Home Improvement Contractors

Background

Home repair is necessary for preserving both the safety and the value of property. Older homeowners are more likely than younger people to own a home, have no mortgage, and live in an older home that needs repair. Thus, they can be at greater risk for home improvement fraud schemes.

Under these schemes, contractors take money up-front and perform shoddy or incomplete repairs. Sometimes they don’t complete any work at all. The financial and psychological effects of home improvement fraud can be severe. Older adults may lose all or a significant part of their life savings.

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. Another challenge is that often there is no written contract, making it hard to determine what the contractor and homeowner agreed to. In addition, state enforcement agencies often lack sufficient authority and resources.

HOME IMPROVEMENT CONTRACTORS: Policy

Licensing, insurance, and bonding

In this policy: LocalState

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

States should put in place criminal and civil penalties.

Redress of grievances

In this policy: LocalState

States should ensure consumers have adequate redress in the event of fraud. This includes a private right of action. (see also Chapter 12, Personal and Legal Rights—Private Enforcement of Legal Rights). States should also establish a home improvement consumer recovery fund. In addition, states should 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.