are times when you should not back down on
significant issues. When a key issue arises, it’s imperative that
you have your documentation in order and that your actions do not
jeopardize your position.
First, be sure your contract is properly written. While we will
not get into all of the aspects of a good contract, there are a few
areas worth noting. The phrase mentioned previously concerning
prior oral discussions is key. Since it’s impossible to address
every subjective issue in a contract, you will often have to rely
on industry standards. It’s key to have an authoritative reference
for these, such as the Residential Construction Performance
Guidelines developed by the National Association of Homebuilders
(NAHB). It is also important to define how disputes are to be
resolved. Mandatory mediation and arbitration are a much better
choice for resolving major disputes than allowing a client to haul
you into court.
It’s equally key to be very careful of what you say. If you
actually get into an arbitration, your position may not be as sound
as you may believe. Chances are, you wrote the contract your client
signed, and you are the professional remodeler. Do not expect to be
given the benefit of the doubt in a legal battle with a consumer.
Even a simple mediation will cost you well over $1,000, and an
arbitration can easily get to $10,000 (if you win). You might want
to consider very seriously whether to dig in your heels when a
dispute with a client arises.
The bottom line is to remember that managing disputes and
resolving them must be based on business decisions, not emotional