Need some advice.

Ok. So quick background on my situation. Back in July I get contacted by a builder doing a generator and wants an estimate for the electric. I give him an estimate and its approved, we sign a contract and get the paperwork in for the permits, and the homeowner orders the generator. I get a deposit and once the permit is back I start the work. Deposit was for roughly 40% of the job. This is where things go south. I've been 100% done with the project since July 31st, the builder failed his gas inspection and failed because the gen was too close to the house, this was on August 5th. On August 8th, I disconnect the electric to the gen so he can move the unit. At this point I tell the homeowner I will be back after everything is done and the plumbing is passed and hooked up, he said ok that's fine. So, up until 2 days ago I've been getting the run around from the builder. Turns out the homeowner sent him a letter on October 8th demanding his deposit back by 10/31 or he's gonna sue. He also hired new contractors to finish the job. I get a call today from the town telling me that the final inspection is tomorrow. WTF. They never did a contractor change. And finished the work under my name. How would u proceed