Bad Contractors Have Easy Time In State One Change - New Law That Takes Effect July 27 Ups The Penalty For Contractors Who Do Not Register

A bad building contractor can leave a homeowner stuck for tens of thousands of dollars, not to mention a botched or incomplete job.

So how can you tell if a contractor is reliable? Under Washington’s laws, critics say, it isn’t easy.

“There are definite problems with contractor laws,” said Paula Selis of the state attorney general’s office in Seattle. “It’s an imperfect system. That’s why we get so many complaints.”

Earlier this month, 34 homeowners in southwest Washington and in Oregon showed up for a bankruptcy hearing in Vancouver for Builder Bob Corp., a residential remodeling company owned by Robert A. McCullough. In May, the Vancouver-based company had filed for bankruptcy, saying it had debts totaling $407,000 to about 200 unsecured creditors and for back state taxes.

In addition, documents show Builder Bob received a total of $540,000 from the 34 families for work never completed. Many of those homeowners say they not only lost the money paid for work not finished, but were hit with liens for thousands of dollars more from subcontractors owed money by Builder Bob.

Oregon has higher bonding requirements for contractors than Washington and an agency to educate consumers and police wayward contractors, with authority to bar the bad ones.

Consumer-friendly regulations will be absent in Washington until “a united voice of wronged consumers” attracts the Legislature’s attention, said Kevin Morris, chief of contractor compliance for the Department of Labor and Industries in Olympia.

Here are some problems:

Washington relies on building contractors to inform consumers of their contractual rights. But if they don’t, there’s no penalty.

State bonding requirements for contractors, meant to protect consumers if work is not completed, are so low they are meaningless when compared to building costs.

Contractors with poor performance records can still re-enter the industry using a new business name and new bonding.

Morris said there have been some small changes. For example, a new law that takes effect July 27 ups the penalty for contractors who do not register with the state from $200 to $1,000. Contractors are supposed to pay the state’s $41.25 registration fee and arrange bonding and insurance.

The state estimates that unregistered contractors avoid $200 million to $400 million in sales and business taxes each year.

Morris acknowledges the laws are weak when it comes to consumer protection.

For one thing, the state relies on contractors to inform consumers about the risks involved in a construction project. If consumers don’t get that information, they can end up with liens on their homes and sometimes must pay twice for the same service to avoid foreclosure.

There’s no monetary penalty for failure to give the information. The only penalty is the contractor can’t bring a lien against the home in the event the homeowner doesn’t pay; the contractor must go to the extra expense of a lawsuit.

Oregon relies on contractors to give a similar notice as well, but motivates compliance with a $1,000 fine.

Selis said Washington’s bonding requirements are not sufficient to be meaningful.

In 1963, the bond was established at $2,000 for general contractors and $1,000 for subcontractors. Back then, $2,000 was about one-third of the median cost of a new home. In 1983, it was increased to $6,000 for generals and $4,000 for subs, but that’s only about 4 percent of the $135,000 median cost of homes now.

Oregon requires $10,000 and $5,000 bonds, respectively.

Last year, state Sen. Sid Snyder, D-Long Beach, suggested raising the bonds to $50,000 for generals and $30,000 for subs.

“His proposal was shouted down immediately,” Morris said. Similar bills also failed in 1994 and 1995.

The only way Labor and Industries can revoke a contractor’s registration is for unpaid judgments.

A judgment is a legal record of a debt obtained through a lawsuit that allows a creditor to attach the contractor’s assets.

But many homeowners won’t take this step because they’re usually trying to scrape together enough money to fix their homes.

If a contractor’s registration is revoked, all the contractor has to do to stay in business is obtain another bond and re-register with the state.

Even if bonding companies reject a contractor, the contractor need only deposit $6,000 cash in a trust fund to become registered again.

Officials at Labor and Industries “wholeheartedly agree that consumers don’t receive the protection they’re entitled to because of provisions in the law that contractors can work around,” Morris said.

Oregon’s Construction Contractors Board investigates consumer complaints, working closely with law enforcement agencies and the attorney general’s office. If the contractor is wrong, the board can levy fines, yank registration or bar individuals from doing business.

“We think its existence has helped our industry, because even when you have registration, there are still bad eggs and people who are not very professional,” said Jim Goodrich, vice president of the Home Builders Association of Metropolitan Portland.

The Building Industry Association of Washington isn’t considering lobbying for a similar agency here, spokesman Brian Minnich said.

Nor is the Clark County Home Builders Association, said Karen Snekvig, executive director.

“The issue has never come up. We’ve never opposed cleaning up our industry,” she said. “The state of Washington doesn’t have the same system in place as Oregon as far as policing the industry overall, and until that gets addressed, nothing is going to change.”