Home Improvement Contractors

Background

The Home Improvement Research Institute anticipates that total home improvement products sales were expected to increase to $319 billion in 2015, with consumer market sales comprising $232 billion. Home repair is necessary for preserving both the safety and the value of property.

Preventing home improvement fraud is a critical concern for older homeowners, who are more likely than younger people to own a home, have no mortgage, and live in an older home that needs repair. As homeowners age, they are more likely to require the services of a contractor for needed home repairs.

The financial and psychological effects of home improvement fraud can be severe. Older people may lose all or a significant part of their life savings and be left with shoddy or incomplete repairs and no legal resources or remedies. Licensing requirements in most states are inadequate. There are often no minimum standards with regard to a home contractor’s skills, knowledge, or financial resources, and no required personal background checks.

The lack of requirements for a written contract and for specificity in contract provisions frequently makes it impossible to determine what the homeowner and contractor agreed to. In addition, state enforcement agencies often lack sufficient authority and resources to tackle the sweeping nature of contractor fraud.

Home Improvement Contractors: Policy

Licensing, insurance, and bonding

In this policy: LocalState

States should require that home improvement contractors are licensed, insured, and/or bonded.

States should have an easily accessible system to check the licensing status of home improvement contractors.

Contracts

In this policy: LocalState

States should require written home improvement contracts and specify required and prohibited contract provisions.

Criminal penalties and civil remedies should be established.

Redress of grievances

In this policy: LocalState

States should:

  • provide consumers with a private right of action,
  • establish a home improvement consumer recovery fund, and
  • create protections for home improvement borrowers who claim contractor malfeasance or nonfeasance. This would safeguard consumers from deceptive practices when securing a mortgage or home equity loan to finance the transaction.