Never Buy Home Repairs from Door-to-Door
Many low income and elderly Americans are targeted by scam artists who use high pressure tactics to sell unneeded and overpriced contracts for "home improvements." Often they charge more than their customers are led to believe. And then, when the consumer refuses to pay for shoddy or incomplete work, the contractor or its closely affiliated financial institution, attempts to force payment by placing a lien on the consumer's home and making threats.
How Consumers Can Protect Themselves
There are several basic steps one can take which can prevent a problem from arising:
- Never deal with any door to door contractors or buy repairs advertised on TV. Deal with local trades people recommended by friends or reputable building supply stores.
- Before agreeing to hire any home improvement contractor, get at least a second estimate for the same work from another contractor.
- Get a written contract or estimate describing the work, the price, the responsibility for cleaning up, the price, and the hourly rate for any added work.
- Get references for the contractor and speak to those references. Ask about satisfaction and any problems that arose.
- Take a look at other work performed by the same contractor.
If problems have developed with a contractor's work, you should immediately take steps to protect your interests, such as:
- Obtain an estimate from a professional detailing how much damage was done by the contractor and the value of whatever services were rendered.
- Take detailed pictures of the work or damage left by the contractor and date them. These photos can be used in court to show the nature and extent of the problem.
- Hire an expert (architect, reputable contractor, etc.) to look at the work for quality and compliance with specifications. The expert can also provide an estimate regarding the fairness of the price for work completed, the extent of physical damage, and its cost to repair.
Deceptive Sales Tactics
Home improvement contractors use several methods of targeting consumers: with phone calls, flyers, advertisements, and door-to-door sales. Often, they use "bait and switch" tactics, offering low prices for installed items like windows, home siding, and swimming pools, then telling the consumer the item is out of stock and can only be replaced with a high-priced substitute. Or the contractor may claim the item is more expensive than advertised because it has to be custom made to fit the consumer's home.
They may misrepresent that the repair is specially priced because the home is selected to model the repair. Energy savings, health benefits, and value added to the home are often misrepresented.
Such contractors are prepared when a customer objects and often resist when a customer tries to cancel a contract. One frequent tactic is to misrepresent to the customer that the deal can't be canceled because certain items already have been ordered or custom made for the job.
Another ploy is to use more than one contract for a single repair in order to confuse the home owner. There is a "cash" contract that doesn't contain financing terms, although the deal is intended to be financed. A consumer should be alerted if the salesperson promises or offers financing, credit terms, or mentions payment amounts.
At other times consumers will be presented at the outset with an installment contract. Attention should be paid to the price terms discussed. Deceptive contractors often put higher prices in the contract than discussed with the consumer, or add extra hidden charges. Frequently contractors do not allow an opportunity or sufficient time for the consumer to read the contract. The work required by the contract should be clearly readable and should contain explicit specifications, standards, and brands, so that the consumer knows exactly what work the contractor is promising to perform.
Complaints About Shoddy Work
The most frequent complaint about home improvement contractors is of overpriced and shoddy work and for jobs left unfinished after the contractor is fully paid. The terms of home improvement contracts should not require complete payment until after a project is finished. In such cases a consumer should not pay the final installment until the work is satisfactorily completed. But there are ways some contractors try to avoid this requirement.
Consumers are often asked by unscrupulous contractors to sign a document certifying completion before the contractor has completed the work or when the work is unsatisfactory. Sometimes this paper is hidden among other papers, and other times the contractor claims that he needs the signature for some other purpose. Such misrepresentation can be grounds for legal action and may provide the consumer with a defense against any creditor who tries to collect payment for the contract
If a bank or finance company writes a check for payment for the work, the check should be payable to the order of the contractor and the consumer jointly. consumers should never indorse the check over to the contractor before satisfactory completion of all the work.
Consumers should be aware of other factors regarding workmanship. These include: 1) Whether the contractor obtained all the necessary building permits. 2) Whether the contractor's work complies with state and local building codes. 3) Whether the contractor violated any norms of the building trade. The local building inspector should be called as soon as there is any question about this. Where such practices were involved, consumers will have a stronger basis on which to challenge the contract.
LIENS: When a Consumer's Home May Be at Stake
Consumer’s should be aware of the fact that, when they sign a home improvement contract, the contract itself may grant a lien on their home to the contractor, bank or finance company.
Even where the contract doesn't give a lien, the law generally gives the contractor a right to put a lien against the property. The most common of these liens is called a "mechanic's" lien. When a lien is placed on a consumer's home it can prevent the property's sale and may result in a foreclosure.
If the consumer refuses to pay because of a dispute regarding the contractor's work, either the contractor or the lender will probably rely on the lien to try to force the consumer to pay, and may even try to foreclose.
If a lien or a foreclosure is involved, the consumer's best recourse is to consult a lawyer who can carefully examine the state's lien laws. Such laws are often complex, but their very technical requirements may offer some form of relief for consumers if the contractor failed to comply with the law.
Warranties and Unfair Practices
Just because a contractor disclaims responsibility for shoddy work doesn't mean he can get off the hook without liability. A contractor who makes any kind of representations, promises, descriptions or guarantees, either in writing or orally, cannot avoid them. These are called "warranties." The terms of the contract specifying the work to be done are important and should be closely examined to see whether they contain any provisions that promise a standard of performance, materials or products, specifications, or a guarantee.
Oral promises are just as binding, though they may be harder to prove. Witnesses who were present and heard the discussions would help to prove oral promises. Any of the above may give the consumer a claim for the contractor's breach of warranty.
Even when a contractor does not make any oral or written guarantees regarding work quality, most states recognize the existence of an implied warranty. Generally, there is an implied agreement (warranty) by law that the contractor will complete all work according to the standards of the trade, or in a "workmanlike" manner. Part of this standard generally includes the requirement that all work must comply with applicable building codes. Failure to meet these standards could be grounds for the consumer to refuse to pay the entire amount.
A contractor who has lied about the true nature, benefits or cost of a proposed job during the sales pitch, tricked a consumer into signing a completion certificate or signing over the loan check before completion, or lied about cancellation rights may have violated the state's unfair and deceptive acts and practices statute
If this is the case, the consumer would have a claim against the contractor or a defense if the contractor is suing the consumer. It is important for a lawyer to determine whether there are any violations of the state's deceptive trade practices law. An increasing number of lawyers will handle these cases with no up front fee, collecting their fee from the creditor and as a percent of the consumer's recovery.
Third Party Lenders
Often the contractor arranges for the consumer to get a loan through a finance company or a bank. Problems with the lender can then arise if the contractor does shoddy or incomplete work, because the lender will claim that the consumer owes the full amount he or she promised to pay for the work. In most cases, especially where the contractor has arranged for the loan, the FTC Holder Rule will make any subsequent party holding the contract (i.e. the lender) liable for all claims and defenses the consumer may have against the contractor.
Sometimes the connections between the contractor and the lender are more apparent than in other cases. Things to look for include:
(1) Whether there has been an ongoing relationship between the contractor and the lender; (2) The frequency with which this lender finances this contractor's work; (3) Documents by one party containing the other party's name preprinted into them; (4) Knowledge by the lender of previous problems with this contractor's work for other customers; (5) Commissions or kickbacks from one party to the other; (6) Ownership of one party by the other.
The Consumer's Ability to Cancel a Contract by Giving WRITTEN Notice
The federal government and most states have passed laws designed to protect consumers from unscrupulous door-to-door salespeople. These laws may allow a consumer to cancel a contract within a certain amount of time (usually 3 business days) after a sale in the consumer's home by giving written notice to the contractor or lender.
These laws usually require that a written notice of these rights and a form for canceling be given to the consumer at the time of sale. If the notice is not given, or not given properly, the time to cancel may continue until 3 days after a proper notice has been given. Thus, the consumer's opportunity to cancel may remain open. It is important for a lawyer to determine, at the earliest possible time, whether the consumer still has a right to cancel the contract.
In addition, the federal Truth In Lending Act often provides a consumer the right to cancel a home improvement contract and prevent a lien from being placed on the home. This law also requires a very accurate disclosure of credit terms to the consumer and requires the contractor to provide the consumer with a notice of the consumer's right to cancel the contract within 3 business days.
This right also remains open beyond the three days (but only up to three years) if there is a defect in the disclosures, the notice or if the notice is not given. It is extremely important to consult a lawyer in these cases because, if the contractor violated the law, the consumer may be able to void the lien on the home (such as a second mortgage), prevent a foreclosure, and reduce the amount, if any, that the consumer owes the contractor or lender for the work. The consumer may even be entitled to recover money from the contractor or lender as damages.
What To Do When a Dispute Arises
A consumer victimized by an unscrupulous contractor should consult an attorney immediately. An attorney may be able to help by finding defenses against any lawsuit brought by the contractor or lender and possibly by finding claims that the consumer has for damages suffered as the result of the contractor's conduct.
References for Consumers
Sylvia Porter, New Money Book for the 80's (1979) Doubleday & Co., Garden City NY. 283-292.
McCleary, E. "How to Avoid Home-Repair Rip-Offs," Consumers Digest Vol. 32 (March/April 1993) pp. 30-32.
Lyons, P. "Home-Repair Rip-Offs: How to Avoid Them," Ladies Home Journal Vol. 109 (Oct. 1992) p. 85.