Ohio Consumer Law Blog
Information on Ohio's Consumer Laws from Attorney Daniel Myers, Myers Law, LLC, not legal advice
Cleveland’s New Funding Program to Assist Elderly With Home Repairs Needs to Protect the Elderly
Yesterday, Cleveland.com posted an online article about a new program that Cleveland City Council announced. According to the article by Robert Higgs of Cleveland.com, City Council voted to approve $1.275 million, or $75,000 per ward, to help senior citizens pay for needed home repairs, such as “roof projects” and “front step projects,” among others. That is exciting and good news for Cleveland’s elderly citizens. But how will it be implemented? And will the City of Cleveland ensure the protection of its vulnerable citizens under the program? According to the article, “program guidelines still must be drawn up,” so we don’t know whether consumers’ rights will be taken into account yet.
Here are a list of eight specific concerns that the City Council and departments need to be aware of when determining the program guidelines. There are many more concerns than this, but these are the major concerns we, as consumer advocates, have. These are based on a desire to protect the elderly and other vulnerable consumers, and based on what other programs are doing poorly:
1. Arbitration Should Never Be Required.
Many times, guidelines and details in similar programs actually harm consumers and take away their rights to protect themselves, leaving them in a worse situation than had they found a contractor on their own. For example, FHA 203k loans, which are used by many consumers to help repair and remodel homes, require the consumers to agree to binding arbitration if they have a problem with their contract. Other programs require the same thing. Binding arbitration requires consumers to give up their right to go to court, their right to much discovery and other due process that they only get in court, and their right to appeal a wrong decision. We have often discussed the dangers of arbitration for consumers. Arbitration can costs thousands more than court, just to file a claim. Arbitration can take as long as court. Arbitrators are often times not trained in the law (and therefore do not understand consumer rights statutes), and other times are business attorneys (the attorneys who represent contractors, not consumers). Anyone who says arbitration is quicker, easier, or cheaper than court has never dealt with the American Arbitration Association’s Construction Industry Rules for arbitration. Arbitration clauses are not helpful to consumers, and in fact are harmful to consumers who find themselves in a dispute with their contractor.
2. Consumers Should Be Consulted About Which Contractors Get Hired.
Another question will be, who gets to determine the contractor that will be used? For some programs, like the Cuyahoga County Lead Safe Program, the County, not the homeowner, selects the contractor, even though the homeowner may be responsible for paying half or more of the project costs. This takes the power away from the consumer to research the contractor’s background, to become comfortable with the contractor’s work, and also means the homeowner likely ends up dealing with the lowest-bidder, which can cause big problems. Just because someone says they can do something cheaply does not mean it will be done correctly, or done at all. You usually get what you pay for. The City should make sure that quality of work, experience, court and consumer complaints, and homeowner concerns are all taken into account, and it should give homeowners some veto power over selections. Homeowners should also have the right to specify other companies they would like to be involved in the bidding process, if there is going to be a process. The City can provide necessary oversight and screening of contractors, and the City should ensure that contractors are registered and permits are pulled, but it shouldn’t force a bad contractor on an unsuspecting homeowner.
3. Contractors, and Not the Consumers, Should Be Ultimately Responsible for the Work.
An important concern on any project is whether the contractor or homeowner is going to be responsible for completing a problem project. In other programs, like the Heritage Home Program through the county, contractors are required to obtain permits and be licensed, but the homeowner is left responsible for “ensuring” that permits were pulled, and are responsible for the contractor’s failure to follow the specifications of the job. This means that if the contractor does shoddy work, lies about permits, shows a fake permit (all of which have occurred before, including to our clients in various cases), or abandons the project, the homeowner is left responsible and liable. The City should make sure that consumers are not left on the hook for shoddy work, for lies, for fraud, or for overseeing these contractors, especially if the contractors were chosen by the City. Remember, many elderly citizens don’t have the ability or technology to review BBB ratings, search Attorney General Complaints, search court records, or look up other online reviews. This makes the role of the City more important.
4. Don’t Require Huge Deposits or Down Payments.
Many other programs entitle contractors to half of the project costs upfront. Not only is that silly, but in some cases, it can be illegal (see R.C. 4722.01 et seq., which allows only a 10% down payment on certain projects). When a contractor receives a substantial portion of the contract balance upfront, the incentive to perform timely, and perform well, is essentially gone. Unscrupulous contractors are more likely to take the money and run when a large upfront deposit is paid. That is, of course, both theft and a violation of consumer protection laws. The problem is that police departments, especially in the City of Cleveland, have historically refused to investigate, prosecute, or even take reports from crime victims over these felony theft-by-deception offenses. Instead, victims are often told their concerns are a “civil matter,” and that they should get an attorney. In these situations, consumers have stated that the police won’t even take the report. We have had clients turned away from the police when they tried to report felony theft-by-deception. Let that sink in–police have refused to allow Cleveland citizens to even report felony theft.
Cleveland isn’t alone in this–most surrounding communities have refused to take similar reports, or investigate them. If a homeowner wanted to submit a theft claim on their homeowner insurance, what is the first thing their insurer asks for? The police report. Requiring or allowing large initial deposits or down payments open the door this sort of elderly abuse. Little to nothing can be done after the fact because homeowners can’t get help from legal authorities, and often the type of contractor who steals money does not have the funds to pay for the damage their fraud and their theft cause, making a civil suit potentially meaningless.
5. Don’t Pay City Money to Contractors Until the Work is Certified by the Contractor and Passes Inspections (more on inspections in the next two concerns).
All too often, we have seen financing and funding programs that pay money to contractors for “completed work” which was never completed. Sometimes people lie to get money. In order to protect City funds, and also the rights of these elderly fund recipients, the City must require that (1) contractors provide a certified (sworn under oath) payment application stating the specific scope and percentages of work that is completed, and (2) perform an inspection to ensure the work is in fact completed. One way to accomplish this with little overhead is to allow payment only upon completion of the project. Progress payments are the problem, and unless the City is willing or able to inspect at various progress points, it should allow only two payments: a small upfront deposit, and the remaining funds upon completion. This ensures that the contractor has the financial strength to complete the project, as only financially strong companies would agree to those terms, and also ensures that everyone gets what they pay for. Requiring the certified statement also helps the customer and City deal with fraud on a different level if the contractor turns out to have lied. Part of that certification can include that all subcontractors were paid, and that no lien rights exists/are being waived.
6. Give the Elderly Better Inspections than City Inspections.
City Building Departments rarely inspect all of the work they are tasked with inspecting. This is especially true on roofing jobs, which were the specific type of projects highlighted by City Council. Building Inspectors do not inspect new roofs–they simply don’t or can’t. They look at the roof from the ground, and almost universally approve the construction. They do not go up on the roof to inspect it, where problems are more noticeable. You can’t see the full picture of the roof by standing on the sidewalk, in a yard, or even from the window of a vehicle. You have to go on the roof. If I look at a roof 20 feet away, I don’t see the detailed problems, the lack of drip edge, the improper valleys, the improper fastening, etc. If I am on the roof, I can see a lot more. Therefore, if the building inspections don’t become more thorough, we’d suggest that part of this program go to pay for a third-party inspector or registered/licensed roofing company, a respected company, to inspect the final roof projects before final payment is made to the contractors.
7. Don’t Allow Building Code Issues to be Cited as Maintenance Code Issues on the Elderly.
We have seen inspectors fail to issue building code violations for clearly code-deficient work, such as abandoned projects, shoddy roofs, lack of permits or registration, etc. In fact, in one case we handled, when the City Building Department was asked to perform a building code inspection, instead of issuing building code violations against the responsible contractor, it only issued maintenance code violations against the homeowner/consumer for the failings of the contractor. This can create criminal liability for the homeowner, who faces possible jail time. It also puts financial stress on the homeowner, who is already out thousands of dollars, and who must come up with the money need to pay someone else to complete the project before the City Building Department deadline expires (usually 30 days). While this looked retaliatory when it happened to a client of mine (and it very well may have been), it highlights a real problem facing consumers who report bad work by their contractor. Why is the City punishing homeowners who are reporting building code violations of bad contractors?
8. The City of Cleveland Must Clearly Require that Contractor Licensing Bonds Cover Consumer Damages.
The City of Cleveland requires that all registered contractors have a licensing bond. The City of Cleveland determines the language used in the bond form, and is listed as the party able to enforce the bond. Our office had to sue a bond company, and take the issue up to the Eighth District Court of Appeals, in order to allow homeowners to make bond claims, at all. Now, bond companies claim that they don’t need to pay the homeowners victimized by bad contractors unless there are written building code violations, which, as I stated above, is difficult to get the City to provide. Since the City departments can’t help these elderly consumers out, you must allow these consumers to have the tools needed to protect themselves. City Council needs to make it clear that these bonds cover exactly what they say they cover–all damages arising from work done.
The City has a powerful consumer protection ordinance that gives rights to consumers to go after their bad contractors. City Council should make the bonds more clear by (1) amending the ordinances to state that homeowners are permitted to make direct claims on the bonds, (2) amending the ordinances to state that code violations need not be found so long as a third-party certified inspector, or registered contractor, can write a report identifying deficiencies with the work that must be addressed, and (3) amending the ordinances to state that the damage covered by the bonds includes, at a minimum, damages available to consumers under the City’s consumer protection ordinance, or under the state consumer protection laws, in addition to the cost to perform the work. These changes don’t cost the City any more time or money, and in fact save the City both time and money because the building department will not have to spend time making as many bond claims. Your residents and citizens, especially the elderly who will benefit from this program, deserve and need these protections.
—————City Council has done something very helpful and very important by approving this spending for elderly citizens. Now the City must focus on making sure that this program will actually benefit the City’s elderly residents and protect them from the very real threat of unscrupulous contractors. Bad contractors will, without fail, try to take advantage of the money and the elderly. Protecting these consumers is not only a moral imperative and a public duty, but wise oversight over these precious City funds.
As always, the attorneys at Myers Law are able and willing to help, and I (Dan Myers) am more than willing to consult with the City departments and council, pro bono, to discuss how the City can protect these residents in this program.
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Daniel Myers
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