Today's Guest

Karalynn Cromeens is the Owner and Managing Partner of The Cromeens Law Firm and the author of Quit Getting Screwed: Understanding and Negotiating the Subcontract. Karalynn holds more than 17 years of experience practicing construction, real estate, and business law. Karalynn is passionate about protecting the businesses her clients have built and being a lifelong partner in their success. An award-winning lawyer, Karalynn is sparking change in the construction industry. Karalynn shares the insights you should know about the subcontracts presented to you.

Resources Shared

• The Cromeens Law Firm, PLLC
• Quit Getting Screwed by Karalynn Cromeens
• Quit Getting Stiffed by Karalynn Cromeens
• The Quit Getting Screwed Construction Podcast
• The Subcontractor Institute
• Thryv
  

Episode Transcript

(Please excuse grammatical errors due to transcription)

Gordon Henry:

Hey, this is Gordon Henry at Winning on Main Street, and this week we're fortunate to meet Karalynn Cromeens, welcome to the show, Karalynn.

Karalynn Cromeens:

Thank you so much for having me.

Gordon Henry:

Great to have you. Quick intro on Karalynn. Karalynn Cromeens is the owner of Karalynn Cromeens Law Firm specializing in construction. She's written two books, Quit Getting Screwed, Understanding and Negotiating the Subcontract, and Quit Getting Stiffed, A Texas Contractor's Guide to Collections and Lien Rights. She has extensive experience within the construction and real estate industries and goes the extra mile, providing her clients with innovative legal strategies and services necessary to protect their rights. Karalynn's on a mission to educate and inform subcontractors on the importance of understanding what they're signing, negotiating a fair subcontract, and understanding their lien and collections rights.

Gordon Henry:

What should our listeners get out of this episode? Karalynn's book says, "Every day subcontractors across all trades face the same critical dilemma. Should I sign a subcontract I don't understand?" She wrote Quit Getting Screwed to help every subcontractor no matter how big or small, understand what those subcontracts mean. Tell us about your career path. What got you into this whole world of subcontracting?

Karalynn Cromeens:

Okay, so I'll start where I started and then we'll go backwards. In my last year of law school, my husband and I actually started a material supply company and I went to work for one of my real estate professors right out of law school and started working with him. And then it very fastly became my full-time job to do our collection works for our material supply company. And so I got into lien and collections and then the people I started collecting from are like, "Oh, you're so good, can you help me?" And then I got into contract disputes and I really didn't understand what advantage I had of growing up in the construction industry. My grandfather was an excavator. My first job was working with my uncle, who was a subcontractor, my brother's a irrigation subcontractor, so it was just something that I knew. And so I could come at it from a place that I've sat in your shoes being a family business and how important it is, and then try to break down the complex legal idea so everybody can understand it.

Gordon Henry:

Why did you write your latest book, Quit Getting Screwed? What were you trying to achieve?

Karalynn Cromeens:

Nobody's out there saying this. If a fresh law school grad or a normal contract attorney was to pick up a subcontract, they would rather burn it than try to fix it because it is so one-sided. And what has happened is that subcontractors are salt of the earth guys. They just want to go to work. And so they would just sign these documents and the general contractors' attorney would draft a document like attorneys do, thinking there would be a negotiation, and they're just never was. And so they just started signing them. And so they have all these horrible terms in there and nobody's saying, "Hey guys, one misstep and it could take your whole business." There are so many dangerous things in these contracts and nobody's saying anything and it's just wrong.

Gordon Henry:

It's really a noble cause, you're looking out for the subcontractor whose sort of the little guy in this whole equation and trying to protect him or her. Is it against the general contractor or is it against somebody else? Who's it against?

Karalynn Cromeens:

Normally generally, it's the general contractor. Yeah, that's who we're generally against. My residential contractor's usually write their own contracts, but we have disputes in that case too. But usually the aggressiveness comes from a general contractor to a subcontractor.

Gordon Henry:

Okay. Before we get into the details of the book, I'd love it if you could give us one or two examples of the worst subcontractor stories of subcontractors getting screwed ever, that you've come across.

Karalynn Cromeens:

Yeah, sure. The first one that comes to mind is really the reason why I wrote the book. In January of '20, I took a contractor to trial and he lost and got a judgment against him for $400,000. And it wasn't because he did anything wrong, it was because he didn't understand the contract that he signed and a particular clause that was a pay one paid clause that because the general contractor was messing up the pay applications to the owner and kept pushing payments out for 90, 120 days, he couldn't float the cash, but he didn't have the right to stop working and he didn't understand that. And then he walked the job and they came after him for what it cost to finish. And these guys have no idea when they're walking that situation that that's what could happen. So that's probably the most egregious one that I've had. It was just what the... I just couldn't believe you can go do a good job and it's still not enough.

Gordon Henry:

Right. And throughout the book you have examples like that of subcontractors basically getting screwed not because they did anything wrong with the job, but because they either signed too quickly, didn't read it, didn't notice it, assumed and bad things happen. It's quite often this can be a real life problem for real life subcontractors if they're not careful and working with somebody like you.

Karalynn Cromeens:

Yeah, absolutely, on the daily. And then here's the thing is, even if you don't want to negotiate the whole contract, at least understanding the risk that you're taking and that you're walking in with your eyes wide open and understand what you're agreeing to.

Gordon Henry:

Yeah. All right, so let's get into the book. It's very straightforward about all the ways you could get screwed as a subcontractor. And I'd like to go into one area where you begin with, which is the bid. So you say when you're talking about the bid, that's the way the whole thing begins. You say that a general contractor will try to attach the conditions of the prime contract, which is the main contract, the general contractor's contract, to the subcontract, and you have to fight that because you don't know what's in there and what you're getting into. That floored me right off the bat. I'm signing two contracts in one almost, and I'm supposed to read all this stuff?

Karalynn Cromeens:

Read and understand it, and most times they don't even give you the copy of the other contract. You're just supposed to say you've read it and agreed to it, but they don't give it to you.

Gordon Henry:

I don't know that many subcontractors, you do, but I imagine they're the little guy, they're up against this big general contractor and they're just like, "All right, seems okay," and just do it. And they're stepping into this whole world of unknown liability, right?

Karalynn Cromeens:

Absolutely. And so they never know which, because it's fine until it's not. Everything's going good. And the other too, there's a lot of technical things, daily reports, and anything that you don't do that on that contract that you sign that you didn't read and don't know what it means, means you're in default under the contract and they cannot pay you and a bunch of other bad things, so you don't even know what you're walking into. And I review contracts on the daily.

Karalynn Cromeens:

I had a client that has signed three or four different contracts with this general contractor, and they're not getting paid on some of the contracts and they're like, "Hey, we have this last contract, we haven't even started. Can you read this? Is there any way we can get out of it?" And there's no way that they can get out of it. So they're not even getting paid on the other jobs, but they have to move forward on this final job that they've signed off on because they signed the contract. And if they don't, then they'll be terminated before they even start and they'll hire somebody else at a higher price, and then my guy would be on the hook for the difference, so it's not a great place to be.

Gordon Henry:

Now, one of the things you bring out on this and other points is that these contracts are written one-sided, for a reason. The lawyers for the general contractor writes the contractor in the general contractor's favor, almost expecting a fight, and then the subcontractor doesn't fight, just signs it and gives up, and if they had pushed back, they probably could have gotten some concession, is that right?

Karalynn Cromeens:

Yeah, absolutely. And usually when we talk about negotiating contracts, it's never like, "No, I'm just not going to agree to this." It's like, "Okay, where can we meet in the middle? What would be average ground?" The whole purpose of the subcontract is to push the risk down and don't get me wrong, the further you push it down, the less likelihood they could handle the risk anyways. But there should be some middle ground, even if the general contractor doesn't get paid, they should have to pay the sub something. You're pushing the risk of the entire project on the guy who can at least afford it. The owner's getting paid because he got money from a bank, the contractor is working and then waiting to get paid. So they work and in month increments and they do a pay app for that month and then they're waiting to get paid. So if there's a kink in that system, very fastly, we can be out of cash, but still have to be running the project.

Gordon Henry:

Okay. So then you talk about subcontractor bonds, which was a new thing for me and how if you have a bond and the general contractor comes after you, they can take potentially all of your personal belongings, right?

Karalynn Cromeens:

Yeah. A bond is basically a personal guarantee of the project, because what you're doing is you're signing the contract that requires a bond and the bond basically says, "Hey, general contractor, if this sub fails to finish, we'll pay you to finish." And then the sub's agreement with the bond company is if we have to pay out one single dime, we're coming after you for that, and all of our attorneys who has an interest and not just you on your company, but in order to get a bond, you have to pledge your personal assets, bank accounts, everything, to get it, and so they already have that available to them. Then it basically becomes a personal guarantee of your performance under the contract, even though you have a company.

Gordon Henry:

So it's not insurance, right?

Karalynn Cromeens:

No.

Gordon Henry:

It doesn't work like insurance?

Karalynn Cromeens:

No. Most people think bond insurance, I'll just file a claim and they'll pay it, not in this situation. And a bond is insurance, but not for you, it's for the general contractor and for the owner.

Gordon Henry:

Right. Okay. Then you talk about scope of work and how if you do not clearly detail the scope of work, you could be liable to perform huge amounts of work and not get paid for it, right?

Karalynn Cromeens:

Absolutely. Yeah. What usually happens is a contractor will review the plans and specs and submit a bid to the general contractor, and that bid will be accepted. And the general contractor issues the subcontractor, a contract that has the scope of work. Subcontractors assume that what they bid is that scope of work. That's generally not the case. There's usually at least something different or if not something hugely different. Your bid is no longer part of the agreement once you sign that scope, and if there's something different that you didn't catch, you're now on the hook to do that, at no additional increased money. It happens all the time that people didn't realize, "That's not what I bid." I'm like, "It doesn't matter what you bid, what was attached in your scope of work, what did you agree to do?"

Gordon Henry:

And we could go on, each chapter, it's almost like each chapter is another, you're reading a page of a novel where you're like, "Oh my God, all the bad things that could happen to this poor person." And then you do say along the way, "You should incorporate," which I would think out of the gate, that would be the one thing most people would know, "Oh, I should incorporate, so I have that liability shield where if they come after me, they come after the company, they can't come after me personally." So how much help is that?

Karalynn Cromeens:

I think it's a lot, unless there's a bond, then it's not much help. But I do think because if you get in one of these situations and you have a company and it goes south, you can bankrupt it and it won't affect your personal assets, it makes it more pliable that you won't... Look if there was a misstep, it's just the company, it's not taking your house or something like that.

Gordon Henry:

Right. Okay. How are most subcontractors in terms of following these instructions? You wrote the book, so I assume a lot of subcontractors do get screwed.

Karalynn Cromeens:

They do. And usually what we help them do is find out their risk tolerance. We'll find their risk tolerance, what they're willing to do and what they're not willing to do. And then we'll go through the contracts and say, "Hey, here's this risk. Here's some ideas on how to negotiate it." And usually, we'll give them the ideas and they go back and do it because it seems awful aggressive when we're negotiating a contract. They think it's awful aggressive if I step in and start negotiating it for them. They want the work, but they don't want to sign up up for something that's so one-sided, so we have negotiations and so everybody's got a different risk tolerance. What is it worth it to them? And generally speaking, if you can get into a groove with a general contractor that you work well together, it's usually not an issue. It's just when things go bad, they go really bad.

Gordon Henry:

Right. It's not a problem until it is.

Karalynn Cromeens:

Exactly.

Gordon Henry:

On top of writing books about subcontracts, you run a law firm helping subcontractors. Tell us about your firm.

Karalynn Cromeens:

We're a construction law firm. That's all we do. We help contractors in all 50 states. We do flat fee, contract creation work, flat fee contract review work. What we really try to do is because growing up with average small-sized business, you need a lawyer, but you don't need something that you can't afford or you don't know what to expect. And so as much as we can, we try to nail that down to here's what you're going to pay, here's what it includes and here's how we can help, and with just different options. Most of my job is problem solving, so I get on the phone and there's an issue, here's our plan of attack, let's try this, let's try this. How can we get to where we need to go as fast and efficiently as possible? And I'm really big on the preventative side, which is writing contracts and reviewing them, so that we don't get sued on the backend.

Karalynn Cromeens:

It's like going to the dentist. The more often you get your teeth cleaned, the less likely you are to have cavities and all that good stuff. And don't get me wrong, people don't like the dentist or lawyers, but we are necessary, and so that's what I try to do. And usually, if I talk to somebody or I do a bunch of speaking, if I can get in front of them and I can get them to hear what I'm saying, they will pay attention. I might not be the number one priority. I might be three and they'll eventually get to me, which is cool. But it's important that they know that these things are out there. And the other thing too is that the more people that know, the more people that push back and we can gain some ground, especially now in this situation where there's less and less people to work if those people that are out there working are pushing and saying, "No, I'm not going to do this." We'll have more flexibility.

Gordon Henry:

Yeah, sure. How long have you been an attorney running this law firm?

Karalynn Cromeens:

Let's see, I've been an attorney for 18 years and I founded the firm in 2006. And only construction is what we've done. All the construction defects, collections, and we get into employment disputes because we have contractors that have employees or subcontractors, so we do all the things from the contractor perspective.

Gordon Henry:

Got it. And you're in Texas, right?

Karalynn Cromeens:

Yep. Our home office is in Texas.

Gordon Henry:

Okay. Do you have clients all over the country or just Texas?

Karalynn Cromeens:

Yeah, all over the country, I have clients. We work in all 50 states. I have clients in California, North Carolina, all over.

Gordon Henry:

Aren't the laws different in different states?

Karalynn Cromeens:

Yeah. Our contract laws are different in all 50 states. Litigation laws are all 50 states. And so we have attorneys in each state that handle that state, that work back to the home office just because one of the big things that law firms are dinged for is horrible customer service. And you can't be a subcontractor in the construction industry waiting weeks for your attorney to get back to you. It's just not something that you can run a successful business and do. And so I try to hone it in and we have 24 hour guaranteed turnaround time on any issues that you have, because we know how important that is.

Gordon Henry:

Okay. Now what does it cost for a typical subcontractor to use your services?

Karalynn Cromeens:

For a contract review is 750 bucks. We have a five business day turnaround. A contract creation for residential contractors is around $2,000. It's nice, first off, there's nobody else out there doing this at all. But it's nice to know that I'm giving you a five business day turnaround and here's the price and here's how it's going to work. And actually we've integrated with a software company called Job Tread, and you can buy our contracts on there and we'll put it in there for you. And it's really making it seamless, as much as possible for contractors.

Gordon Henry:

Yeah. Terrific. So on top of all of this fun stuff, I understand you have three daughters.

Karalynn Cromeens:

Yes, sir. My oldest is 18, I have a 16 and 12.

Gordon Henry:

Wow.

Karalynn Cromeens:

It's crazy. Goes by fast. Let me tell you, my oldest is in college and my middle's a junior in high school, its crazy.

Gordon Henry:

How do you have time for running a firm, writing books, three daughters. How do you have time for all this?

Karalynn Cromeens:

Just a little at a time. And I think it all works together. I'd be bored if I didn't do all these things. I always have projects going on and the main thing is always working on improving, getting better, making the business better, making myself better and all of the things, so always working on improving in growth.

Gordon Henry:

I'd like to make sure that subcontractors know how to get in touch with you because you do have so much valuable information to provide. The book, again, at least the latest is, Quit Getting Screwed. It's available where, I assume Amazon?

Karalynn Cromeens:

Amazon. Anywhere books are sold, but Amazon is usually where everybody gets it.

Gordon Henry:

Okay. And also your website is www.subcontractorinstitute.com. What is Subcontractor Institute?

Karalynn Cromeens:

Subcontractor Institute was actually a website that I started when I wrote the book, Quit Getting Screwed. And if you go on there, if you don't like to read, I teach the 20 chapters for free on there and have forms on there, free forms and everything, just because. Since that website launched, I've turned it into a non-profit, so that we can really get boots on the ground and get educational materials out there and be more active. We're still working on what that'll look like.

Gordon Henry:

That's terrific. And I saw you say there, visitors to the site can get any of the PDFs mentioned in the book for free as well. These are all these forms that they have to know about. That's all available on the site for free. They can also read your blog, right?

Karalynn Cromeens:

Yep. I have a great blog on all different topics for residential contractors, collections, all of the things, I have blog articles on the lien rights in all 50 states, so it's a great resource if you're in construction.

Gordon Henry:

And you can also find on the site... No, well, you can find on the site also the courses they can take. And then if they want to email you, I guess they can email you through there or just directly at Karalynn@thecromeenslawfirm.com. And why don't you spell it? Karalynn is...

Karalynn Cromeens:

K-A-R-A-L-Y-N-N.

Gordon Henry:

At?

Karalynn Cromeens:

The, T-H-E, Cromeens, which is C-R-O-M-E-E-N-S, Law Firm, L-A-W-F-I-R-M.com, absolutely.

Gordon Henry:

And then you're also on Instagram, LinkedIn and Facebook. What do you do there that's different?

Karalynn Cromeens:

I just put out some really good content and we have podcasts called, Quit Getting Screwed, where we interview people in the construction industry about having good bookkeepers and all of the things, mindset. We have a mindset coach on there. All of the different things to help you grow and run a better business.

Gordon Henry:

Yeah, that's awesome. What's next for Karalynn Cromeens? You're doing so much, what do you see as the next chapter?

Karalynn Cromeens:

Well, I'm really starting to develop the firm and to be more helpful and to reach contractors on all 50 states. I'm working on the third book, which will be called, Trust Your Gut, which will be the guide for residential contractors and what to put in your contract. I hope to publish that in early 2024.

Gordon Henry:

Man, you are a machine. Do you sleep?

Karalynn Cromeens:

Got to help, man, got to help. Yes, actually I go to bed relatively early at 8:30, but I do get up at 4:15, I'm one of those morning people.

Gordon Henry:

I knew there was a secret in there somewhere.

Karalynn Cromeens:

Absolutely.

Gordon Henry:

Well, Karalynn, I really want to thank you for coming on the show. This is just great stuff. Again, the book is, Quit Getting Screwed. You can find it on Amazon or go to subcontractorinstitute.com. And I just think you provide a very valuable resource to help subcontractors and probably all small business people could learn a little bit. You don't have to be a subcontractor. A lot of these lessons are applicable to anybody who's starting a small business, right?

Karalynn Cromeens:

Absolutely and the things you should watch out for.

Gordon Henry:

Yeah, 100%. Thanks for coming on the show, Karalynn, great to have you here.

Karalynn Cromeens:

Thank you so much for having me. I really enjoyed it.

Gordon Henry:

I want to also thank our producer, Tim Alleman and our coordinators, Diet Barnett and Daniel Huddleston. They do a great job. And if you enjoyed this podcast, tell your colleagues, friends and family to subscribe and please leave us a five star review. We'd really appreciate it. It helps us in the rankings. Until next time, make it a great week.

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