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Monday, June 15, 2009

Protect Yourself From Shady Contractors
Story from the Baltimore Sun

surety bonds from mourer fosterYou find the new home of your dreams. But what happens when the home builder does not deliver as promised?

The Maryland Attorney General's Office announced Friday that it has charged Columbia-based home builder Altieri Homes with taking deposits and payments from at least 20 homebuyers in Howard and Harford counties but failing to either start or finish the homes. The attorney general's Consumer Protection Division also accuses Altieri of not refunding consumers' deposits or advance payments and failing to pay subcontractors.

As if buying a home is not stressful enough, what are your rights and recourse if you're faced with a similar situation? How do you protect your hard-saved deposit?

Marylanders buy more than 10,000 new homes each year, according to the attorney general's office, and a new home purchase is protected by state law.

Here are other questions to consider:

How do I find a reputable builder?

For starters, make sure your builder is registered. All home builders operating in Maryland must register with the attorney general's Home Builder Registration Unit, except for firms that build exclusively in Montgomery County. (Home builders there must register with the Montgomery County Office of Consumer Protection.)

"It's so important for consumers to check with our office to see if the builder is registered and if they have any complaints, especially on an investment this large," said Raquel Guillory, a spokeswoman for the Attorney General's Office. "Probably for some people this is their life savings, their dream home."

Call (410) 576-6573 in the Baltimore area or (877) 259-4525 in other parts of the state to find out whether your builder is registered with the Home Builder Registration Unit. Or visit www.oag.state.md.us/homebuilder.

A builder's registration can be suspended, revoked or denied for several reasons, including engaging in a pattern of poor workmanship. Another avenue to investigate your home builder is to check lawsuits at the Maryland Judiciary Case Search at http://casesearch.courts.state.md.us/inquiry/inquiry-index.jsp.

A word of caution: The sheer number of lawsuits alone may not be a good indication of a home builder's reputation and quality of work.
How do I protect my deposit?

State law requires the home builder to place your deposit in an escrow account, unless the builder has corporate surety bonds or an irrevocable letter of credit on file with the state.

The builder must disclose whether your deposit is protected by an escrow account, bond or letter of credit.

The attorney general alleges Altieri failed to put customer deposits in an escrow account or secure them through a bond or letter of credit. Verify the builder's escrow account by calling the bank. To verify the builder's bond or letter of credit, call the Home Builder Registration Unit.

What if I encounter problems?

Contact the builder first. Put your problems in writing to the builder. Keep copies of all correspondence and maintain a log of your contact with the builder.

The attorney's general says the best chance of resolving problems is to catch them early and to try to work them out with the builder.
What if a dispute with a builder goes nowhere?

There are several options.

If the builder has provided home warranty coverage, you may be able to file a claim under that plan.

You could also file a complaint with the attorney general's office. The Mediation Unit will attempt to resolve the dispute. But if that fails, the dispute can be submitted to the Arbitration Unit, if both parties agree to it.

For contracts with registered home builders agreed upon after Jan. 1, consumers can file a claim with the Home Builder Guaranty Fund. The fund provides compensation of up to $50,000 for "actual loss" due to incomplete construction, breach of warranty, failure to meet standards or guidelines, or failure to return a deposit.

Before filing a claim with the fund, the attorney general's office says you must file a complaint with the Mediation Unit and have already provided the builder with an opportunity to address your problems.
Should I consider a legal claim against the builder?

"They have the right to sue a general contractor for workmanship that isn't up to standards or somebody who has caused them damage because they didn't do work," said John Prisbe, a partner with Venable's Baltimore office who has represented buyers and builders. (Prisbe has not done any work with Altieri.)

Before taking the legal route, check your contract, which can call for binding arbitration or other forms of alternative resolution as well as prohibit a buyer from suing the builder.

"That could dictate where you're going to bring your claim," Prisbe said.

Another issue to consider: Weighing legal costs against your chances of recovering damages.

"A concern is when you have a builder who's in financial difficulty and whether you have the ability to recover," Prisbe said.

Remember that the plaintiff has the burden of proof. The case's resolution can depend on the complexity of the dispute and how much is at stake, Prisbe said.

For claims $30,000 or less, you can file in District Court or also choose to file in Circuit Court, Prisbe said. For claims over $25,000, you must generally file in Circuit Court.