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Architects, Builders and Other Crooks

You don’t hear much about church development problems because most churches are so embarrassed at what happened to them, they would never tell anyone. I want to share church’s stories so your eyes are open to what can really happen during your church development project.

To maintain anonymity, I will not name the individual churches or tell you their locations. Instead of naming construction companies, architectural firms or banks, let’s just refer to any adversaries as “Chuck”.

A church in California asked me to to put together a cost breakdown for the building they had designed. It was my intention to do the development for them, but unfortunately that didn’t happen. Chuck and his construction company came along with a price that was substantially less than mine. I looked at the cost breakdown and knew there was no possible way Chuck could complete the project for that low of a price.  Chuck came in hundreds of thousands of dollars less than me. The church was thrilled with the low price! So for me to come back and say “He can’t do it” would just sound like sour grapes, right?  The church stayed in touch with me and I kept an eye on the project, just to see how things would turn out.

Here’s what happened: Chuck came in and had the grading contractor get all of the gravel done to cut the pad. He had the concrete come in for the foundation, so the foundation and all of the underground plumbing and electrical work were finished. All of the steel, the lumber package and the mechanical units showed up. This went on for about three months, and each month the pastor would ask “Chuck, you know what?  Shouldn’t we be paying all of these guys for their work?” Chuck would say, “Oh no, these guys are on a ninety to one hundred twenty day pay cycle. They don’t expect to be paid yet, so why draw money on your construction loan and start paying interest?”  Chuck looks like a hero, right?

Not only did he come in hundreds of thousands of dollars less than my bid, he was helping the church to not have to pay interest by drawing out the payments.

The first and second month went by and nobody got paid. Everybody seemed happy. The third month came along and Chuck handed the church a bill for all the work done in the project – it totaled five hundred thousand dollars for the first draw of the construction project. The church gave the draw request to the bank and they came out to the project site for an inspection. Sure enough, there was five hundred thousand dollar’s worth of completed work, so they signed off on it and wrote a check to Chuck for five hundred thousand dollars. The bank handed him the check on a Friday and that was the last they ever saw of Chuck. He flat out disappeared with the money. He had lied to all the subcontractors, to the grading guys, the concrete foundation company, the underground utilities contractor, the lumber company, and the steel company. He told them that the church was getting their financing put in order and that they would be able to pay soon. He’d been telling them this for several months. Chuck had lied to both the church and the subcontractors.

The subcontractors were angry. They did not care that Chuck got paid and fled with the money. They wanted to be paid, and they wanted to be paid now! So the church went to the bank and said “Hey, we need another five hundred thousand cause Chuck’s skedaddled, but we’ve got to pay all these subcontractors.” Of course the bank said “No way! We only pay for work that is done and there is five hundred thousand dollars worth of work done out there – and we already paid for that. We are not giving you one dime until we have full releases from all the subcontractors and suppliers, and proof that they have all been paid.” What could the church do? They shut down the entire project for over a year and did one fundraising campaign after another to try to keep the contractors from suing them and putting liens on the property. Years later the church was able to pay all five hundred thousand dollars to the subcontractors. Their permits for the project had expired and any things had to be renegotiated before they could start building again. Eventually, they were able to get the building finished.

This was an absolutely horrible thing to have happen to any church! The last thing I would want to say to them is “I told you so,” because I had told them that there was no way Chuck would be able to build their project for that price.  It would have been good if they had realized that the cheapest bid is not always the best bid.

You can get more information on how to protect your project from crooks like Chuck.  Learn about the power of writing joint checks, using conditional lien releases and how they are different from unconditional lien releases in  our e-books. We’re here to help you. bradoaster@mac.com

Learn how to avoid the crooks, call me at 719 439 3019.

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