Back charges can be a scary part of the construction business. They’re often abused or misused and subcontractors can find themselves with their backs against the wall out of nowhere....
Back charges are amounts held back or charged back to a contractor on a construction project. In a typical scenario, payment due to a contractor is reduced because of an allegation that the contractor did not perform the work correctly or completely. For example, a contractor may agree to perform work for $100,000. During or after work, the general contractor or owner may contend that $20,000 of the work is incorrect or incomplete. In that case, the contractor’s payment is reduced from $100,000 to $80,000 (=$100k – $20k).
It’s common for “back charges” to be the source of disputes, delays, and problems on construction jobs. It’s also common for general contractors and owners to use “back charges” as leverage against subcontractors to force them to perform work that is out of scope, or to make other change orders or change directives in the work. Even when back charges are claimed and there is a dispute, contractors and subcontractors have the right to assert a claim (i.e. a mechanics lien) for the full value of the work that they contend to be due.
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