No Guarantee In Construction Law

February 28, 2003
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GRAND RAPIDS — A local lawyer says existing and proposed home building consumer protection statutes spring from admirable motives, but fall more under the heading of damage control than protection.

David Malson Jr., a member of the law firm Dickinson Wright, told the Business Journal that people who are having homes built or remodeled must rely on themselves rather than the law.

What brought the subject to his attention, he said, was learning last year that the U.S. Department of Housing and Urban Development was proposing to adopt a sort of buyer’s bill of rights for people contracting to have homes built or remodeled.

“You’re much better off,” he said, “if you heed the old rule of Caveat Emptor: Let the buyer beware.”

He explained that HUD’s proposed bill of rights really is nothing more than a checklist of the commonsense things a good builder should do. Furthermore, he said, the contents of the HUD proposal already are embodied in a number of Michigan statutes, some of which lately have been equipped with some real regulatory teeth — meaning it is easier for the state to yank a builder’s license.

“This is all well and good,” he said. “But the problem is – and this is my two cents – that consumers can’t just sit back and say, ‘I’m protected by all these statutes and if something goes wrong, I’m OK.’

“The reality is a builder who gets himself into trouble by accident, nine times out of 10 is going to trying to make it right and work through those things.

“But the builder who has a history of living a little on the edge and not doing the right things is another story. Nothing prevents them from winding up the work that they were doing under the name ABC Co. and then working as DEF Co. next week.

“The reality is that once he’s got your money, all these laws really aren’t going to do you a lot of good.”

But before executing any contract, he said, “it’s better to take some time. Do your research. Ask the state license bureau if there’ve been any complaints against the builder you’re looking at. Ask the Better Business Bureau in your county. Check with the Home Builders Association and see if there’ve been any complaints.”

He said such checks inevitably disclose two or three complaints against any business. “But if you encounter a pattern of three to five complaints year after year,” Malson added, “then you’d better be wary.”

He said this community has dozens of good builders who’ve been in the business for generations and have strong long-term relationships with their subcontractors. “That’s the kind of firm you want. They do niche work and they’re good at it.”

And he said it’s paramount for the buyer to involve himself in the project. “Once you sign that contract,” he said, “you need to have regular meetings with the builder, asking, ‘Where are we?’

“If this is a financed project,” he explained, “the bank’s going to sit down with the builder every week and be saying, ‘Where are you?’ And they’ll get, ‘We just finished the rough-in stage, so therefore we’re requesting a 20 percent draw.’

“All the bank is concerned about at that point is, ‘Do you have appropriate lien waivers in place?’ Because they don’t want to advance money and then find out that the subs or materials suppliers weren’t paid.

“Well,” Malson added, “the buyer needs to think along exactly the same lines as the bank. And they need to sit down and say not only ‘I want to know what’s going on there,’ but ‘How are we doing on everything else?’ and ‘Are we going to be all right on the budget for lighting? Is everything coming in on time? Is anything back-ordered?’”

Unfortunately, Malson said, most buyers rarely get involved.

“Why? It’s because they’re excited that they’re going to add to or get a new home. It’s something positive. They’ve saved their money and they’re eager to get going with the project.”

He said he has dealt with some clients who have wound up facing genuine horrors: a six-figure cost overrun on one home-building project, and a five-figure remodeling project that became a repair bill double the original contract. And he said the problem usually occurred because buyers weren’t meeting regularly with builders.

He said that in his observation, buyers who have taken an active role in the project are the ones who turn out OK.

“And when buyers do take an active role,” he added, “a good builder shouldn’t resent it. In fact, I’m acquainted with one builder who requests a weekly meeting in which he produced a computer printout that reflects the status of timeline, money and supplies.”

Malson grants that such meetings with contractors can be time-consuming.

But he said it’s nothing compared to the time and money that’s wasted in litigation.

“When you end up hiring a lawyer like me and invoking the protection of the statutes, you’re already in trouble,” Malson said. “Because you’re spending on me.

“And the most frustrating thing about trial is the delay, delay, delay, delay. Somebody will string it out, string it out and string it out, hoping for some leverage. It’s maddening.

“When I hear someone say, ‘I want to take this person to court,’ it makes me cringe,” he said, “because you’re never going to be made whole and you’re throwing good money after bad.”   

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