Problem of dishonest contractors

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Rikkitic

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#310582 3-Nov-2023 10:55

I have a friend who’s future depends on a number of home renovation projects she is currently undertaking. She is careful and so far she has been fortunate with tradies and contractors and she does everything she can to avoid the bad ones, but she lies awake at night worrying about the consequences if she gets it wrong. The constant items on Fair Go and in the media about rogue operators ripping off private people for thousands of dollars that can’t be recovered are not very reassuring.

Although I am not directly affected by this, I am interested on my friend’s behalf and I am perplexed by the apparent inability of our justice system to do anything about it. From the media stories most of the victims seem unable to recover their losses even when they have legal judgements in their favour. At the same time, contractors seem to insist on thousands of dollars up front before they will even look at a job. To my inexpert eye this seems like a huge power imbalance. If you want anything done, you have to hand tons of money to someone in advance and you just have to trust that they are honest and capable. And if they aren’t, there is very little you can do to get your money back and the bad guys seem to be able to carry on with impunity with little fear of meaningful consequences.

How can this be? Why are such things not taken seriously by the authorities? What protection, if any, do customers have? Apparently Master Builders membership is also no guarantee. Is this really as bad as it seems? Is there any kind of insurance available for this kind of thing? Why should anyone be compelled to hand over their life’s savings to a stranger just on the strength of a promise? Do the contractors have it all their own way?

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Networkn
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#3155330 3-Nov-2023 11:15

We have had quite an unfortunate run of trades people over the years and ended up on TV as a result with Fair Go.

I don't doubt there are honest, hard working trades people who a good job and charge reasonably for it, but they seem hard to find. It doesn't help that 5 plumbers will give you 5 different reasons for the same issue occurring, which can be confusing and leave you with a lack of confidence in which one is correct or if you get it wrong that there could be serious issues. It feels like right now, trades people are using inflation as a reason for charging stupid money for things.

Builders Crack will give you a reasonable visibility of well reviewed tradies, though it's far from complete. Referral from the paint supplier of painters they recommend is another similar way of ensuring those trades people are usually going to be OK. I've found recommendations from friends and family to have fairly mixed results, as everyone has a different expectation.

Membership to a professional body for that trade, master plumbers etc, are useful, though no guarantee.

Most tradie disputes as we have learned the hard way are covered under civil matters and the police have neither the inclination, legal recourse or resources to chase things like this. It takes pretty flagrant offending to garner their attention. In our experience with a paver, it was ONLY the fact he booked two appointments at the same time to do work, that pushed it over the line to fraud, despite having fleeced people over over 100K.

MikeAqua

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#3155339 3-Nov-2023 11:41

When it will be life altering if it goes wrong, you need to do lots of due diligence.

Ask around for recommendations of good tradies. Word of mouth.

Also look for established long running businesses. Look up the firm and it's director(s) and shareholders on the companies office website. Avoid people listed as banned directors. Avoid people who have been directors/shareholders of many struck off companies. Dodgy operators hide behind a series of companies which they simply wind up when the heat comes on.

Ask for a contract and an insurance certificate and that both are in the name of the company that has quoted and is doing the work and will invoice the work. Insist that invoices be from that company. Do a credit check on that company. Never ever pay the builder for materials that aren't on site. If the builder is unable to pay for materials in arrears, that means their credit is no good. That means they are a risky choice.

Ask for evidence of the qualifications of the people who will be doing the work.

The chances of a dodgy operator complying with all of the above are rather slim.

Mike

Rikkitic

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#3155344 3-Nov-2023 11:56

I get the importance of doing proper due diligence but my issue is why this kind of situation is allowed to exist in New Zealand in the first place. It is almost like being a shady contractor is a license to steal money. Why don't the police give a damn? Why are there not at least mechanisms in place to properly punish transgressors? Why should shady contractors be able to keep getting away with it by using shell companies or just ignoring court orders?

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networkn

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#3155355 3-Nov-2023 12:18

Rikkitic:

I get the importance of doing proper due diligence but my issue is why this kind of situation is allowed to exist in New Zealand in the first place. It is almost like being a shady contractor is a license to steal money. Why don't the police give a damn? Why are there not at least mechanisms in place to properly punish transgressors? Why should shady contractors be able to keep getting away with it by using shell companies or just ignoring court orders?

You can't blame the police, they have a limited set of powers, it doesn't include chasing what are likely to be civil complaints which have their own remedies. I agree more power needs to be given to AN entity, but given police aren't even preventing daily ram raids and burglaries, it's unlikely they have the resources to deal with those matters. There are some measures in place if the trades person belongs to a professional body for their industry but not the extent I imagine you want to see.

tehgerbil

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#3155356 3-Nov-2023 12:26

If you talk to practically anyone in Christchurch they can tell you horror stories from EQC Tradie Contractors making utter bank while leaving Christchurch with an over 1 billion dollar RE-repair bill and tens of thousands of homes a ticking timebomb of poorly done slapdash repair jobs. [Obligatory screw you Fletchers and screw you Gerry Brownlee.]

You'd have though that alone would be a wakeup call for our piss poor laws governing Tradies, but nothing has changed.

MikeAqua

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#3155357 3-Nov-2023 12:29

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.

Mike

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#3155408 3-Nov-2023 12:46

The police saying it is a civil matter all the time. At least the gangs can useful in recovering a debt from these scum tradies who think they can get away with it. 😉

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Eva888

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#3155454 3-Nov-2023 14:23

We got done for $9k by Peter, a middle aged Wellington installer that we had used a number of times in the past and that we trusted enough to pay up front for heating units which never eventuated. He gave us months of bullshit excuses. It was clear fraud and he’s getting away with it as I have no idea what can be done without spending more money.

Police won’t be interested as they will say its civil. 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.

So if you’re getting prices in Wellington by someone called Peter, message me and I’ll give you the name of the company to avoid.

MikeAqua

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#3155467 3-Nov-2023 14:54

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.

Mike

networkn

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#3155468 3-Nov-2023 14:55

cruxis:

The police saying it is a civil matter all the time. At least the gangs can useful in recovering a debt from these scum tradies who think they can get away with it. 😉

Let's not be encouraging/advising criminal activity to deal with criminal activity. You are a much easier target for the criminal system than the gangs are.

tweake

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#3155477 3-Nov-2023 15:21

unfortunately it happens everywhere.

lack of enforcement is a major factor and lack of punishment. many simple repeat because the punishment is so weak.

but there can also be a social side. for eg work caught a thief who had stolen from a lot of people (who got convicted etc). work got bad mouthed by other companies who obviously didn't like us catching the theif they where making money off. there is a lot of people who turn a blind eye to allow the dishonest to operate.

Rikkitic

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#3155523 3-Nov-2023 16:55

There needs to be a system of escrow payments for this kind of thing, where the contractor knows the money has been paid and the customer knows it can't be released until the job is correctly done. At present even honest contractors may demand ridiculous up front payments before they will even consider a job. This puts the customer in a very difficult position where they have to part with considerable sums on nothing more than trust. This seems very unfair.

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gzt

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#3155527 3-Nov-2023 17:06

Why exactly are people required to pay tradespeople for materials instead of the supplier? That's a big chunk of it. In cases where the tradesperson carries stock that is reasonable. In other cases where it can be adequately received by the end buyer I really wonder.

Handle9

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#3155531 3-Nov-2023 17:18

It’s a complex problem.

Most domestic contractors are small businesses, under capitalised and run on very tight margins. This means cashflow is usually a crucial issue and they will struggle to absorb bad debts. A lot of clients are bad payers, pay late or don’t pay the full amount.

Couple that with the construction contracts act, which means that materials fitted can not be recovered by the contractor (once they are fixed ownership transfers to the client, even if they are not paid for) means that most small contractors will want upfront payments for large capital items.

It’s all very well to say that the contractor should stop working on a job if payments are late but that creates other significant problems. You need your workforce to be fully utilised to make money as a contractor and if you pull them off the job you still have to pay them. Very quickly you run out of cash. Most contractors go bust on cashflow not profit.

It’s not easy to deal with and requires significant due diligence on both sides. Too many people spend thousands or hundreds of thousands of dollars without getting advice or doing sufficient due diligence.

Handle9

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#3155532 3-Nov-2023 17:22

gzt: Why exactly are people required to pay tradespeople for materials instead of the supplier? That's a big chunk of it. In cases where the tradesperson carries stock that is reasonable. In other cases where it can be adequately received by the end buyer I really wonder.

They aren’t. Paying suppliers directly is one way to deal with this type of issue but it does create complications.

To give you an example if a contractor supplies and installs an air con unit they hold the warranty on the entire installation. If anything goes wrong they have to fix it. If the client buys the unit directly then the contractor is only responsible for the installation. If it’s a hardware fault then the contractor can quite correctly charge the client for any costs related to the fault and the client has to recover those costs from the supplier of the ACU.

There’s no free lunch and everything has consequences.

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