A common type of construction fraud is when contractors start a job but don't finish, making off with deposits.
You hire a contractor to finish your basement, or build that addition you’ve
been saving for. The work progresses smoothly, until the contractor fails to
return to finish the job.
It’s an all-too-common situation for many homeowners – construction fraud. Whether it is failure to complete work, presenting a false name and information, or falsely posing as a licensed contractor, this type of fraud can frustrate homeowners and leave them feeling helpless.
“There are a fairly good amount of complaints – in the hundreds (each year), but not all are cases of fraud,” said John Palangio, director of the state attorney general’s consumer protection unit.
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According to the attorney general’s office, the consumer protection unit received almost 20,000 calls for a variety of complaints in 2003.
“Some are contractor disputes,” said Palangio. “We are seeing a rise in what we call the bad cases, and these often happen to the elderly, where contractors get a down payment and don’t do any work at all.”
The state Contractors’ Registration Law requires all contractors to register with a Contractors’ Registration Board, under the state Department of Administration. The law provides protection for both the homeowner and honest contractors, in the case of a dispute or breach of contract.
According to Joseph Marran, special assistant attorney general and a legal liaison to the board, the economy plays a large roll in scams in the construction industry.
“It’s all tied to the overall economy – people are robbing Peter to pay Paul,” he said.
Marran said that in the past year alone, the number of claims under the law has doubled from 25 to 50, but it might be because the public is simply becoming more aware of the law.
“There are bad guys who have been out there for years,” Palangio said. “They’ve been unregistered or suspended, and they know how to manipulate the system. Most of these are bad guys with criminal records.”
Finding a good contractor is difficult because the good ones are usually always busy, officials said, and a bad contractor might sell himself well, but homeowners need to do their homework before hiring one, even for a small home improvement project.
“When you’re interviewing a contractor, if they want excess deposits,” consumers beware, said Roger Warren, executive director of the Rhode Island Builders Association. “A reasonable deposit is one thing, but if they want you to pay in advance, your antennae should go up.”
Always check the contractor’s references, Warren said. The best way to do that is by obtaining contact information for the last three jobs he did and talking to them about the work. Research the contractor. By law, each one is required to give a customer his registration number.
Go to the Contractors’ Registration Board Web site, www.crb.state.ri.us, which contains information on all registered and unregistered contractors, including whether their registration and insurance are current, and if the contractor has ever been prosecuted by the board.
In Rhode Island, registration with the board is in lieu of having a contractor’s license, although contractors registered with the board can say they are licensed contractors, Warren said.
Marran said he foresees the state instituting a licensing law in the near future.
“There is no test, no experience (required). Anyone can become a contractor,” he said. “Five years from now, I see a licensing law in Rhode Island that would require testing, and background and financial checks.”
Warren also encouraged homeowners to find out if their contractor is a member of a local or state industry association.
“Most professionals gravitate toward professional organizations,” he said.
Most of the cases of construction fraud are so blatant that they make the news, and those are the incidences that people most remember, Warren said, but sometimes contractors or carpenters can make honest mistakes, albeit bad business practices, that leave the homeowner in the lurch.
Sometimes contractors spread themselves too thin financially, he said.
“A contractor might have a couple of jobs going, and he’s buying materials based on me paying him for my job, so that he can do your job, but if I don’t pay him,” the job might not get finished. “Most of the time, contractors can get out of it; I’ve heard the stories. Most of them are legitimate people.”
Homeowners who fall victim to fraudulent contractors should contact an enforcement agency – their local police department, the attorney general’s consumer protection unit or the Contractors’ Registration Board, to file a complaint.
The claim must be filed within one year of completion of the work or closing on the home. The board hires someone to investigate and resolve it out of court if possible. If not, the board takes it up and renders an order to the guilty party to honor the contract, Marran said. If the party still does not respond, the incident is considered a misdemeanor and the attorney general will prosecute – but even that is sometimes difficult.
“We can’t put someone in jail for being poor” because a contractor can’t pay restitution, he said.
