Homeowners v. Contractors: Key Things to Be Aware of in Residential Construction Contract Disputes

 Posted on August 14, 2025 in Real Estate

When hiring a contractor for a home improvement or construction project in Virginia, the contract you sign is more than just a formality; it is a legally binding document that governs the entire relationship between you and the contractor. A well-drafted construction contract will protect your rights, outline the expectations for everyone involved, and minimize the risk of costly disputes.

Our highly-sought litigation team has won precedent-setting construction law cases, including one recently where a Fairfax jury awarded our client, an injured homeowner, $565,000 in damages against an unlicensed construction company after a four-day jury trial in Fairfax County Circuit Court.

Confirming the Contractor’s License

The Department of Professional and Occupational Regulation (DPOR) is the body that governs the contracting industry and is responsible for maintaining ethics in that field. You can verify whether a contractor is licensed or not by searching the DPOR’s License Lookup here.

Unlicensed Contracting Work Is a Class 1 Misdemeanor Under VA Code § 54.1-1115

Under Virginia Code § 54.1-1115, it is illegal for a contractor to perform work requiring a license without holding one. A contractor’s license must be current, valid, and appropriate for the scope of work being performed. Performing unlicensed contracting work is a Class 1 misdemeanor offense. Note that if a Contractor attempts to use the license of another licensed contractor, that is also prohibited under § 54.1-1115(3).

How Unlicensed Contractors Lose the Right to Enforce Contracts

Subsection (C) of § 54.1-1115 provides that:

"A construction contract entered into by a person undertaking work without a valid Virginia contractor's license shall not be enforceable by the unlicensed contractor... unless the unlicensed contractor (i) gives substantial performance in good faith and (ii) did not have actual knowledge that a license was required."

If your contractor is unlicensed, they may be barred from suing you for payment, but you may still have to pay for work they substantially performed in good faith. This is where disputes often arise, especially if the work is defective.

DPOR Regulations Governing Key Minimum Requirements For Construction Contracts

DPOR Regulation (18VAC50-22-260) details the minimum requirements for construction contracts, and in addition to understanding the terms that must be included, homeowners will need to make sure they will have the proper legal protections. An attorney with experience in construction law can help homeowners ensure that contracts are properly drafted and enforceable under Virginia law.

Virginia law (18VAC50-22-260) details the minimum requirements for construction contracts, and in addition to understanding the terms that must be included, homeowners will need to make sure they will have the proper legal protections. An attorney with experience in construction law can help homeowners ensure that contracts are properly drafted and enforceable under Virginia law.

Common Dispute Triggers in Residential Contracting Disputes

1. Project Timeline and Completion Dates

Delays are common during construction projects, and without a proper timeline in place, a contractor could delay a project indefinitely. A well-drafted contract should specify the anticipated start and completion dates of a project and any interim deadlines during different phases of the project. Provisions may also be included that may extend deadlines due to weather or supply issues.

Virginia courts will typically enforce clear contractual deadlines if there is a TIME IS OF THE ESSENCE clause. Without such a clause, a delay in completion is not always a material breach of contract. A contract should include language that provides remedies such as partial refunds or termination rights if substantial delays occur.

2. Quality of Workmanship and Defective Work

There is an implied warranty of workmanship in Virginia in every construction contract. This was recognized by the Virginia Supreme Court in Mann v. Clowser, 190 Va. 887, 901 (1950), in which the Court held that a contractor must do work in a workmanlike manner in accordance with good usage and accepted practices in the community in which work is done. A construction contract should include a clear warranty period. It should detail who may be held responsible for defective materials or substandard workmanship.

3. Unclear Scope of Work, No Change Orders, Materials and Allowances

One of the most common sources of disputes in residential construction contracts is an ambiguous or poorly defined scope of work. When the contract does not spell out exactly what will be built, the quality and type of materials to be used, and the allowances for fixtures or finishes, disagreements are inevitable. A vague scope of work gives the contractor room to cut corners, substitute cheaper materials, or claim additional charges for items the homeowner assumed were included.

• Materials Substitution: Without specifying exact brands, grades, or specifications, a contractor may replace high-quality materials with cheaper alternatives that meet only the bare minimum standard.

• Hidden Upgrade Costs: If the contract contains vague "allowances" (e.g., "$5,000 for kitchen cabinets"), and the homeowner chooses materials exceeding that allowance, the contractor may demand significant additional payment.

• Omissions in Scope: Tasks or finishes that the homeowner assumed were included may be omitted entirely unless expressly written into the contract.

Changes may need to be made while a construction project is ongoing. A contract should include terms detailing how changes to the scope of work will be handled. A change order clause can require all changes to be made in writing and signed by both parties, and it can also detail how price and timeline adjustments will be handled.

Without the proper change order clauses, disputes can arise over whether additional work was authorized and how much it should cost. Oral agreements made between a homeowner and contractor may not be enforceable should disputes arise.

4. Payment Schedule and Withholding Rights

A homeowner should be sure they fully understand how payments for a project will be handled. A contract should include a clear payment schedule that is based on the completion of project milestones. It should also include language allowing the homeowner to withhold payment if work is defective or incomplete while stating that the final payment will be due upon inspection and approval.

5. Termination Rights and Dispute Resolution

The contract should outline the conditions under which either party may terminate the agreement, such as when a contractor has failed to meet deadlines or a homeowner has failed to make payments as required.

A contract should also include a dispute resolution clause. While many contracts include arbitration clauses, homeowners should understand the pros and cons of these terms. Arbitration can help ensure that disputes can be resolved more quickly, but a homeowner’s right to appeal may be limited. Some contracts may also require mediation before any lawsuit can be filed.

• Termination for Cause by the Contractor: Contractors often reserve the right to terminate if the homeowner fails to make payments as agreed, refuses reasonable site access, or makes material changes to the project without mutual consent.

• Termination for Convenience: This allows one party (typically the homeowner) to end the contract without alleging a breach, usually with the obligation to pay for work completed to date plus a reasonable overhead and profit percentage. This can be valuable if your circumstances change mid-project.

In Virginia, courts generally enforce termination clauses as written, so clarity is key. If a contract is silent on termination rights, the parties may have to rely on common law breach principles, often leading to more litigation.

6. Damages and How They Are Calculated

In Virginia, when a contractor breaches a construction contract, the measure of damages is usually the cost to correct or complete the work, rather than the loss in the property’s value.

As the Virginia Supreme Court explained in Nichols Construction Corp. v. Virginia Machinery Tool Co., LLC, 661 S.E.2d 467 (Va. 2008):

"Cost of correction or completion rather than loss in property value ordinarily affords the proper basis for measuring the damages which result to the owner from the breach of a building or construction contract."

Negligence Claims and the Economic Loss Rule: In some cases, homeowners may also sue for negligence, for example, if defective construction causes personal injury. But if no personal injuries are involved, the claim must get past the economic loss rule, which limits negligence actions when the damage is purely financial. Virginia courts look at whether the defective product only damaged itself or whether it damaged "other property."

• Example: Negligence Allowed: In USAA Property & Casualty Ins. Co. v. Armstrong Air Conditioning, Inc. (Va. Cir. Ct. Sept. 3, 2004), a defective oil-burning furnace caused a fire that destroyed the entire home. The court held that the residence was "other property" because the furnace did not just damage itself, it damaged the house. This distinguished Sensenbrenner, where the product damaged only itself.

• Example: Negligence Allowed for Component Failure: In AIU Ins. Co. v. Omega Flex, Inc., 2011 WL 2295270 (W.D. Va. June 9, 2011), lightning damaged stainless steel gas tubing in a home. The tubing failed, leaking gas that ignited and destroyed the home and personal property. The court ruled that the economic loss doctrine did not apply because the defective tubing damaged other property, like the home and contents, not just itself.

Some contractors may attempt to limit the homeowner’s legal remedies in the event of defective work. Homeowners should be wary of restrictive clauses that could prevent them from holding a contractor responsible for damages. They can negotiate terms that provide broad remedies that will address financial losses or other damages that may occur.

Contact Our Fairfax Construction Contract Dispute Lawyers

Construction contracts can be complex, and without the proper protections, a homeowner could experience significant financial losses, and they may struggle to resolve any disputes with a contractor. Before you sign a contract or begin a project, the Fairfax, VA construction law attorneys at Fox & Moghul can review the agreement, negotiate better terms, and help you protect your rights. Contact us at 703-652-5506 to set up a consultation and make sure you will have the protections you need.