Harris County Texas

Homeland Security and Emergency Management

What is Contractor Fraud?

Contractor fraud is an illegal act committed by a contractor involving the misrepresentation to a customer of services to be performed and/or project remuneration. It occurs in the form of underperformance, use of poor quality or recycled materials, inflating costs, or abandonment.

Fraudulent Contractor’s Common Practices

Fraudulent contractors show up frequently after natural disasters, and prey on survivors at their most desperate moments.

Indications of contractor fraud include:

• Contractors offering discounts for referring other customers;
• Contractors requiring an immediate decision;
• Contractors requiring significant payment up front, only accepts cash, or suggests that the customer borrow from a lender the contractor knows;
• Contractors providing written contracts that do not include verbal agreements;
• Contractors asking the customer to get the right permit(s);
• Contractor offers “lifetime warranty/guaranty”;
• Contractor tells the homeowner that their home will be used as a demonstration at a “greatly reduced rate”;
• Contractor does not have a listed business number in the local telephone directory;
• Contractors reveal unforeseen problems that need extra work and cost; and
• Contractors buying extra materials to sell to you for a cheap price.

Steps to Avoid Home Repair Contract Scams

Homeowners can take steps to protect themselves from being taken advantage of by unscrupulous contractors.

• Homeowners should negotiate and pay as little of the total cost upfront as possible. Preferably no more than 10-25% of the total price. It is against the law for contractors in disaster areas to take any money up front unless they have had a local office in your county or a neighboring county for at least one year
• Make sure everything the homeowner wants, and agrees to, is included in the contract.
• Make sure that the contractor is bonded and insured.
• Request that the contractor get a builder’s permit as this will protect homeowners from unlicensed contractors. Unlicensed contractors may cut corners in their workmanship. If a building permit is obtained, a building inspector will conduct inspections of the work that is done, preventing the cutting of corners in performing the work.
  • A building permit will be needed for any new construction or demolition, as well as for any structural alterations to an existing structure in Texas, including building small structures like decks and pools, and alterations like interior and exterior remodeling, electrical, plumbing, and mechanical work. Typically, contractors are required to obtain the necessary permits, but it is ultimately the responsibility of the homeowner to know what permits are needed and whether they have been “pulled.” The local Building Department can tell the homeowners what permits will be needed for their projects.
  • If a contractor refuses to obtain necessary building permits, it may be a red flag indicating they are unlicensed. The State of Texas does not require that all contractors be licensed or that contractors register their businesses with the state. Whether a contractor is licensed can be determined through the Texas Department of Licensing and Regulations, however not all contractors need a license.
• Make sure the contract requires that the homeowner and the contractor both sign before anything is charged or worked on to prevent the contractor from doing work that the homeowner does not want.
• Homeowners should not buy services or materials on the spot or on an impulse. They should always do their research and make sure the contractor has a good reputation. They should find out whether the contractor has a report with the Better Business Bureau (BBB) (the numbers and types of complaints, and the reports of government actions).

QUICK GUIDE ON HOW TO AVOID HOME REPAIR FRAUD:

1. Get several bids.

1. Try to get written bids or estimates from at least three different contractors.

2. Check out the contractor.

1. Get the contractor's full name, address, business name, phone number, and any other contact information.
2. Ask for references and call them.
3. Check with the Better Business Bureau and courthouse for criminal history and civil cases against the contractor.
4. For repairs that cost more than $10,000, ask the contractor for a copy of their Certificate of Registration with the Texas Residential Construction Commission.
5. Be careful when dealing with contractors who have out-of-state license plates.

3. Get it in writing.

1. Get a written contract.
   
2. Specify the work to be done.
3. Specify the price.
4. Don't sign anything you don't understand.

4. Control the money.

1. Do not pay for the entire job up front.
2. Try to pay as little as possible up front.
3. It is against the law for contractors in disaster areas to take any money upfront unless they have a local office in your county or one county over for at least one year.
4. Insist on waiting to pay the full amount until after the work is finished.
5. You are protected by special rules if the contractor does not have a local office in your county or the next county over.
6. Do not make the final payment until you have inspected the work. Make sure you are completely satisfied with the repairs.
7. Do not pay in cash.
8. Get receipts for all payments.

Report bad contractors to: Better Business Bureau; the Texas Attorney General; the local district attorney; and Lone Star Legal Aid.