04/06/09: Dealing With Unlicensed Contractors
By Benny L. Kass
Q: I had a home improvement salesperson come into my home who swore that she was a licensed agent in the District of Columbia..
She persuaded me to do home improvement projects with her company and I signed an agreement that had her signature, title and her license number. She explained that her costs were higher than the price another company I was looking at because of the quality work and the fact that they do not sub out the work.
When the work was finally completed, the original company I had solicited for the job actually did the entire project. I ended up paying three times more for the work than I would have paid with that other company.
Now I find out that she was not a licensed sales representative for this company after all. She put someone else's number beneath her signature and it is also on her business card. I would have never allowed her to come into my home without being licensed.
I paid all but $1900 which I held back until the last phase was completed. They are now suing me for that money.
My court case is coming up in June. I feel my contract is void and I should not have to pay based on the false information she gave me. The work was beautiful but I paid far more than I ever should have. Can you advise?
A: Get a lawyer who understands consumer and contract law immediately. In general, home improvement contractors in the Washington metropolitan area are required to obtain a home improvement license. If the contractor is not licensed, the contact will in most cases be considered void and not binding on you.
The laws differ in our three surrounding states. In the District of Columbia, for example, if you give an unlicensed contractor $300 or more upfront, you are entitled to get back all of the moneys you paid him or her. It does not matter how good the job is. The public policy of the District is to penalize contractors who do not obtain a license.
In Virginia, it is a misdemeanor, punishable by fine (and possibly jail) for a contractor without a license work of a job of over $100.
In Maryland, the Home Improvement Commission regulates and supervises contractors. It will also investigate complaints and seek restitution from those who are unlicensed. According to the Maryland Department of Labor, Licensing and Regulation, "in the last fiscal year, (the Commission) recovered close to $2.5 million for homeowners who were cheated by unlicensed contractors.
It is also a misdemeanor in Maryland not to have a license, and on conviction, the contractor is subject to a fine of up to $1000, and imprisonment up to 30 days.
You made a mistake of believing the salesperson, with out checking references or even independently determining if there was a valid, current license.
In today's economy, with home sales sluggish, many homeowners decide to make improvements to their property. Here are a number of suggestions on how to protect yourself.
- get a copy of the license that the contractor professes to have. Depending on where you live, you can confirm the license either on the appropriate government website (search under Professional licenses) or call the licensing department of the State or County where you live.
- get references from the contractor and check them out. Keep in mind, however, that contractors will only give you good references. In some cases, depending on the size of your job, you may actually want to visit one or two references and see what kind of work the contractor did.
- contact the Better Business Bureau in your area to determine if there are any complaints against the contractor.
- insist on a written contract, spelling out the total cost of the job, when it will start and when it is estimated to be completed. If the cost of your job is over $10,000, insist on using an American Institute of Architects contract. This contains many consumer protections, such as your right to terminate, and how disputes are to be handled. You can purchase a number of different AIA contracts on line (www.aia.org).
-compare prices. Do not enter into any contact until you have obtained at least two or three bids from other contractors. Keep in mind, however, that price alone should not be the criteria for deciding which contractor to use. Remember the old saying "you get what you pay for".
- include a retainage provision in the contract. You should hold back 10 or 15 percent of the job until it is completely finished and you are satisfied with the work. I have represented too many homeowners who paid their contractor 80 or 90 percent of the contract price when only 50 or 60 percent of the work had been completed. And then the contractors just walked off the job.
- as the work is progressing, do not agree to any verbal changes in the scope of the job. All change order must be in writing, and signed by you and your contractor. Keep copies of all such documents.
- if there are subcontractors on the job - such as electricians or plumbers, periodically ask them if they have been paid by the general contractor. If not, you can make your next draw payable to both the contractor and the sub.
- when the job is completed, and before you make the final payment, insist on getting a release of mechanics liens from all subs as well as from the contractor. You don't need a formal document for this; a simple statement signed by the parties is sufficient.
Maryland Attorney General Douglas Gensler recently released a "Consumer IQ test" on a number of consumer related issues. Referring to home improvement contractors, he wrote: "If a licensed contractor fails to do the job, or does it poorly, you may be able to recover your losses through the (Maryland) Home Improvement Commission's Guaranty Fund".
But, if the contractor is unlicensed, you may not get that relief.