Avoiding home improvement scams

May is National Home Improvement Month.

During times of a softer economy paired with the approach of warmer weather, the National Association of the Remodeling Industry (NARI) wants to remind homeowners to beware of unscrupulous people posing as remodelers.

One common issue exploited homeowners have run into is having to pay both the contractor and the subcontractors. The homeowner’s financial obligations should only be to the contractor.

Some dishonorable contractors are collecting large upfront payments from residents. When the work has been completed, instead of paying the subcontractors, the dishonest business owner instead pays the interest on properties they have already purchased and can only re-sell below cost. This leaves subcontractors without paychecks and forces them to establish liens on their customers’ properties.

The subcontractors secure payment for their work, but this causes difficulties for homeowners, who then pay the same fee twice for one remodeling project. Since subcontractors have 90 days to file mechanics’ liens, it could take months for homeowners to realize that they have been defrauded.

Residents should note that these types of liens will pay the subcontractors before the homeowners if occupants sell their properties.

To avoid these circumstances and ensure that they only pay the cost of a project once, NARI suggests homeowners take the following steps:

• Be sure to hire an experienced remodeling contractor, not a ‘fly-by-nighter’ waiting for the building industry to pick up again.

• Contact the State Contractor’s Licensing Board to ensure a contractor meets all requirements.

• Check with the local NARI chapter, the government Consumer Affairs Office or the Better Business Bureau to ensure the absence of any adverse files on record for the contractor.

• Ask to see a copy of the contractor’s certification of insurance or for the name of his or her insurance agency to verify coverage. Most states require a contractor to carry worker’s compensation, property damage and personal liability insurance.

• Verify that the contractor’s insurance coverage meets all the minimum requirements. If homeowners request estimates from several different contractors, they should confirm that they are bidding on the same scope and quality of work. Discuss any variations in bids and beware of any bid that is much lower than the others.

• Draw up a contract before a remodeler begins work that includes the contractor’s name, address and phone and license numbers, if applicable. It should also include details about what the contractor will and will not do.

• The agreement should offer a detailed list of materials for the project, with information such as size, color, model, brand name and product. The contract should include approximate start and completion dates.

• Study the design plans carefully. Before any work begins, the homeowners should insist both that they approve the plans and that the contractor identifies the design plans in the written contract.

Known as the “Right of Recision,” federal law requires a contractor to provide a homeowner with written notice of the resident’s right to, without penalty, cancel a contract within three business days of signing it, provided it was solicited at someplace other than the contractor’s place of business or appropriate trade premises.

The contract should include a warranty covering materials and workmanship for a minimum of one year and identify the warranty as either “full” or “limited.” The contract must identify the name and address of the party that will honor the warranty, namely the contractor, distributor or manufacturer. Homeowners should make sure the document specifies the time period for the warranty.

Consumers can also call the NARI National hotline at (800) 611-NARI and request a free copy of NARI’s brochure, “How to Select a Remodeling Professional,” or visit http://www.RemodelToday.com and click on the homeowner’s guide for more information.