How to Avoid a Renovation Nightmare

March 25, 2018 Off By amlan

Nobody ever intends to hire a shoddy contractor, but it often doesn’t take much for a home renovation project to go awry. The potential woes are many: poor workmanship, countless delays and a bill that seems to keep growing. Or worse yet, a contractor who takes your money, doesn’t finish the job and then disappears.

Complaints filed against home improvement contractors rank among the top five complaint categories year after year in New York City, according to the city’s Department of Consumer Affairs. In 2017, there were 1,116 complaints filed against contractors and $1.5 million in fines issued.

“There’s been a slight decrease in the number of complaints since 2016, but it’s an ongoing problem,” said Lorelei Salas, the consumer affairs commissioner.

So what can a homeowner do to find a good contractor — and there are many hardworking, skilled tradesmen out there — and avoid a renovation nightmare?

To start, familiarize yourself with the regulations in your area: Laws regarding home improvement aren’t uniform and can differ by state and municipality. And make sure you are working with a licensed professional on any home renovation job that costs more than $500. Because, as Ms. Salas cautioned, if you don’t hire a licensed contractor, “there are very few remedies.”

Do Your Homework

After getting recommendations from friends and neighbors who have used contractors in recent years, call or go online to the appropriate consumer affairs department to see if those contractors are licensed. Home improvement contractors working in the five boroughs need a license from city’s Department of Consumer Affairs, while general contractors are licensed through the Department of Buildings. But home improvement contractors on Long Island get their licenses through the county, and New Jersey licenses are issued by the state.

Do some digging and find out if there have been any complaints filed against a recommended contractor. City residents can call 311 and be connected to a consumer affairs official, but if you are a data hound, you can tap directly into the city’s Open Data system. (Search for Consumer Affairs under “Datasets by Agency” and you will find documents that list charges, complaints, inspections and violations by contractors.)

Long Island residents should call the consumer affairs bureaus in both Nassau and Suffolk counties when checking licenses. A contractor with a bad track record in one county can easily get a license in the other county and continue working.

“Contractor licensing and home remodeling is kind of like the Wild West,” said Adam G. Singer, an attorney specializing in consumer protection with offices in Manhattan, Rockland and Westchester counties.

Once you know a contractor is licensed, you should do some online research, but don’t just read reviews. Check the Better Business Bureau to see if a complaint has been filed there. Search using legal research software like LexisNexis to check if there are, or have been, any lawsuits filed against the contractor. Potential red flags include a homeowner suing a business for breach of contract or a subcontractor seeking a large amount of overtime or back pay.

Why do such a deep background check? There is a skilled labor shortage in the country, making it harder to find high-quality tradesmen available for work, said Dan Taddei, director of education and certification at the National Association of the Remodeling Industry, an industry trade group. A recent survey by the Associated General Contractors of America found that many general contracting firms are having a hard time finding skilled tradesman to fill open positions.

As Mr. Taddei said, “The good ones are busy, so many times they’re not looking for more work.”

The push by educators to emphasize the importance of a four-year college to all students and the disappearance of the traditional high school shop class over the past several decades, among other things, have had a “negative impact” on the industry, Mr. Taddei said. And sometimes, a skilled tradesman who can work wonders with his hands can simply be an ineffective business owner. “We’ve seen great tradesmen with great reputations get in over their heads because they take on too many jobs,” he said.

When you’ve narrowed down your choices, ask for bids and several references. Call the references and ask how they communicated with the contractor about their projects: Were there regular meetings or weekly progress reports? In addition, sit down with the contractor to gather information, Mr. Taddei suggested. Will the contractor have multiple renovation projects happening at the same time? What type of insurance does he have? Which subcontractors will work on your project? Do the same due diligence on them.

And finally, “ask yourself if you can see working with this contractor,” Mr. Taddei said, for weeks or even months.

James Mansfield, the chief executive of West Village GC, a Manhattan-based general contractor, said clients should perform the same due diligence they would before investing in a company or mutual fund. “Are you willing to fork over $80,000 or $800,000 to that company?” he said. “Your renovation is an investment in your home, so I’m surprised when I see sophisticated people not ask any questions.”

He estimated that only about 10 percent of his clients who have requested bids ask for references and actually call them.

Signing a Contract

When it comes time to draw up a contract, make sure it stipulates that the contractor must put any advance payments into an escrow account, Mr. Singer said. This is one way to ensure that the contractor doesn’t use your deposit to pay for his next vacation. “If you’re nervous about how the contract should be worded, hire a lawyer to look one over,” Mr. Singer said.

Many homeowners use a one-third rule, dividing the total bill in three equal payments: before, during and after the job is done. This can work well on small projects, but some homeowners who feel they have been duped on larger renovations advise against it and urge a more detailed schedule and payment plan.

“Do not pay for anything your contractor hasn’t finished,” said Alan Goldman, a homeowner in Niskayuna, N.Y.

He hired a contractor who came with great referrals to redo his master bathroom in late July of 2016. And although Dr. Goldman could see that the work wasn’t progressing as the leaves started to change color, the contractor kept asking for money.

“He worked on his own and had a very tight margin,” Dr. Goldman said. “I felt bad for him and kept rationalizing in my mind that he would get it together to finish the job.”

As the holidays approached and his bathroom was nowhere near done, Dr. Goldman, who had lost about $11,500 at that point, had had enough. In January, he fired the contractor, who by then had health issues and admitted he couldn’t finish the renovation. Dr. Goldman said he regretted not having a concise, tailored contract that detailed the schedule and scope of work with a corresponding payment plan.

Get an Architect

For large projects like a kitchen or bathroom overhaul that requires a change in plumbing lines or electrical wiring, or a gut renovation or an addition on a house, it is best to hire an architect.

Trying to manage a large project that might cost hundreds of thousands of dollars is too much for a homeowner to handle, said Brian Baer, an architect and executive director of the Elevated Studio, a nonprofit group that offers design and storm recovery case management. Architects provide design skills, and they can also explain building regulations and codes and help “to manage your expectations,” he said.

You can download a standard contract from the American Institute of Architects. Besides detailed information about the renovation, the contract should define how the architect, contractor and homeowner will communicate throughout the project.

Mr. Mansfield, the general contractor, said clients need to play an active role in the renovation process. “There are many valid reasons why the deadline on projects gets extended, or the price goes up, but if you’re not taking the time to hear about it, then you’re caught weeks later wondering what happened, and you’ll feel like you’re being taken advantage of,” he said.

Hillary Merman said she now regrets hiring an unlicensed contractor to renovate a bathroom in her rowhouse in Windsor Terrace, Brooklyn. But she had hired the same contractor years earlier and felt he had been “good enough” back then. And he was the lowest bidder.

Ms. Merman said she was baffled when a “rotating cast of workers” showed up at her home, and later figured out that the contractor wasn’t paying them. After demolishing the bathroom and ripping out the electrical outlets, the workers stopped showing up. And the contractor eventually stopped answering his phone after repeatedly promising to restart the job “tomorrow.”

Ms. Merman paid about $2,700 to the contractor before he disappeared. As she put it, “You get what you pay for.”

If you don’t know where to start, online services like Sweeten, Bolster and Homepolish can connect you with designers and contractors, and even help manage a renovation.

Filing a Complaint

What recourse do you have if you find yourself in a dispute with a contractor?

Check to see if your state has a right-to-repair law, which puts some warranties on home improvement construction, allowing the contractor an opportunity to make repairs. If a conversation with your contractor doesn’t yield a satisfactory result, find a mediation service. In New York City, the New York Peace Institute provides free services, and many law schools and legal organizations offer volunteer mediators.

If your contractor is licensed, you could also file a complaint with your local consumer affairs department. In New York City, once the department receives and reviews a complaint, it will contact the business and begin mediation. The department can resolve your case by requiring the contractor to pay restitution or fix or finish the job.

The department can also file charges against the business and seek a decision from an administrative law judge through the city’s Office of Administrative Trials and Hearings. After a hearing, an administrative judge can order a business to pay restitution, issue a fine or even revoke the contractor’s license. If the business doesn’t have the resources to pay the homeowner, the consumer affairs department can tap into its home improvement contractor trust fund to award the homeowner up to $25,000. The fund currently has about $7.5 million, compiled from fees paid by licensees, Ms. Salas said.

Out of the 1,116 complaints filed against home improvement contractors in 2017, 509 cases proceeded to mediation. (Complaints that did not move to mediation were either withdrawn or did not have the necessary paperwork to proceed.) Of the cases that went to mediation, only 71 resulted in homeowners getting monetary restitution from their contractors, while 61 were resolved without financial compensation but to the satisfaction of the consumer. Some of the remaining cases were sent to a judge or an outside agency like the district attorney’s office for resolution.

Either through mediation, decisions handed down by judges or settlements from the trust fund, homeowners received about $2.4 million in restitution in 2017, Ms. Salas said.

Roberta Heiden, a homeowner in Marine Park, Brooklyn, has had two experiences with the consumer affairs department. Her first case, in 2009, took about a year to settle through a department mediation, and the contractor reimbursed her $5,000 for a bad job done on a driveway and garage project.

Her current dispute with a fence installer, however, has tested her patience. Since her complaint was filed in 2015, the contractor has not responded to the department, Ms. Heiden said, and the case is now in the administrative hearing system. She was recently told by a city official that the contractor could take a year to respond to a summons, forcing her to wait longer for possible restitution from the city’s contractor trust fund.

“I’ve been waiting three years to resolve this issue,” she said. “Do you think this system is for the consumer? It sure doesn’t feel like it.”

Consumer affairs officials would not comment on Ms. Heiden’s current complaint, but said the timeline for a resolution depends on the complexity of the case.

Homeowners can also try to seek criminal charges or file civil lawsuits against contractors, but prosecuting contractor fraud can be difficult. In recent years, though, there have been some criminal indictments against contractors charged with defrauding homeowners trying to restore homes damaged by Hurricane Sandy in 2012.

David Ramroop, a homeowner in Amityville, on Long Island, said he hired Capstone Remodeling, a Smithtown-based contractor, to raise his house in 2015 to comply with federal regulations after Hurricane Sandy. He paid Capstone about $87,000 for work that was never finished and subsequently learned that the house had not been elevated to the correct height. He ended up paying another company to finish the job after months of delay.

Frustrated, he started a website to warn others about Capstone and its owner, Lee Moser, and soon found that dozens of other homeowners had similar tales.

Although he felt some relief after Mr. Moser was arrested and charged with grand larceny and fraud, first in Suffolk County last October and then in Nassau County in December, he said, “I think consumer protection is an afterthought.” Mr. Ramroop considered filing a civil suit against Capstone, but decided against it because his legal fees would easily eat up any potential restitution he might get.

Mr. Moser’s contractor’s license was revoked in both Suffolk and Nassau Counties in 2016. When reached on the phone, he declined to comment and his attorney, Brian A. Trodden, of Castro & Trodden, in Smithtown, N.Y., did not return calls.

The Suffolk County Department of Consumer Affairs and the District Attorney’s office declined to comment, as did the Nassau County Department of Consumer Affairs.

The Nassau County District Attorney, Madeline Singas, said she would like to bring more charges against contractors, but the current statute makes it difficult because there needs to be evidence that proves the business owner never intended to finish the job.

“It’s heartbreaking,” she said, “because these homeowners were victimized first by the storm, and again by their contractor.”

In Ocean County, N.J., an area hit hard by Hurricane Sandy, there have been 65 criminal indictments against contractors since the 2012 storm, said Stephen Scaturro, director of the county Department of Consumer Affairs.

“Even though we have gotten some pushback from local builders’ associations, we have been aggressive about enforcement,” he said. “There’s a lot of legitimate guys out there, so it’s unfortunate we still see enough unscrupulous contractors that give the industry a bad reputation.”