Financial management is vital in the construction industry. Contractors can quickly find themselves in hot water should something go awry. When a contractor faces financial troubles with projects underway, the fallout spreads to homeowners, subcontractors, and suppliers. This is exactly what happened to Romm Custom Homes, and it’s not looking good for this once respected Virginia general contractor.

What happened?

Romm Custom Homes was contracted to build a home in the Cameron at Grey Oaks subdivision near Wyndham, Virginia. In fact Romm had been hired to build several homes in the subdivision and was described as their number-one builder, completing more than 50 homes in the area. Romm’s reputation has not fared well lately, however.

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Romm was hired to build a custom home in February, 2015. After four months, the project had not progressed past the foundation and framing stages. By May of 2015, the homeowners contracting with Romm had filed suit. The owners alleged that the contractor abandoned construction on their home as well as neighboring homes in the community.  The suit alleges that the contractor induced the owners to advance money for construction costs and that the contractor subsequently did not deliver as promised.

Since the first suit was filed, Romm’s legal worries have multiplied. Two more homeowners filed suits over their unfinished homes and a supplier has filed mechanics liens relating to the projects.

Unfortunately, a general contractor defaulting on promises is nothing new. According to Romm, the company faced a financial setback during in 2015. Indications are that the financial issues are due to personal issues of William H. Romm III., proprietor of Romm Custom Homes. Before all of these problems started, the contractor was a trusted builder in the community. Romm claims that as a result of the setback, personal assets were used to try to continue projects and that their financial situation has improved over the last several months.

For more on the situation, here is the original article from Richmond BizSense.

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Virginia Lien Law

Virginia lien law is a lot like many other states, for the most part. As long as a party to a construction project is licensed, they likely have lien rights. As with every other state, the web of deadlines and notices is complex and can trip up lienors if not navigated properly. But Virginia general contractors do have an advantage when it comes to pay when paid contracts. Though these contracts are generally disfavored across the map, Virginia looks at them on a case by case basis.

Unfortunately for Romm, it appears the pay when paid leniency in Virgina will not be of much service. The vast majority of its legal issues are based on contracts with homeowners, and the fact that Romm appears to have accepted payments in advance may leave any pay when paid protection with the supplier unhelpful.

Takeaway

Even responsible construction companies can fall on hard times. While this Virginia general contractor may or may not fall into that category, it is clear that before these legal issues arose Romm Custom Homes was a trusted builder in the area. There may be unique hurdles in the construction industry, but it’s imperative that construction managers relieve, rather than compound, issues. Whether the financial woes in this case came from business management or personal issues, it is the contractor’s responsibility to manage their funds and perform under contract. This Virginia general contractor is paying the price for poor financial management.

At Levelset, we believe that the construction industry deserves a transparent, collaborative payment environment. One step toward this goal is to empower financial managers with tools to maintain a healthy business. Follow our weekly Construction Financial Manager Review to keep up with trends in construction payment and current events on the subject. For more on Virginia Lien Law, head over to our Virginia Lien and Bond FAQs and check out our other posts on the subject.

Summary
Virginia General Contractor Serves as Cautionary Tale
Article Name
Virginia General Contractor Serves as Cautionary Tale
Description
Once considered a reliable builder in the community, a Virginia general contractor is facing multiple liens and breach of contract claims.
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zlien
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