A Competitor Fails and Their Customers Start Calling
Why this matters
A shop in your market closes and your phone starts ringing with their customers. It reads as a windfall and it is partly one, but the calls arrive carrying obligations that belong to somebody else, and the specific danger is that you can pick those obligations up without ever agreeing to them. A warranty you did not write, a deposit you never received, a half-finished installation with somebody else's permit on it, and a customer whose idea of what this work costs was set by a shop that could not survive charging it. Handled well this is a genuine intake of good customers. Handled by reflex it is a season of unpaid callbacks.
This article is not legal advice about your situation. One place below is worth a call to your own attorney, and it is named where it arises.
What is actually being offered
Some of these customers chose the failed shop on price, so they will compare you to a number that was never viable. Some chose it on relationship, because they liked the owner, and those are excellent customers who are currently unhappy about something that is nobody's fault. And some are calling because they have a problem right now, which makes them the easiest to win and the most likely to be a poor fit.
The second thing on offer is equipment installed by people whose work you cannot verify. You inherit whatever was done to it, and you inherit it in the customer's eyes regardless of who did it, because you are the shop that touched it last.
The warranty you did not write
Start from the position and hold it: you owe nothing on another company's warranty unless you take it on. There is no mechanism by which a competitor's failure transfers their labour obligations to you.
Two coverages have to be separated, and getting the separation right is what lets you give the customer real help without taking on the liability.
The manufacturer's parts warranty usually runs with the equipment, not with the installer. It is typically parts only rather than parts and labour, it commonly requires registration within a stated window after installation, and some manufacturers condition it on installation by a licensed contractor - which is a live question when the failed shop's licence status is part of why it failed. The remaining term runs from the installation date, so the document to ask the customer for is the original invoice.
The labour warranty was the failed shop's, and it died with the shop. If the failed business is in a bankruptcy proceeding, an unperformed labour warranty is a claim in that case, not an obligation of yours.
The exposure is not that you will be forced to honour something. It is that you will assume it by implication: you go out, you fix it, you discuss the bill afterwards, and the customer reasonably concludes from the sequence that you were standing behind the original work. Whether a statement or a course of conduct created an enforceable obligation is a state contract-law question and one for your attorney. What you can bank without asking anyone is the operational fact: the split between what the manufacturer may cover and what you are charging for goes in writing, on your own estimate, signed, before the van moves.
The deposit you did not take
Customers who paid a deposit on work that never started will ask you to credit it, sometimes indirectly, usually because they genuinely do not know where else to turn. The answer is no, and the kindness is in saying it in the first call rather than the third.
That money is a claim against the failed business. Where a bankruptcy case is filed, a consumer who prepaid for goods or services never delivered has a priority claim under 11 U.S.C. 507(a)(7), capped at an amount that is adjusted for inflation every three years under 11 U.S.C. 104, and the customer files a proof of claim in that case. Where no bankruptcy is filed, it is an ordinary civil claim, and in many states the practical route is a contractor recovery fund or a claim against the licence bond, both of which exist only if the shop was licensed and bonded and both of which vary by state in coverage, caps and deadlines. Point the customer at their state licensing board's complaint process and at the bankruptcy notice if one has been mailed, and stop there - working out which route applies is their lawyer's job, not yours.
What you can do is address the fear underneath the ask, which is that they will be out twice. Offer a payment schedule tied to milestones rather than a large deposit up front: a smaller sum at scheduling, a payment when material is delivered to their property, the balance at commissioning. That costs you working capital and it removes the objection honestly, rather than by absorbing somebody else's loss.
The half-finished job, and the permit that does not come with it
Before anything else, treat an abandoned installation as live and untested. Nobody knows what was energized, pressurised, charged or capped, and the person who would know has gone. De-energize at the source and prove the circuits dead with a meter checked on a known live source before and after, per NFPA 70E-2021, 120.5, with work practices at 29 CFR 1910.333(b)(2); that work is for a qualified person, and if nobody on site is qualified it goes to an electrician. Assume no gas connection has been pressure-tested or properly capped until you have tested it yourself under the fuel gas code your authority having jurisdiction has adopted - the authority having jurisdiction, or AHJ, being the building department or inspector who enforces the adopted code in that town. Do not open, energize or pressurise anything to see what happens.
Then the paperwork, which is where the real cost is. The permit was issued to the failed shop's licence, and most jurisdictions will not transfer a permit between contractors. You apply for your own, and the moment you do, your licence is attached to the whole installation, including the rough-in you did not do and cannot see. An inspector signing off is signing off on your work.
So the sequence is: call the AHJ before you quote, not after. Ask what they require to take over the job, whether any inspection was passed under the old permit, and whether they will accept a scope letter limiting what you are certifying. Then price the verification as its own line - opening up, testing and documenting what is already there - separately from the completion work, and state in writing what you are and are not certifying. Some of these jobs are worth taking. The ones that are not are the ones where the concealed work cannot be verified without demolition, and that is a conversation to have with the customer before the quote, not during the job. See related: Reading the Prior Work, Good or Bad, and What to Do When You Find Someone Else's Unpermitted Work.
Three calls in one week
Call one: a fourteen-month-old installation, a failed component, and a customer who expects it covered. The equipment is inside the manufacturer's parts term. The shop asked for the original invoice, confirmed the installation date, and told the customer on the phone: the part is likely covered by the manufacturer and we will handle that claim; the labour is not covered by anyone and here is what it costs. Both halves went on a signed estimate before the van moved. The customer accepted, and they are now a customer. The version of this that goes wrong is the one where the technician fixes it first because it is a small job and raises the bill afterwards.
Call two: a deposit of roughly 40 percent paid on an install that never started. The shop said in the first call that it could not credit another company's deposit, gave them the state board's complaint page and told them to watch for a bankruptcy notice, and then offered a milestone payment schedule on its own quote. The customer took two weeks and came back. The version that goes wrong is the sympathetic half-answer - "let us see what we can do" - which the customer hears as yes and which has to be walked back at the worst moment.
Call three: an installation with the rough-in done, equipment sitting on the floor, and a permit in the failed shop's name. The shop treated it as live, proved the circuits dead before opening anything, and called the building department before quoting. The department would not transfer the permit and would not accept a partial inspection done under the old one. That turned a finish-the-job quote into a verify-then-finish quote: a separate line for opening, testing and documenting the existing rough-in, and a written scope naming what was inspected and what was not. The customer was told the reason plainly - my licence goes on all of it, so I have to see all of it. They accepted. If they had not, declining was the right answer, and the reason to make that call early is that it is far cheaper before a van has been there twice.
The intake screen
Five questions, asked by whoever answers the phone, before anything is scheduled. They take a minute and they sort the population above.
- Is there work in progress, or is this a new request? Work in progress routes to the section above and does not get a same-day slot.
- Did you pay a deposit or hold a warranty with them? Answer it on the call, not at the door.
- Who installed the equipment, and roughly when? This is how you find out whether you are inheriting work of unknown quality.
- Is a permit open on the job? If they do not know, that is an answer, and it means the AHJ call happens before the quote.
- What were you expecting this to cost? Asked neutrally, it surfaces the anchor before you have invested a visit in it.
The point of screening at the phone is that the expensive version of every problem in this article begins with a technician standing in a house discovering it.
The price conversation, and who set the anchor
Some of these customers hold a reference price from a shop that was not covering its own costs, and that number does not die with the shop - the mechanism is derived in a sibling card, see related: Competing Against a Shop That Does Not Know Its Own Costs.
Two rules for the conversation. Do not explain your costs; customers do not buy an explanation of your overhead and it sounds like a complaint. State what is included, what happens afterwards, and what the warranty is, and let the comparison be about the job rather than about the two companies.
And do not disparage the failed shop, at all, for three reasons that are all practical. Some of these customers liked that owner and are not looking for confirmation that they chose badly. Some of them will repeat what you said. And a shop that tells customers how bad the last one was is inviting them to make the same call about you when something goes wrong.
The line that does the work is short and unloaded: "I do not know what happened there and I would not want to guess. Here is how I do it, and here is what you get in writing."
Whether to go after their base at all
Yes, and as a capability notice rather than a chase. Their customers have a real problem: nobody is servicing their equipment and they do not know who to call.
What works is quiet and specific. Tell your own customers you have capacity, because they are connected to the failed shop's customers and referral is how most of this moves anyway. Update the service page for your area so a search finds you. Tell your supply houses, your referral trades and the property managers you work with that you can take on orphaned equipment.
What does damage is outreach that reads as opportunism: a mailing to the failed shop's customer list, if you could even obtain it lawfully, or a campaign timed to the closure announcement. Buying that list is a separate transaction with its own consent problems and is not the same thing as answering people who call you.
References
- See related: Competing Against a Shop That Does Not Know Its Own Costs, Reading the Prior Work, Good or Bad
- See related: What to Do When You Find Someone Else's Unpermitted Work, What Happens to Your Warranty When Someone Else Touches It
- 11 U.S.C. 507(a)(7) consumer deposit priority, with dollar caps adjusted under 11 U.S.C. 104; state contractor licensing boards and recovery fund or bond claim procedures
- NFPA 70E-2021, 120.5 verification of an electrically safe work condition; 29 CFR 1910.333(b)(2) work practices for qualified persons