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Beware of Construction Scams
In my years in the construction industry I have witnesses my fair share of negligence and unethical behavior but nothing came close to what…
In my years in the construction industry I have witnesses my fair share of negligence and unethical behavior but nothing came close to what I have witnessed recently working as a consultant for an Utah Solar contractor entering the home improvement space. Lucky for me I was able to see what was happening and got out before I found myself in the position of the numerous subcontractors and vendors that are out 10’s of thousands of dollars each or the home owners who have been scammed out of their money, mostly through loans procured on their behalf.
After I realized that I had been being played myself by this contractor I contacted a private investigation firm to help me recover the money I was owed. In the background investigation it was revealed that the key members of the company has a lengthy criminal history both with jail time and numerous liens and judgements each. Furthermore their companies were all tangled up in DBA’s and shell corporations with license holders and spouses that were listed and not active in the actual day to day operations. What was shocking about this to me was that these guys were able to obtain a contractors license and were working with a finance company that they were using to defraud numerous homeowners by way of taking home improvement loans out for work they were unable to complete.
Something that I realized about this type of criminal mind is that they either just don’t care about the people they are taking advantage of or have lied to themselves to justify their actions. For 3 weeks while I worked 16 hour days trying to unravel the mess they had created I truly believed they were good people with bad business sense. I too was in the trance of a con artist.
I am compelled here today to write out my experience and my lessons so that others can learn from this and protect themselves from these types of characters. Trust no one as my private investigator reminded me. There are many things I have identified that could have been done by both the subcontractors and Vendors as well as the home owners to have protected themselves from the situation they currently find themselves in.
All subcontractors and vendors have 20 days from when they start a job for a contractor to place a pre lien on a project. This notifies the homeowner that there is materials and labor on their project that needs to be paid by the contractor. Homeowners have the ability to write joint checks to the subcontractors and vendors to make sure they are satisfying 3rd party debts and should receive from their contractor a release upon payment from all subcontractors and vendors who have filed pre-liens on their project. I still had my rights to file pre liens on all the projects I worked on since I had a signed contract with and had documented my work. Many of the subcontractors and vendors I was working with did not do their due diligence and will struggle to recover their money. The home owners that will be receiving liens from my work will be obligated to pay even though they had already paid for the services to the contractor.
I was shocked by the predatory lending practices I witnessed. In my decades of general contracting I never experienced a finance company like the one with this contractor. Funds control is usually required by a finance company when money is lended for construction. This is a standard practice to make sure that the work contracted is completed before payment is released to the contractor. If your lending company is not requiring this I would recommend hiring a 3rd party funds control or construction manager to help in this process. From a construction management position I use the power of the purse to make sure that the quality and completion of each trade is complete before a payment is released to any contractor on a project.
Edit 3/27/23 — I found out since writing this that some clients were asked to lie to the finance company to say that the work had been completed so the contractor could get a deposit at which time the contractor would draw down the entire amount of the loan. This is just illegal and everyone in this situation needs to take responsibility for perpetuating these crimes. Con artists are playing the confidence game and are skilled at getting your trust. After this experience I must say trust no one and do your due diligence, especially when someone asks you to commit fraud!
Payment and Performance Bonds
When researching the State of Utah’s code there is a specific provision that all projects over $50,000 the homeowner has the right to require from the contractor a payment and performance bond for the project. This is a cost that the contractor can charge the homeowner for and protects the homeowner from liens to their property by making sure there is insurance in place to pay for repairing poor workmanship and ensuring that the subs and vendors are paid. Even though this mandatory clause was in the contracts written between the contractor and homeowners not one of them had asked for the contractor to secure this insurance.
Review your contracts
Upon a more in depth review of the contracts signed by the homeowners many red flags came up for me. Specifically when it came to the scope of work in the contract. Homeowners were promised verbally a home improvement for $100,000 + and signed a solar only contract for the amount. The solar they would require for the project would only cost around $35,000 so essentially they were signing a contract for a really expensive solar installation and nothing else. When there was actually a scope of work for home improvements it was so vague that it didn’t even describe what the work to performed would entail. Instead of quantifying what the homeowner would receive in a true scope of work it would say Bathroom Remodel $10,000 with no other description. The contract is your bible in construction and the contact documents are the only thing you have to guarantee the work agreed is the work that will be performed for the price specified.
If it smells bad it likely is
In other situations the company would install panels on roofs, take a picture to receive the financing and then remove the panels. I was shocked that the homeowners would go along with this type of fraudulent behavior. Many that I talked to were suspect but it is our human nature to want to trust people. It is the con artists game to play on trust.
Hire a Construction Manager
No one expects a homeowner to be familiar with all the ends and outs of construction and the local laws but many homeowners embark on this journey without proper support. A construction manager is a common practice in commercial contracting as larger companies rely on the knowledge and professionalism that construction managers provide. There are laws and procedures to protect the homeowner but they need to be deployed properly so that it is effective. Furthermore it is a large undertaking and worthy of a role in your construction team. The construction manager is hired by the client to oversee all the construction process from design through completion making sure the client is protected.
I have officially launched my new project Carley M Design Studio to offer design and construction management for homeowners. I bring decades of construction experience from commercial, public works and residential construction to support homeowners on an otherwise risky journey through construction. I also have identified the emotional toll that having your personal space ripped apart and do everything I can to support the client in this journey. I am available for consultations for design, construction management and construction claims management.
Please visit my website for more information and to schedule a consultation www.carleymontgomery.com