Dealing with Sketchy Contractor

So my in-laws up in Michigan (wife and I are in NC) have been doing an involuntary kitchen remodel since Thanksgiving. The faucet burst and flooded the kitchen, leading to an insurance claim. The kitchen is very small (120 sq ft) and very old, so the estimate for repair is around $8k from insurance, not including the water remediation that was paid separately. Knowing what we've paid for our own projects, we'd have no problem doing the project for that amount. Given the age of the kitchen, they are pretty much gutting it (cabinets, sink, counter tops, and floor), so there is *some* increase in scope outside of the claim but not a whole lot. We explained to them they should just buy the floor and use the recommended installer, same with the cabinets. No need for a GC or plumber since they are just swapping like-for-like. Just installers/handymen since FIL can't screw in a lightbulb. 

What do they do? They hire a plumber who brings in his GC brother. GC requests $3,000 and is promptly given $3,000, no questions asked (from what has been retold to us). As far as we understand from 600 miles away, no clear scope was discussed (other than here's what all needs to be done for the whole project). We told FIL that he needed to immediately get an itemized breakdown of what that money was for. He claims to have asked for the breakdown and got crickets. 2 months later, the drywall is finished. That's it. Now GC is requesting more money ($17k) with no breakdown provided for past or future work. 

We told FIL to dump this guy. FIL tells the guy he is no longer need. GC then responds predictably angrily and threatens to put a lien on the house. 

Our understanding is that this is a very empty threat in the absence of anything resembling a contract. Even if this guy claims a verbal contract was in place, it was for $3k which was assumed to be all labor (floor and cabinets would be paid for directly by FIL).  To deescalate, we told FIL to explain that he simply does not have the $17k the GC claims he'll need to finish, so they have no option but to part ways. If the cost truly is $17k more, there's no middle ground to be found. 

What say ye? I want to make sure we are not giving bad advice. 

You can try to get these inbred contractors in line with written job requirements, schedules and bills but I doubt it will work.  On the other hand it would be fun to take them to small claims court and ask some neat questions about their past customers and such.  But in the end cut them loose and consider it an education of how to run a project.

In reply to porschenut :

No doubt the next step is to cut them loose (technically they already did and now are dealing with the fallout) - the biggest question is if GC's threat to put a lien on the house is enforceable. From what I've googled, a written contract must be in place in Michigan for residential projects. At the very least, if a verbal contract suffices, a contract amount must be stated on the lien form. When he tossed out the $17k for completion, FIL did not agree to that amount. The only amount they both agreed to was the $3k that has already been paid. The $17k was simply an estimate, not a contract. 

I wouldn't allow a contractor to start work without a detailed contract and I wouldn't pay without a detailed invoice.  Both of these things can be handwritten.  Protects both parties.

Sorry, no help on the current situation.

I'd sure want to see an itemized bill for the work done to date. If he provided product and labour, he is due that, although it's his fault for not being a proper businessman.  If he wants $17k for future work, tell him to drift.

Now, I would also suggest this- $8k for a complete kitchen remodel is fantasy.  I bought cupboards for my admittedly large kitchen in 1990 or so, and I think the bill for the boxes was $3800cdn.  I would count on at least $25k to totally redo mine today, if it was being contracted.

Liens are usually for materials, and are processed by the material suppliers, not the contractors. It's to ensure materials for the job that were installed on the project are paid for. You are required to receive a preliminary notice, usually from a law firm retained by the supplier. If they didn't provide any materials for the job, then you should have nothing to worry about. If they opened a job account for your job at a supplier and bought materials that were not installed on your job, that's on them. They have to prove that the materials made it to your house and were installed. They would need proof of delivery receipts to your address, or proof that the materials that they bought were installed. It doesn't sound like either of those happened. FYI, if you hire a contractor, you want to obtain lien releases before you pay them. Those are basically confirmation from the supplier that they have paid their bills to the supplier for materials for your job. Otherwise you could be on the hook if the contractor doesn't pay their bills. 

Can you check with the state  to see if he even has a contractors license ?

Streetwiseguy said:

I'd sure want to see an itemized bill for the work done to date. If he provided product and labour, he is due that, although it's his fault for not being a proper businessman.  If he wants $17k for future work, tell him to drift.

Now, I would also suggest this- $8k for a complete kitchen remodel is fantasy.  I bought cupboards for my admittedly large kitchen in 1990 or so, and I think the bill for the boxes was $3800cdn.  I would count on at least $25k to totally redo mine today, if it was being contracted.

I shouldn't have implied it is a full remodel. The floor is approx $1,500-$1,800 as per my go-to flooring guy. The appliances are staying. Countertop is laminate. Figure $4k for cabinets installed on the high end (not even 10' of uppers and lowers). Faucet, sink, and DIY paint make up the rest. Like I said, it is a very modest job.  

In reply to cyow5 :

Is the lein determination made by a judge?  If so it would be fun to let them try it.  I have been part of the legal process when the other party was dead wrong.  The judge ripped into them pretty hard and yes I won the case.