Avoid Remodeling Fraud During a Soft Economy

Soft Economy and Warm Weather Can Bring Out the Con Artists. Tips for Homeowners to Avoid Home Improvement Scams.

Des Plaines, IL, April 11, 2008 --(PR.com)-- May is National Home Improvement Month. During times of a softer economy paired with the approach or warmer weather, the National Association of the Remodeling Industry (NARI) wants to remind homeowners to beware of unscrupulous people posing as remodelers.

One common issue exploited homeowners have run into is having to pay both the contractor and the subcontractors. The homeowner’s financial obligations should only be to the contractor. Some dishonorable contractors are collecting large, upfront payments from residents. When the work has been completed, instead of paying the subcontractors, the dishonest business owner instead pays the interest on properties they have already purchased and can only re-sell below cost. This predictably leaves subcontractors without paychecks and forces them to establish mechanics’ or materialmens’ liens on their customers’ properties.

The subcontractors secure payment for their work, but this causes difficulties for homeowners, who then pay the same fee twice for one remodeling project. Since subcontractors have 90 days to file mechanics’ liens, it could take months for homeowners to realize that they have been defrauded. Residents should note that these types of liens will pay the subcontractors before the homeowners if occupants sell their properties.

To avoid these circumstances and ensure that you only pay the cost of a project once, NARI suggests you take the following steps:

Hire an experienced remodeler and not a fly-by-nighter waiting for the building industry to pick up again.

Contact state or local licensing agencies to ensure a contractor meets all requirements.

Check with your local NARI chapter, the government Consumer Affairs Office or the Better Business Bureau to ensure the absence of any adverse files on-record for the contractor.

Ask to see a copy of the contractor’s certification of insurance or for the name of his or her insurance agency to verify coverage. Most states require a contractor to carry worker’s compensation, property damage and personal liability insurance.

Verify that the contractor’s insurance coverage meets all the minimum requirements. If homeowners request estimates from several different contractors, they should confirm that they are bidding on the same scope and quality of work. Discuss any variations in bids and beware of any bid that is much lower than the others.

Draw up a contract before a remodeler begins work that includes the contractor’s name, address, and phone and license numbers, if applicable. It should also include details about what the contractor will and will not do.

The agreement should offer a detailed list of materials for the project, with information such as size, color, model, brand name and product. The contract should include approximate start and completion dates.

Study the design plans carefully. Before any work begins, the homeowners should insist both that they approve the plans and that the contractor identifies the design plans in the written contract.

Known as the “Right of Recision,” federal law requires a contractor to provide a homeowner with written notice of the resident’s right to, without penalty, cancel a contract within three business days of signing it, provided it was solicited at some place other than the contractor’s place of business or appropriate trade premises.

Verify that you share an understanding of financial terms with the contractor and that the contract explicitly states them. The total price, payment schedule and any cancellation penalty should be clear.

The contract should include a warranty covering materials and workmanship for a minimum of one year, and identify the warranty as either “full” or “limited.” The contract must identify the name and address of the party that will honor the warranty, namely the contractor, distributor or manufacturer. Homeowners should make sure the document specifies the time period for the warranty.

In the event of a disagreement, a binding arbitration clause is useful. Arbitration may enable the homeowner to resolve disputes without costly litigation.

Before signing a contract, completely review it and confirm that you comprehend it. Consider the scope of the project and verify that the contract includes all requested items. If the agreement lacks mention of a specific, discussed item, consider it excluded. Never sign an incomplete contract, and always keep a copy of the final document for review.

Homeowners can depend on NARI

NARI reminds all homeowners that its members must adhere to a strict code of ethics and that there are grievance procedures in place for members who do not. Under the NARI code of ethics, members pledge to always provide quality service and work and follow the high ethical standards of the association, to only promote products and services that are functionally and economically sound, and consistent with objective standards of health and safety, that any advertising or sales promotions will be factually accurate, and any agreements or warranties will be fair and mutually beneficial to all parties concerned.

NARI members also agree to honor all contractual obligations, until and unless all contractual parties involved alter or dissolve them. They also will promptly acknowledge and act on any customer complaints, and refrain from any act intended to restrain trade or suppress competition.

National Association of the Remodeling Industry
Nikki Golden