October 27, 2021

McKenzielee Blog

Wicked Clever House Experts

Hire at your own risk

14 min read

Burt Schlosberg is 88, has arthritis and admits he’s not very handy around the house.

“I need an instruction booklet to change a light bulb,” Schlosberg says. “I can use a screwdriver on simple stuff and a hammer, usually not breaking anything, but anything more complex is beyond my limited scope.”

Recently, and shortly before getting a hip replacement, Schlosberg went through all the steps to become registered as a home improvement contractor in New Jersey. It took several months, delayed in part by the pandemic and in part because of a small mistake on his certificate of insurance.

He was approved without question. He is now allowed to hire himself out to fix floors or renovate kitchens, even though he is quick to say he’s no Bob the Builder.

Burt Schlosberg was approved for a Home Improvement Contractor (HIC) registration, but he says he needs instructions to change a light bulb.

Schlosberg would have had a tougher time if he wanted to cut hair.

To get a license to give a $15 haircut in New Jersey, stylists must complete 1,200 hours of instruction at a state-approved school and take a state exam. To get a manicurist license, you need 300 hours of instruction followed by an exam. Licensed skin care specialists go through 600 hours of training and also must pass an exam.

But renovate a bathroom? Install a deck? Build an addition? Contractors need little more than a toolbox.

No tests. Not a single class. In fact, contractors don’t need any formal education or experience at all. They don’t have to prove they know how to hammer a nail.

The consequences can be devastating for homeowners.

From shoddy work to safety issues to downright fraud — contractors who take money and never do the job — New Jersey’s system does little to protect consumers. While other states offer licenses with robust requirements, including training, skills testing, fingerprinting and proof of financial well-being, New Jersey’s system requires little more than payment of a $110 fee and proof of liability insurance.

Criminals can also get a pass. While the state’s Home Improvement Contractor (HIC) registration application asks whether the applicant or any company officers have been convicted of a crime, a conviction won’t necessarily stop someone from receiving the HIC registration, according to the Division of Consumer Affairs. And because the statute explicitly does not allow criminal background checks, there’s nothing to stop a criminal from lying.

In the absence of greater protections, homeowners often have to fend for themselves.

Thousands of homeowners across the state are now faced with rebuilding after Tropical Storm Ida wrecked their homes with severe flooding, wind damage and even tornadoes. But under the state’s current system, there are no guarantees the contractors will be qualified, and consumer advocates say they fear they will see illegitimate and unqualified contractors target storm-weary homeowners as they did in the aftermaths of Superstorm Sandy and Hurricanes Irene and Floyd.

Indeed, there’s usually little talk of reform until the issue comes to the forefront, usually in the aftermath of widespread storm damage and even then, the state has pursued prosecutions rather than change the rules to better safeguard homeowners.

In one horror story, Carol Ferraioli and her family hired a contractor who had a valid registration in New Jersey to lift and rehab their Port Monmouth house after Superstorm Sandy. But the contractor, Jamie Lawson of J&N Construction, took $68,000 and didn’t complete the job, leaving the wrongly lifted house on the verge of collapse, the family and prosecutors said.

Lawson went on the lam after a December 2016 indictment, and then he was arrested in South Carolina in June 2017.

In all, Lawson admitted to defrauding 41 people whose homes were damaged by the storm out of $1.86 million and he was sentenced in 2018 to 10 years in prison. He will be eligible for parole on June 15, 2022. The law changed in 2014, requiring contractors to get a separate registration to elevate houses.

Carol and Anthony Ferraioli say they were scammed by a contractor who was convicted of stealing from homeowners and not completing the jobs he was hired to do.

Prosecutors said Lawson had criminal records in six other states for similar frauds — something that would have been revealed with a background check, which is not required by New Jersey law — but he lied on his application for the HIC registration, court documents show.

“I think there needs to be stricter requirements in New Jersey to be a contractor,” said Ferraioli, who moved back into the home in July 2020, and that was only with help from a non-profit organization. “People are going through this every day, not just due to a horrible storm, but everyday repairs.”

“This needs to stop. Something has to get done,” she said.

New Jersey requires the HIC registration for a wide variety of contractors, including those who do driveways, kitchens or bathrooms, basement waterproofing, roofing and additions. It covers anyone who is involved in “repairing, renovating, modernizing, installing, replacing, improving, restoring, painting, constructing, remodeling, moving or demolishing residential or noncommercial properties,” according to Consumer Affairs.

As of Aug. 6, there were 48,525 active HIC registrations in New Jersey, Consumer Affairs said. An unknown number operate illegally without a registration.

Schlosberg, who applied for the registration at the request of NJ Advance Media to illustrate how flawed the system is, said the registration process “is not one that instills confidence.”

“For me to form a home renovation company and get approved? I think that I should need to provide evidence that I am capable of doing what I say I can do,” the retired insurance company executive said. “There has to be regulation to protect people.”

How N.J. compares to other states

NJ Advance Media’s experiment with Schlosberg spotlights what critics say is wrong about the process in New Jersey, especially when compared to the hundreds of hours of training and exams that other states require.

At least 32 states require training and an exam before they bestow a license. Many work with the National Association of State Contractors Licensing Agencies (NASCLA), a nonprofit that promotes best practices and license uniformity for the construction industry, creating curriculum and tests for agencies that grant licenses.

For example, to apply for a registered contractor license in Florida, candidates must first pass a “certificate of competency” in the cities or jurisdictions where they want to work. Then they must submit to fingerprinting and a credit check, and show proof of “financial stability” and liability insurance.

To earn a certified general contractor license, applicants must pass a state exam, have four years of experience or a combination of college and experience, show proof of liability insurance, submit to a credit check, agree to be fingerprinted and pay a fee.

The exam has three parts. In the fiscal year ending in June 2021, 40% failed the “Contract Administration” portion and 49% failed the “Project Management” section, according to the Florida Department of Business and Professional Regulation. The “Business and Finance” section, which is required for all licenses in the construction industry, had a 49% fail rate, though the state said it cannot break down the pass/fail rate specifically for general contractor license hopefuls.

California has a 15-person board that creates its own testing for the state’s more than 40 contractor license classifications. The pass rate is 50%, spokesman Rick Lopes said.

To be eligible for the California exams, candidates must have at least four years of journey-level experience, which the state describes as an apprenticeship or related work. A qualifying individual must then pass both a business law test and a trade exam, Lopes said.

The applicant also must be fingerprinted and undergo a criminal background check before a license is issued, he said.

New Jersey does have similarly stringent training requirements for certain tradespeople, such as plumbers and electricians, but not for home improvement contractors. Even with training prerequisites for some trades, the state does not require background or credit checks, or fingerprinting. It was only in 2004 that the Legislature passed the registration requirement into law, and it took more than a decade to do it.

Former state senator Kevin O’Toole said his office started to get a lot of complaints about unscrupulous contractors who had taken deposits and left — or who did a lousy job — in the 1990s.

“A vast majority of contractors are honest and diligent, but we had to find some way to stop the predatory nature of some of these contractors,” O’Toole said. “Today we are licensing tattoo artists, beauticians, but we’re not licensing contractors who can take someone’s life savings, their investment in a home.”

He said he probably would have supported a stricter licensing system when he was in office.

“I think this demands the Legislature today look at what other states are doing,” O’Toole said.

Good for consumers, good for business?

With so much at stake, it’s not surprising that home construction problems have been at the top of consumer complaint lists in New Jersey for years.

In 2020, home improvement contractor complaints were the third most common made to Consumer Affairs, trailing only complaints about COVID-related price gouging and vehicle-related grievances. It was No. 2 in 2019, again behind vehicle complaints, and it was the top complaint in both 2018 and 2017, Consumer Affairs said.

The agency does not keep tallies of how many of the complaints are about someone who has an HIC registration or about someone working illegally without one.

While licensing might seem like an obvious way to protect consumers from predatory or inexperienced operators, any move to strengthen regulations is likely to face headwinds, including pushback from lobbyists and trade groups. The counter-argument is that training requirements and testing would be cost- and time-prohibitive for contractors, and serve as another example of overregulation in a state often criticized for micro-management. And, critics say, unscrupulous contractors would ignore licensing requirements in the same way they do the current registration system.

Jeff Kolakowski, chief executive officer of the New Jersey Builders Association, said he would “need to understand the intent, see the specifics and analyze the impact of any change in policy before offering a position” on contractor licensing.

“The construction industry is perhaps the most highly regulated industry in New Jersey with developers, builders, contractors, design professionals, code officials, etc., all operating within a matrix of complex regulations and standards promulgated and enforced by various governmental entities,” he said in an email.

Others in the industry say better oversight is good for business.

Arizona’s home improvement contractor license became effective in 2012 and it was supported by the home improvement industry, said Greg Crow, administrator of the state’s contractor licensing board.

He said the state’s Home Builders Association was the prime mover behind the legislation.

“The industry felt that reasonable regulation would be beneficial to both the public and to the legitimate industry,” Crow said. “Like in any profession, it is the few bad apples that give a black eye to the rest of the profession.”

“The key, in my opinion, is to find reasonable levels of licensing requirements that are not overly burdensome, but still give a reasonable level of protection to the public,” he said.

With 30 years of experience, Michael Bodei knows well the construction business in New Jersey. His HIC registration is in good standing, and he’s now working to obtain a license in Florida because his family has business interests there.

“Florida’s exam is very complex,” Bodei said. “There are over 20,000 pages of books. The exam is two days long, eight hours a day. You also must demonstrate extensive trade experience, financial stability, pass a background check and provide insurance.”

“It’s also several thousand dollars by the time you take prep classes, buy books and pay for the exams,” said Bodei, the owner of Bodei Contracting in Morristown.

Contractor Michael Bodei says he would support a license for contractors in New Jersey.

He said he’d like to see New Jersey establish a license that isn’t quite as strict but would still ensure people are competent enough to get a job done right.

“A Home Improvement Contractor registration guarantees nothing other than a contractor paid the fee and had liability insurance at the time of the payment,” he said. “There are no requirements that you have any experience in the building trades or any business experience at all.”

Bodei said licenses would protect not only consumers, but legitimate contractors, too.

“It’s difficult to compete with people who have no license, insurance or regard for any sort of standards,” he said. “You wouldn’t want to be on the road if no one had a license. This is just as dangerous.”

Homeowner Jenny Klopman said she believes contractors should need to prove they have the skills to take on a job, noting that under today’s regulations, “Any Joe can get (a registration).”

She hired a contractor in November 2019 to paint her condo and install laminate flooring. She didn’t realize it at the time, but he had an expired HIC registration and his insurance policy had lapsed.

Not only was the paint job a mess — he didn’t cover furniture or paint around vent covers and lights, she said — but the laminate flooring was poorly installed and the floor moldings were cut poorly, leaving unattractive gaps.

Jenny Klopman’s contractor used wood putty to fill gaps after he miscut the flooring he installed. She won a $15,000 judgment against the contractor. (Courtesy Jenny Klopman) Courtesy Jenny Klopman

“When he couldn’t get the floor together properly, he filled the gaps in with wood putty, and he also cracked a piece by my front door,” Klopman said. “My floor is lifting. There are gaps and it’s warping because he didn’t put it down right.”

The contractor refused to correct the mistakes, so she took him to small claims court and won a default judgment for $15,000. She hasn’t seen a penny.

Looking for change

Despite the enormous cost to homeowners, the issue of reform rarely comes up until a natural disaster happens, when contractors swarm to score jobs from thousands of homeowners facing devastating damage.

While many of the contractors are legit, others are scam artists who promise a quality job and take deposits, but sometimes never start the job, never finish the job or do poor work.

Thomas Calcagni, director of the Division of Consumer Affairs from 2010 to 2012, said the licensing issue was regularly discussed during his tenure.

“The notion of requiring proof of education as a condition to registration or licensing makes sense,” Calcagni said.

He said adding sensible training and education requirements would help to better filter out fly-by-night operators.

“No question about it, New Jersey’s Contractors’ Registration Act does very little to ensure that registered contractors have the ability or inclination to undertake and follow through with a project,” he said.

A state police helicopter operates over Manville on Sept. 2, 2021 after flooding from Tropical Storm Ida.  Andrew Mills | NJ Advance Media for NJ.com

Despite that assessment, Calcagni questioned whether a stricter licensing requirement might have unintended consequences.

“The implementation of a real licensing scheme, with meaningful training requirements and proof of aptitude, and the associated costs, would create a barrier to entry for many in a blue-collar industry,” he said.

Like Calcagni, former Consumer Affairs chief Eric Kanefsky said he believes New Jersey’s system could be substantially improved, leading to better outcomes for consumers, but he also suggested that the worst actors won’t be deterred by a new framework, particularly after disasters, when homeowners are at their most desperate.

“So whether the state has a relatively lax registration scheme like the current one or a more stringent licensure scheme, the problem posed by these unlicensed actors is going to unfortunately persist,” Kanefsky said.

A licensing system would have to be approved by the state Legislature.

Gov. Phil Murphy didn’t reply to multiple requests for comment.

One bill, co-sponsored by Asm. Paul Moriarty, D-Gloucester, would give some protection to consumers who are abandoned by a contractor by requiring they have a bond.

“One of the issues we see a lot is people who take advantage of consumers. The bad actors out there take small deposits and don’t do the work or do shoddy work or don’t finish it,” Moriarty said.

In cases like that, consumers don’t really have a remedy, he said. It’s often not worth hiring an attorney to recover smaller amounts, and Consumer Affairs may not have the manpower to track down the crooks, he said.

“The bond gives people a place to go to try to recoup their money,” he said.

Other non-health care licensees in New Jersey are required to have a bond.

Moriarty said he’d be interested to learn more about what other states require for contractor licensing, but “at the end of the day, no authority can stop anyone from breaking the law.”

“We definitely have to do more, that’s for sure, to address the problems that exist out there,” he said.

But getting support for a license could be tough. Versions of the contractor bond bill — a relatively small requirement — have been introduced every legislative session since 2012, but have never passed.

Moreover, the fines for operating without a registration — up to $10,000 for the first offense and up to $20,000 for each subsequent offense — aren’t stiff enough to deter crooks, some say.

Felix Ma of Summit learned that first hand when he hired what he thought was a legitimate company to make his garage level with his driveway. He turned over a $1,000 deposit in March 2020.

“They said they were going to Home Depot to get supplies and just never came back,” said Ma, who reported it to Consumer Affairs.

Felix Ma said he gave a deposit to a contractor, who left to get supplies and never came back.

Not only did the workers not have a registration, but they were impersonating a legitimate company, trying to get jobs based on the other firm’s good name, court documents show.

Two people were charged with theft by deception and engaging in deceptive business practices. The case is now pending in Passaic County Superior Court.

Ma is also pursuing a civil case against the contractors.

Short of requiring a license, there are other common sense steps lawmakers could take to protect consumers without being overly restrictive for legitimate contractors.

It could mandate a state-created contract that includes all the items required by law, something many contractors ignore. The cost would be minimal and could be passed on to the contractors via their registration or annual state renewal fees.

“That is certainly something worthy of consideration and would be easy to publicize on state websites and social media,” Senate Majority Leader Loretta Weinberg said. “It would be a simplified outline for consumers to follow. You could require that as part of the registration that you have to use this contract.”

When the registration law was passed, it did not require Consumer Affairs to establish a board to regulate registrants, unlike what exists for plumbers, electricians, home inspectors and other licensees. So when a consumer files a complaint about a contractor, there is no dedicated board tasked with discipline.

Instead, the director of Consumer Affairs may suspend or revoke registrations. They can also be pulled after a judge’s order or after a lawsuit or settlement, when a company signs a consent decree with the state.

The legislature could also require a background check, paid for as part of the application fee. That, at least, would have revealed Ferraioli’s contractor’s criminal history and stopped him from being approved in New Jersey.

“If the state had stricter requirements on obtaining a contractor license, including requiring applicants to go through a background check and fingerprinting, then there would be a lot less contractor fraud,” Ferraioli said. “In our case, if New Jersey had stricter requirements, then we would not have been a victim of our contractor.”

“It’s very, very scary hiring a contractor here in New Jersey with how easy it is to obtain a contractor’s (registration) now,” she said.

“Anyone can get one,” she added.

Just ask Burt Schlosberg.

https://www.nj.com/news/2021/09/hire-at-your-own-risk.html

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