Contractor Fraud

Posted by Garden Route Contractors on

What Is Contractor Fraud?

Contractor fraud refers to illegal business practices committed by individual contractors or contracting firms hired to renovate, repair, or (re)build residential properties. Contractor fraud in the residential sector may also be referred to as "home improvement scams." Contractor fraud encompasses a range of issues, from shoddy work and using substandard materials to escalating project costs and over-billing.

Contractor fraud often ends up costing the victim twice because apart from losing a significant amount to the fraudster—whose inferior work may cause damage to previously undamaged parts of a home—a legitimate firm may also have to be paid to bring the work up to standard or repair the damage. A victim of contractor fraud is often pressured into paying for the work through threats and intimidation.

KEY TAKEAWAYS

  • Contractor fraud refers to illegal business practices committed by individual contractors or contracting firms hired to renovate, repair. or (re)build residential properties.
  • Common contractor frauds include: asking for a substantial upfront cash advance, leaving out key project details / low-ball offers, purportedly running into unexpected problems that require additional cash, working on areas where permits are required from the municipality without approval, and selling materials supposedly left over from previous jobs.
  • Tips to consider before hiring a contractor include: Verify the contractor on https://isearch.co.za . Request if such said contractor will consent to register with the Western Cape Contractors Collective. Obtaining access to a legal council (we can refer you) before such said work is to be performed and ensuring a comprehensive contract is drawn up depending on the scope of work. 

Understanding contractor Fraud

Common techniques of contractor fraud include the following:

-Social Media, social media especially META a.k.a Facebook and social groups are a familiar favorite. Unsuspecting public can easily be persuaded into contracting with the incorrect "contractor" Why does everyone recommend contractors on social media? Ask that question as well.

Substantial upfront cash: This is one of the most prevalent contractor frauds. The contractor demands a significant upfront advance to order materials and equipment, and then either disappears with the full amount, delays the project by lengthy periods, or does slipshod work that is not worth the thousands of Rands that the homeowner may have already forked over. 

Leaving out key project details/low-ball offers: Contractors can also defraud homeowners by deliberately leaving out key details of the project's scope, so that the homeowner is actually getting much less than what they are paying for. Completing the rest of the project can end up with the total cost going well beyond the homeowner's initial budget. This category also includes low-ball offers wherein the contractor intentionally quotes a price that is well below the going rate for similar work, and then tacks on additional prices that may result in the final cost being much greater than the initial estimate.

Running into unexpected problems that require additional cash: Another common ruse, this involves the contractor purportedly running into unforeseen, major problems—such as hidden water or termite damage—once the job is already underway. The contractor then demands a large payment to "fix" the problem, leaving the hapless homeowner with little choice but to pay up in order the keep the project on track.

We are trying to make making it harder for these fraudsters to prey on informed consumers, but some fraudulent contractors continue to target vulnerable groups such as the elderly by going door to door. Or utilizing social media. 

Signs of Contractor Fraud

  • Social media post detailing work, this unfortunately impacts the real professionals. There is however means to identify it when you look closely at a picture. Unsure .. Contact us for assistance.
  • Knocks on your door for business because they are in the neighborhood
  • Happens to have materials left over from a previous job
  • Pressures you for an immediate decision
  • Only accepts cash and asks you to pay everything upfront
  • Suggests you borrow money from a lender the contractor knows

How to Avoid Contractor Fraud

Renovating, remodeling, and maintaining a home can be complicated. Hiring qualified professionals who can do the work for a fair price and in a timely manner can make it a much easier process. While there are fraudulent contractors who will do a poor job, or never even show up, taking a few precautions and conducting basic due diligence can minimize the risk of contractor fraud. Garden Route Professionals and Contractors suggests the following tips to consider when hiring anybody to work in your home:

    1. Research and gather information: You can search for a contractor's business profile on the Contractors verification tab to get free information on the contractor's company profile, customer reviews, and check if the contractor is with Garden Route Professionals and Contractors 
    2. Contact Us: We pull all the information on the contractors that you want to obtain taking into consideration the scope of the project.
    3. Ask for multiple quotes: On the platform you will get access to the same disciplines and you can request quotes, set up meetings and find the contractor that fits with you. 
    4. Get it in writing: Always get quotes in writing and ensure that any work never begins without a comprehensive written and a signed contract. The contract should include: contact information, start and completed dates, a detailed and accurate description of the work to be done, material costs, payment arrangements, and warranty information as well as all verbal promises by the contractor.
    5. Verify: Garden Route Professionals and Contractors will match you up and in line with POPIA provide you all information on the contractor you require. 
  1. Confirm building permits: The contractor must obtain the correct permissions—generally at your cost—before commencing the project. Include a clause that final inspections should be completed by local building authorities before you make the final payment. And obtain input from a Property inspector.
  2. Find out about a lien waiver: In South Africa, this is a statement from your contractor that says all suppliers and subcontractors have been paid for their work. Ensure should there be subcontractors that all is sourced from the platform and that a comprehensive digital file on all involved on the contract is available. 
  3. Think about future service issues: Ensure you are aware of your warranty coverage and how to deal with service issues in the future.
  4. Arrange a payment schedule: Never make full payment upfront, but stagger the payments so that the final installment is not due until the work is complete and has been fully inspected by Professional Property Inspector. Do not worry we have you covered here as well. 
  5. Get a receipt: Obtain a receipt from the contractor marked "Paid in Full" once the job is completed and you have made the final payment.
  6. Keep your contract. Put the contract in a safe place, just in case there are any questions after the work is finished. Keep all digital records in a safe place. 

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