Home repair & improvement scams

For many consumers, the process of remodeling or repairing a portion of their home is one of the largest financial commitments they make. The information provided below can help you avoid many of the problems consumers face when having this work performed. Use it as a guide when choosing a contractor and be aware of what should and should not be included in contracts.

Selecting a contractor

  • Deal only with reputable, established firms. Ask friends and neighbors for recommendations.
  • Get written estimates from at least three different contractors. Make sure all costs are covered in the estimate including the down payment, finance charges, building permit fees, installation costs and all materials.
  • Request names of past customers and contact them to find out if they were satisfied.
  • Never select a contractor who has not come to your home to assess the job.
  • Ask questions about what methods or material will be used, when work will begin, how long before the job is completed and what method of payment is required.
  • Insist on getting a written, detailed contract.
  • Don't let a persuasive seller push you into signing a contract on the spot until you have received several estimates and are completely sure of the contract terms.
  • You may be asked to sign documents other than the contract. Read these papers thoroughly so you know exactly what you are signing.

The contract

Most disputes involving consumers and contractors result from differences in expectations. These could be avoided if contracts were in writing and specifically detailed the rights and obligations of each of the parties. Contracts should include the following:

  1. The name, address, license number, and phone number of the contractor;
  2. Your name, address, and phone number;
  3. A clear statement of the total cost and terms of payment for materials and labor. Consumers should be very wary of making sizable deposits or advance payments to the contractor. It is advisable to set up a payment schedule based upon the percentage of work completed, with final payment made only after all work has been fully completed to your satisfaction;
  4. A complete description of the work to be done;
  5. Specifications to the type of materials to be used, including size, weight, quantity, and color of each material;
  6. A provision requiring your written approval for any changes in the agreed-to plan and specifications;
  7. A requirement that the contractor obtain workmen's compensation and public liability insurance so that you are protected in case of injury to the contractor's employees or to private citizens;
  8. A requirement that the contractor obtain all appropriate building and zoning permits;
  9. The starting date and approximate completion date;
  10. A statement as to who is responsible for cleaning up the premises after the work is completed;
  11. A satisfactory warranty provision and a guarantee on the materials used. Consumer should recognize that the guarantee or warranty is only as good as the company who gives it;
  12. A statement identifying subcontractors and material supplied;
  13. A pledge that materials be free of all liens by suppliers; and
  14. Signatures of both parties, BUT before signing the contract, make sure you understand it and make sure all blanks are filled in. Don't rely on oral agreements. They cannot be guaranteed unless they are made in writing and signed by both you and the contractor.

In addition to the contract, obtain copies of all documents involved in the transaction, such as a retail installment agreement or warranty. And finally, do not sign a contract which waives your legal rights.

Canceling the contract

Generally, contracts CANNOT be canceled!

EXCEPTIONS — you have three business days to cancel contracts which result from a home solicitation (door-to-door) sale of $25 or more and/or which result in a lien against the home unless the work is done on an emergency basis. If you wish to cancel such contracts, send a WRITTEN notice of cancellation within three days to the business.

Do not confuse rights you may have to cancel a mortgage loan on your house with your contractual obligation to the contractor. You may be able to cancel the loan but still be legally obligated to pay the contractor some amount of money.

Lien waiver

A lien waiver is a form of receipt which prevents a contractor or subcontractor from collecting money from you twice for the same job. Often when you contract to remodel a part of your home, the job may be sub-contracted to another firm or may require special laborers. As you pay the contractor for the job, he in turn is supposed to pay these laborers. If he fails to pay them, each laborer or materials supplier is entitled to collect payment from you unless a lien waiver was signed by the subcontractor. If not, the subcontractor may have the right to place a lien on your property.

Also beware of the contractor who asks you for advance payments for materials. Require him to provide you with a lien waver from the place where he gets the materials. The lien waiver is proof that all materials and labor used in subcontracting arrangements have been paid for.

The payment

You should not pay the full amount due on the contract before the work has been completed. Try to limit the amount of progress payments to no more than the value of the work already finished. Never sign a completion of work statement before the job is completed to your satisfaction and officially inspected by the appropriate government agency. Find out if the subcontractors have been paid before you pay the final amount due to the contractor. You may want to pay the subcontractors directly and deduct this amount. Remember, if they are not paid, they can take a lien against your property, even if you have paid the full amount to the contractor.

If you have a complaint

If you are dissatisfied with the work performed, first attempt to resolve the problem with the contractor. Allow him time to correct problems and repair defects. If the contractor does not make the corrections to your satisfaction, contact the Attorney General's Office.