Vol. 11, No. 1, Pg. 24. Home Improvement Contracts: Are Consumers Getting Nailed? Six Tools to Help Repair the Damage.

• Author: By Dave Maxfield

South Carolina Lawyer

1999.

Vol. 11, No. 1, Pg. 24.

Home Improvement Contracts: Are Consumers Getting Nailed? Six Tools to Help Repair the Damage

24HOME IMPROVEMENT CONTRACTS: Are Consumers Getting Nailed? Six Tools to Help Repair the DamageBy Dave MaxfieldOne of actor Tom Hanks' more forgettable roles was as a beleaguered homeowner in The Money Pit. Hanks and his wife, played by Shelley Long, move into a "fixer upper" house with plans to renovate it. At one point, water is streaming out of the house in the background. A plumber hands Hanks a huge bill, declares that he is late for his daily golf game, jumps into his Corvette and disappears.

While the scene is funny, there may be an eerie familiarity to it if you own a home. And chances are, the scenario is also familiar to some of your clients who are homeowners. Few of them will ever be hurt seriously in an automobile accident or terminated wrongfully. But many will experience problems with the people to whom they have entrusted their most valuable asset-their home.

Here are some of the "tools" that can be used to prevent a home improvement job from turning into The Money Pit. Or, at least, to do a decent job of repairing the damage if it does.

AVOIDING THE "RUSTY NAILS" OF THE HOME IMPROVEMENT INDUSTRY

Without question, there are many scrupulous, honest and skilled home repair and improvement contractors. But this article is not about them. So instead we will focus on the exploits of contractors like "Rusty Nails Home Improvements." Although the names are fictional, the story below is based on actual events that have occurred in South Carolina.

Rusty Nails is in the business of selling and installing vinyl siding,windows and other home improvement products and services. One day, Rusty shows up on the doorstep of Ms. Colleen Consumer. Colleen's house is obviously in need of work, and Rusty attempts to sell her vinyl siding and replacement windows. He has a "one day only" special that seems like a good deal.

Colleen is a single mother of two children. By almost anyone's standards, she is low-income. The modest home is her first and she purchased it only the year before with HUD financing. In addition to the first mortgage on the home and the responsibility of her children, Colleen has many other debts. Although she wants badly to improve the appearance of her home, she tells Rusty that she cannot afford the $5,000 price he has quoted.

But Rusty has a "solution" to this problem. He offers to secure financing not only for the $5,000

26 cost of the improvements, but for an additional "debt consolidation" loan of $10,000. Neither the interest rate nor term of the loan is discussed, and Rusty neglects also to inform Colleen that the loan will be secured by a mortgage on her home.

The next day, Rusty shows up at Colleen's house with a retail installment contract. The contract is printed on a form from The Cash Factory, a lender. The contract recites that $15,000 is the price of the improvements. This sum is to be financed at 16 percent for 20 years. The total cost to Colleen over the life of the loan will be in excess of $50,000. The contract does not mention any sum being remitted to Colleen for "debt consolidation" as promised. Colleen signs the contract.

A few days later, Rusty brings over some more "paperwork" for Colleen to sign "so that the work can begin." Among these documents are a mortgage and a certificate indicating that the work has been completed. Anxious for the beautification of her home, Colleen again signs. Shortly after the contract is executed, Rusty forwards it to The Cash Factory. The Cash Factory funds the project and forwards Rusty a check for $15,000. The Cash Factory immediately sells and assigns the note and mortgage to Currency Corporation.

Three months pass. No work on the house has begun. At first, Rusty answers Colleen's telephone calls with excuses about building material delays and promises that work will begin shortly. At one point, he pacifies her by promising to install an air conditioner free of charge. But now Colleen's calls simply go unanswered. However, the telephone calls and letters to Colleen from Currency Corporation discussing "foreclosure" have just begun.

How could Colleen have avoided dealing with Rusty in the first place? According to the Federal Trade Commission, which fields thousands of consumer complaints about home improvement contractors each year, the best place to get the name of a good contractor is from a friend, neighbor or co-worker who has used the contractor. Local trade organizations can provide the names of area members in good standing.

Consumers can also contact their local Better Business Bureau and the South Carolina Department of Consumer Affairs to determine if complaints have been lodged against the contractor in the past. For example, if Colleen had called the Department of Consumer Affairs...