Problem of dishonest contractors

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#3155534 3-Nov-2023 17:24

MikeAqua:
Eva888: I wondered if a collection agency would be able to retrieve some even if they kept most of it, I’d rather that than the crim having the pleasure.

I think you would need a disputes tribunal decision in your favour first.

Yup. It costs $45 and isn’t a difficult process to get a decision. Recovering the money is a different story.

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#3155545 3-Nov-2023 18:08

MikeAqua:
Eva888: I wondered if a collection agency would be able to retrieve some even if they kept most of it, I’d rather that than the crim having the pleasure.

I think you would need a disputes tribunal decision in your favour first.

I don't think it would be difficult to get a decision in our favour as I have kept all the texts and it’s clear deceit. We paid and got nothing but lies. I can’t see him paying it back easily and it appears he’s still in business working. It’s very unpleasant to deal with thus the procrastination.

Handle9

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#3155556 3-Nov-2023 18:25

MikeAqua:

Partly because people don't do due diligence. If people were at all cautions, dodgy contractors and other scammers would not prosper.

Partly because we have limited liability companies system in which it is very easy to set up companies. That's considered good thing but it allows business owners to dodge personal responsibility.

Partly because the bar for criminal fraud is set too high, and this kind of behaviour is treated as a civil matter. Although, people are rarely compensated for financial loses from criminal acts, so a criminal prosecution could be a double-edged sword for a complainant.

Partly because there is very poor enforcement of compensation orders from the disputes tribunal.

The other side that rarely gets discussed is it happens the other way as well. Clients pay late, partially pay or just don't pay. Once again it's a civil matter but that doesn't help a small contractor who just has a personal guarantee called in by a supplier.

It's even more difficult with subcontactors. Pay when paid contracts are illegal although in practice that's what happens. If a general contractor followed the law many more would go broke.

Most problems with contractors are because they are terrible at business, not because they are dishonest. They focus on winning work and not on getting paid and making money.

Rikkitic

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#3155558 3-Nov-2023 18:32

Does this not all mean it is a terrible mess that needs to be fixed? Whether small business operating on hope or helpless customer handing over large sums that may or may not lead to a result, why can't something be done about it? Is this not a crap way to do business?

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#3155600 3-Nov-2023 20:33

Handle9:

Yup. It costs $45 and isn’t a difficult process to get a decision. Recovering the money is a different story.

I heard of one dodgy builder in Auckland who created an off-the-shelf company for every house contract.

No chance of ever getting anything from people like him.

Handle9

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#3155602 3-Nov-2023 20:39

Rikkitic:

Does this not all mean it is a terrible mess that needs to be fixed? Whether small business operating on hope or helpless customer handing over large sums that may or may not lead to a result, why can't something be done about it? Is this not a crap way to do business?

The vast majority of contractors complete the vast majority of jobs and they finish off ok.

"Fixing" the ones that go wrong isn't easy as there will be unintended consequences which will lead to otherwise good contractors going bust. The way we build things is the fundamental problem as that leads to the contractor behaviour. For a long time procurement and lowest conforming tender has driven contractor behaviour.

This problem isn't unique to New Zealand and no one has really been able to solve it. In a lot of ways construction is a failed industry. Where productivity per FTE has exploded in most industries through the use of technology it's gotten worse in the construction industry. IMO the reasons for that are linked to what I posted earlier but it's incredibly difficult to fix without crippling the industry.

This paper gives a good explanation what has happened without touching on the why https://bfi.uchicago.edu/wp-content/uploads/2023/01/BFI_WP_2023-04.pdf

I don't have the answers to fixing it, I just know it's broken.

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#3155603 3-Nov-2023 20:42

decibel:

Handle9:

Yup. It costs $45 and isn’t a difficult process to get a decision. Recovering the money is a different story.

I heard of one dodgy builder in Auckland who created an off-the-shelf company for every house contract.

No chance of ever getting anything from people like him.

It's rational behaviour. When you're building a house on low single figure net margins why wouldn't you do that?

If you get one fixed price project wrong (as opposed to acting in an unethical manner) it can sink your company.

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#3155613 3-Nov-2023 21:29

Handle9:

It's rational behaviour. When you're building a house on low single figure net margins why wouldn't you do that?

If you get one fixed price project wrong (as opposed to acting in an unethical manner) it can sink your company.

Why should you be shielded from the consequences of your mistakes any more than someone who makes a mistake that doesn't relate to running a business?

Why are you entitled in this situation to more protection than the person who paid you for the work, and is now out of pocket due to your error?

Handle9

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#3155614 3-Nov-2023 21:36

networkn:
Handle9:

It's rational behaviour. When you're building a house on low single figure net margins why wouldn't you do that?

If you get one fixed price project wrong (as opposed to acting in an unethical manner) it can sink your company.

Why should you be shielded from the consequences of your mistakes any more than someone who makes a mistake that doesn't relate to running a business?

Why are you entitled in this situation to more protection than the person who paid you for the work, and is now out of pocket due to your error?

That’s how limited liability companies work.

The risk/reward equation in construction is broken. The risks are high and the margins are small. It’s very common for clients to require contracts with unlimited liability. Without a way to encapsulate the liability no one with a brain would take on a construction contract.

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#3155670 4-Nov-2023 09:35

Handle9

That’s how limited liability companies work.

The risk/reward equation in construction is broken. The risks are high and the margins are small. It’s very common for clients to require contracts with unlimited liability. Without a way to encapsulate the liability no one with a brain would take on a construction contract.

Yes I am well aware how limited liability companies work, but it is not intended for use as a shield for shareholders/directors from their own mistakes, but protect them from issues outside of their control. Admittedly this isn't been detailed well enough, and is open to abuse, like setting up 50 companies for 50 houses, in order to not have to face the consequences of your own errors.

In business, you take the good with the bad, the ups and the lows and the risks with the rewards. There are methods to pierce that shield for shareholders and directors who flagrantly ignore their responsibilities, but for every 1 prosecution there are 10 who abused it and get away with it.

If the risk/reward equation is broken in construction, then reform is required. I doubt National have an appetite for it (but I think they should do it anyway), but Labour in their current state weren't capable of it.

Perhaps some form of less limited structure is required. One that doesn't protect you from your own mistakes, but prevents you as a construction company, losing everything if example, the domino effect from a larger entity you aren't directly trading with, goes under.

I have some sympathy for the situation with construction, but feel that setting up a company per house is way over the line.

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#3155857 4-Nov-2023 16:05

National are going to fix something they dont care about. Right.

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#3155894 4-Nov-2023 18:20

Handle9: National are going to fix something they dont care about. Right.

There ya go, I clarified the statement I made about it.

I don't think they have any appetite to tackle it (but I feel they should)

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#3155990 4-Nov-2023 21:32

networkn:
Handle9: National are going to fix something they dont care about. Right.

There ya go, I clarified the statement I made about it.

I don't think they have any appetite to tackle it (but I feel they should)

There’s nothing for them to tackle. It’s a business model problem not a regulatory problem.

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#3156040 5-Nov-2023 00:48

The Licensed Building Practitioners do now have a code of ethics that some trades people must follow which only came in last year https://www.lbp.govt.nz/for-lbps/code-of-ethics/ . This includes carpenters and roofers. So you may want to make sure they are a member of that. But word of mouth and reviews, and making sure they don't contract out the work to other companies after they have got the contract is also important. But there is a reason why I DIY as much as I can, and DIY is not just about saving money and getting it up to a standard I am happy with. But it is also that it can be difficult to find really good tradespeople and I don't want to have issues with poor workmanship and then having to fight to get it done properly. Currently I am struggling to get a plumber back to fix defects on a new home who has moved out of the area and looks like I will need to take it to the disputes tribunal.

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#3156095 5-Nov-2023 10:04

mattwnz:

But there is a reason why I DIY as much as I can, and DIY is not just about saving money and getting it up to a standard I am happy with. But it is also that it can be difficult to find really good tradespeople and I don't want to have issues with poor workmanship and then having to fight to get it done properly. Currently I am struggling to get a plumber back to fix defects on a new home who has moved out of the area and looks like I will need to take it to the disputes tribunal.

similar story here. i have had 4 different plumbers over the years and only one has not leaked. the one well known good plumber has so much work they pick and choose what jobs they do, so they just don't return calls.

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