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We've Got This Contractor . . .

Posted by Kerry Hagan | Dec 11, 2023 | 0 Comments

Here's what I say . . . You just don't know. So you've got to take steps to protect yourself.

Certain bad situations seem to bring the biggest charlatans, cheats, and swindlers into contact with you. For example, after Hurricane Harvey, people claiming to be contractors descended on whole cities, neighborhoods, and the people living in them. They were like so many swarms of devouring locusts, insatiable grasshoppers, or ever-hungry turkey vultures, feeding off the unfortunate folks that tragedy had run over like a Mack truck. That certainly happened during Harvey — people whose homes had flooded were displaced with their children in tow — and they were desperate to restore some sense of normalcy in their life. They were easy picking and lots of them fell victim to "contractors." It was easy to see that the "job" of the front-man was to seek out needy people, walk & talk slick and informed, write up a proposal form with white, pink, and yellow carbon sheets, collect money to "secure their availability” given the high demand for their expertise, and promise that workers would appear. I saw it. I know first-hand how it works.

If appearance did occur, it wasn't for long; and with no plans and specifications to define the scope of work, the work ended up being crappy and non-conforming to any expected standards. It doesn't always have to be a tragedy that brings out and births these shakedown schemes. The rip-off can happen in a more ordinary context, with the victims walking right up into my conference room. Like this:

Husband and Wife come in and after just four words I knew the entire story. They said, "we've got this contractor" and I stopped them, like I usually do. I then told them their own story:

You wanted some remodeling done on your house or lake house and he / they gave you a bid. They needed some money for “materials” and to “get started,” right? So, you paid them like they asked. After that you gave 'em a "draw" for some partial work? They then said they needed more money for materials, and you gave it to them? Maybe they needed another draw to get it done? Then they stopped showing up? Won't answer the phone? The job isn't complete? The materials aren't at your house, and if they ever made it to your place, they've now vanished into thin air? Maybe they “bought” some other items and left you with an unpaid bill at the lumber yard?

It's at this point that they ask me if I actually know their contractor. I tell them, "yea I know him — I've met him dozens of times, and every time he looks exactly the same — like a wolf in contractor's clothing.

Here's the straight skinny. I'm not saying all people claiming to be contractors are thieves, swindlers, and cheats. But based on my admittedly non-scientific survey of them, a bunch of them dang sure are. Even though I know it's obviously irrational, it just seems to me that way too many  of them are crooked and bent. But let's leave aside the issue of the prevalence of bad contractors in comparison to the good ones. And let's talk about how you can protect YOURSELF, so you never end up in my waiting room, like a starfish laying on the beach in the sun — mumbling sadly, "we've got this contractor."

My first question is always the same, "do you have a written contract?" If the answer is "yes" I'm encouraged. Now, you need to know the "big boys" have what's called a "performance bond,” under which a real insurance company pledges to stand behind the contractor and make sure the contract is fully performed, properly, in accordance with contract plans and specifications. Contractors working for governments, churches, or those building big installations usually ALWAYS  have performance bonds to protect the OWNER (that's YOU.) The bond price gets figured into the price of the entire deal, and in my experience of having sued contractors and bonding companies, the owner always ends up getting protected when there's contract documents and a bond. I've never seen a regular person who had a bonded contractor, however. But still, it needs to be said: contract + bond = best situation. It's the gold standard!

Ok, let's get back to my conference room and the usual presenting situation . . . the contractor has gotten ahead of the owner and they owe work performance that has not occurred. I even had one couple in the last few months sadly tell me the contractor convinced them to let him go to the bank with them — so he could get the cash right as it came out of the teller's hands. What a Turkey Buzzard — like I said earlier! I tell them I can file suit, but there are two problems. The first is my fee; I can't do it for free. It's usually good money after bad I tell them. The second issue is what you've got at the end of the lawsuit road. You see, when you get a recovery in a lawsuit it gets put in a written form that outlines what the winner gets. In legal language it's called a “judgment.” I call this paper a hunting license because that's what it is. You can hunt and search for assets to glom on to but irresponsible contractors all know how to rip off people and make sure their own assets are not subject to seizure. They don't own; they RENT. They don't have accounts with E-trade, Fidelity, or MorganStanley; they deal in CASH. They don't have stocks, bonds, or mutual funds; the stuff they want to actually “keep” is titled and held in THE NAME OF OTHERS. There is a fancy word that describes their “assets.” The term is "ephemeral". It means illusory, fleeting, transitory, or vanishing. In the world of rip-off contracting, it means, "ain't nothing here to get" — in the event you persevere and actually get yourself a hunting license! You know the old saying, you can't squeeze blood out of a turnip? Well here's what I say: you can't squeeze money out of a contractor with ephemeral assets.

So, what do you do? Where does protection lie? Here you go . . . in my perceived order of preference:

  • Spend some money - get a proper written contract.
  • You could get a bond or put money into escrow in a lawyer's trust account (under the right circumstances.)
  • Pay the contract price only upon 100% completion with no advance(s). If you are considering a contractor that can't (1) perform in full, and then (2) get paid in full — on a 0-$20,000 job, then they are not the contractor for you. Keep looking. 
  • If you are going to make partial payment DURING performance and NOT AT THE END OF IT, then hire an inspector of YOUR choosing to make sure your payments don't get ahead of your contractor's performance.
  • Hold retainage. If you are going to advance $5,000 then hold $2,000 until the job is completely done. I mean: DONE! Which means 100%! Swept. Trash Removed. Everything Perfect. Then you pay that last amount of the contract that's due PLUS the 40% retainage you've held out of all partial payments to guarantee proper & complete performance.
  • No advances of money to anyone for materials. If you have to, go ahead buy everything yourself at the store using your own money. The contractor gets no reimbursements because they have no reimbursable expenses. None. Zippo. De Nada.
  • Make sure your materials get applied to your job and not to either the contractor's last one or the next one coming up behind you. This is part of YOUR job, or that of your INSPECTOR. Apply the rule: I see what comes on my property and exactly where it is applied. If you don't have an inspector, then YOU ARE THE INSPECTOR. Of everything! 
  • Get real references and really check them out. Not just work stuff; ask for the name and number of their preacher. Someone who has known them since high school.  Get imaginative. `
  • Get on your computer (or phone) and check them out on one of those criminal background check-out thangs on the internet! If you find unusual or weird stuff = not your person! Find S.O.D. (Some Other Dude!)

Good Luck. Like I said when I opened this post, "you just don't know. So you've got to take steps to protect yourself." I like empowering people to protect themselves; I don't like giving them the news that they've been victimized by a rip-off contractor. So, don't you let me see you sit down in my office and say, you see Mr. Hagan, "we've got this contractor." Because I'm telling you right here and now — by that point in time, your money is gone, and you've already been screwed.

About the Author

Kerry Hagan



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