As a project consultant, part of my job is to help keep people from getting burned by inept contractors and unscrupulous business practices. During the consultation process, I tell them what to watch out for in order to avoid costly mistakes.
One of the biggest mistakes is in assuming that just because you pay the contractor, that your financial liabilities for the project are done. Unfortunately for homeowners, there are laws designed to protect sub contractors and material suppliers. The laws, while well meaning, put the homeowner in severe financial jeopardy.
Essentially, anyone in the supply chain, from the distributor to the manufacturer to the sub contractor performing the installation can place a lien on your home if they did not get paid for products and services rendered at your property. So even if you pay the contractor in full, if he/she does not pay the warehouse or subcontractor, they can file to place a mechanical lien on your property and force you to pay for those products/services again.
I was about to explain that to a client yesterday, but before I could, he related his own horror story. He literally lost the farm because his contractor failed to pay the supply house for materials used on his project.
An elderly gentleman from Lebanon, he told me his contractor did a great job so he paid the balance of what was owed for the $175,000 project. The contractor took the money and even provided a lien waiver. Because the contractor didn't pay the supply house, the supply house placed a lien for over $100,000 on the property. The farmer didn't have the money to pay to release the lien, so this poor man's farm was foreclosed upon. Not only did he loose his farm, his credit was ruined, which came back to haunt him again years later when he wanted to purchase a furnace and air conditioning from me. He went on to say that he was not the only victim of this contractor. Before he was caught, the contractor did the same thing to other people that he knew.
In order to protect yourself, homeowners are required to obtain a lien from everyone in the supply chain. This places a tremendous burden on the homeowner, since they may or (in most cases) may not even know where the materials are acquired from.
As a project consultant, it is bad enough to read about some of the unethical / incompetent business practices home owners are subjected to. Hearing about them first hand and seeing the effects is even worse. The problem is that once someone has been victimized, they are often put under such financial distress that they cannot afford to have a legitimate contractor resolve the original problem. As a result, they become victims all over again.
One elderly woman who needed a new roof had already had three "new" roofs installed on her home, but it still leaks when it rains. With five liens placed on her home by the "contractors", she cannot get financing for a quality roof replacement - even though the home was paid off prior to hiring the first contractor.
As I was relating these stories to a potential client, he boasted that that would not happen to him. Unfortunately, it is just that type of arrogance that opens the door to fraud.
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