Sunday, June 6, 2004

Good help is hard to find

A building and remodeling boom
has produced a contractor's market

TV's home make-over shows breeze through fuss-free remodeling projects that always seem to take a mere 30 minutes.

But don't call it "reality TV." It's pure fantasy to many Hawaii homeowners, for whom even simple projects have become drawn-out affairs as overbooked building contractors struggle to juggle a wave of remodeling work.

"I started wondering if it would ever get done," Glenn Muranaka says of plans to install a set of maple cabinets in his Kaimuki home.

In May of last year, the president of Meadow Gold Dairies Hawaii paid a $2,500 deposit to a reputable kitchen remodeler and waited for his cabinets to arrive.

Spring turned to summer and the busy contractor asked for another $4,000. Summer turned to fall and still no cabinets. Finally, as 2004 dawned, Muranaka wrote a letter to the Better Business Bureau. His cabinets were installed in a couple of weeks.

"In the end, we didn't really get exactly the cabinets we wanted but at least we got something," he said.

Homeowners face even worse headaches. Consumer-protection groups report a sharp increase in renovation-related complaints, including contractors who won't show, shoddy work and the outright abandonment of half-finished projects.

Hideo Moritsugu, a licensed contractor and supervising electrician, works on a new home being built on Ainakoa Street. While licensed contractors are busy in the current market, hiring them protects home owners if anything goes wrong.

"Complaints have definitely increased," says Anne Deschene, president of the Better Business Bureau of Hawaii.

"A lot of these guys are so overbooked that they'll bust open a kitchen wall and it'll stay that way for two months. So, the complaints range from criminal in nature down to something like, 'Geez, I didn't really expect this.' "

The problem is too much work and not enough licensed, qualified contractors to do it.


The number of building permits issued in Honolulu grew from 13,627 in 2002 to 15,733 last year and is on track to surpass 18,000 in 2004, according to city figures.

The largest single segment of those permits is for home renovations and alterations -- accounting for roughly half of all permits.

Many homeowners are taking advantage of low interest rates and higher home values to either refinance mortgages or take out a home-equity credit line. And they are using the newfound cash to spruce up.

At the same time, the number of licensed contractors operating in the state shrank from around 11,000 in the early 1990s to around 7,000 today, according to the Building Industry Association of Hawaii, after a soft 1990s construction market thinned their ranks.

All of which leaves homeowners in the lurch, even those with good connections.

Charlie Jencks, a real estate development consultant and former Maui County director of Public Works, searched for six months for a contractor to remodel the kitchen of his Kula home.

"My wife finally just said 'get it done,' " says Jencks, who wound up doing the work himself.

"You can't blame the contractors," he adds. "They book enough work to stay extremely busy so that they can keep guys on their payroll and not lose them to other contractors. They gotta keep their heads above water."

Even if a contractor can be found, experts say homeowners need to observe a number of rules to protect themselves, such as hiring only a reputable licensed contractor, asking for references, checking with the state's Regulated Industries Complaints Office or the Better Business Bureau for complaints, and ensuring that project contracts clearly detail the work to be done and a timetable.

"Not all contractors are created equal," says Karen Nakamura, chief executive officer of the Building Industry Association of Hawaii. "You should take precautions because many really know what they're doing, but many don't. That's when it can get dangerous."

However, many frustrated homeowners are throwing caution to the wind and turning to a thriving market for unlicensed carpenters, electricians, painters and other contractors, who are generally more available.

Such contractors can only legally perform jobs worth less than $1,000 but are often hired for bigger projects since they don't carry the overhead of the worker's compensation insurance required to keep a license and can thus offer more attractive quotes.

Rick, an unlicensed contractor who asked that his full name not be used, held a license until the early 1990s, when his $14,000 in annual insurance premiums became untenable and he went unlicensed.

"I did better work after that because I didn't have to worry about money so much," says Rick, who does carpentry, electrical, masonry and other projects and gets nearly all his work from referrals.

Since then, premiums have skyrocketed, forcing many of his peers to take the same route, he said.

"There are a lot of guys out there who know what they are doing and are real professional but are shying away from being a licensed contractor because it's just too hard," he said.

However, the lower prices offered by the unlicensed come with potentially huge risks. Under state law, a homeowner who hires unlicensed workers is technically required to provide worker's compensation insurance, though this rarely happens.

"So if someone falls off your roof and gets paralyzed, you're toast," says Ken Kuniyuki, a construction-law attorney. "They'll sue you because they don't have worker's comp and chances are your homeowner's insurance won't cover them."

Personal-liability waivers also are a bad idea, he said, since worker's compensation law does not honor them.

Moreover, unlicensed contractors are often less experienced, Kuniyuki said, and if their work is shoddy, homeowners are left with little recourse. Unlicensed worker's often don't have an insurance provider to recover damages from; the state can't force them to correct shoddy work; and a reputable licensed contractor is unlikely to come in and take over an aborted job fraught with potential liability.

"Hiring someone without a license is really a mistake," he says. "You're just asking for trouble."

Rick, the unlicensed contractor, admits there are risks in hiring someone like him, but adds that a license is no guarantee against trouble either.

"I've seen licensed guys pull some real nasty stuff. I've come in to finish jobs where a licensed guy had taken a $10,000 payment, worked a couple of days and then took off," he says. "A lot of people are getting ripped off -- especially old ladies."

A state Contractors Recovery Fund is in place to reimburse homeowners for faulty construction, but a contractor's actions have to be near-criminal to win an award, simple breach of contract is not enough, says Kuniyuki.

In many cases, pursuing contractors in the courts is often a losing proposition due to the cost of hiring a construction lawyer, he says.

"If the dispute concerns $10,000 or $20,000 worth of work, it's not worth pursuing legally. Forget it," he says.

He recommends that homeowners insist on the inclusion of an arbitration clause in their work contract, such as those contained in the standard work contract of the American Institute of Architects, which will trigger the appointment of an arbitrator if a dispute arises and is a far cheaper process.

But with service and quality levels dipping, the best insurance against malfeasance is to know who you are hiring.

"People think because someone has a license, they're totally protected. But the most important thing is to get referrals and talk to their past customers," Rick says. "It's not the license that matters, its the person."

As for Glenn Muranaka, he's waiting once again. He wants to build a rock wall around his property and accepted a pair of quotes several months ago but has heard nothing back.

"I know these guys are busy, but come on ... "


Useful Links

Information on hiring contractors and reports of any complaints against them can be found at the following Web sites:

>> Better Business Bureau of Hawaii
>> Regulated Industries Complaints Office
>> Division of Professional and Vocational Licensing

Homeowner's Checklist

The Hawaii Contractors License Board recommends taking the following steps when hiring contractors for home remodeling.

>> Get at least three estimates. Beware of any bid that is substantially lower than the others. It may indicate the contractor has made a mistake or has not included all the work you want done.

>> Ask for references. Call previous customers or go look at the contractor's work yourself.

>> Hire licensed contractors. They must meet experience, examination and insurance requirements, and homeowners may recoup losses from the state Contractors Recovery Fund only if their contractor is licensed. Also, the warranty on many building materials is void if the installer is not properly licensed. Check the status of a license with the Department of Commerce and Consumer Affairs at 587-3222.

>> Check for prior complaints against the contractor. Contact the DCCA's Regulated Industries Complaints Office at 587-3222, or the Better Business Bureau at 536-6956.

>> Get a written contract. It should spell out exactly the work to be performed, the price, a timetable and, ideally, a mechanism for resolving any disputes, such as an arbitration clause, and should be accompanied by a complete set of plans. Reputable contractors should be more than willing to provide these. If you have a lawyer, let him or her review the contract.

>> Obtain lien releases from any subcontractors. This ensures subcontractors, if they are used, will not put a lien on your assets if the main contractor fails to pay them.


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