Buyer beware: Delaware contractors licensed, not regulated

With more than 8,000 licensed contractors in Delaware, picking a good one is not always easy.

Georgetown resident Michael Teti says he found that out the hard way. For $2,450, he hired a contractor to expand his asphalt driveway and replace the apron, but Teti says he's less than pleased with the work.

“The water drains through the asphalt where it wasn't packed right,” he said. As for the apron, there's the opposite problem – rainwater pools and overflows onto the sidewalk. Teti said that will be dangerous when winter freezes hit.

But the contractor, Joshua H. McNeil, said the contract for the work only guarantees 80 percent drainage, and the water remaining on the driveway falls well within the 20 percent allowance.

“I’m not ripping it out. There’s nothing wrong with it,” McNeil said. McNeil said he offered to seal the driveway at no extra cost, but Teti refused.

Teti said when he confronted McNeil about the shoddy work and requested he redo the apron, the contractor got frustrated. Teti said the paver started yelling at him until neighbors came out, and the contractor took off.

“They should yank his license,” Teti said. McNeil said he has been a licensed contractor since 1980, and the family business has been working in the Cape Region for more than 50 years.

Still, the case illustrates how difficult it can be to resolve disputes over work that is completed.

“We didn’t stay in business this long by doing bad things,” McNeil said. “He wants a new driveway, and I’m not giving him a new driveway. If he wants to take it further, I’ll go to court, and he’ll pay me for my time lost.”

Teti says he would be satisfied if the company would remove and replace the apron so it drains properly, and then seal off the rest of the driveway. McNeil says he will not redo a driveway he considers well done.

Teti researched the Millsboro-based business – but only after he discovered the problems. He found eight complaints and an F-rating on the Better Business Bureau's website, as well as two judgments against the company from previous clients, information he said he wished he had considered before he hired them.

“You cannot please everybody you work for,” McNeil said about his company’s BBB rating. “I probably do five driveways a week and maybe out of the whole year, I’ll get two complaints.”

Contractors working in Delaware are required to be licensed through the Department of Revenue’s Division of Finance, but they are not regulated for quality of work, said Delaware Department of State spokesman Charles “C.R.” McLeod.

“In this case,” McLeod said, referring to Teti's situation, “a customer's only recourse, if personally harmed, is to pursue civil damages.”

Teti said he may consider a lawsuit; for now, he filed complaints with the BBB and Attorney General's Office.

Getting a license

For an annual fee of $75, a Delaware resident can apply for a contractor's license. Additional fees may apply, including a gross receipts tax, and the process is a little more complicated for nonresident contractors.

For contractors who may have had prior judgments against them, it's easy enough to file for a limited partnership – it requires a one-page form and a $200 fee – or become an LLC, which allow a company to avoid poor reviews under its previous name.

At the end of the day, it's up to the customer to make sure they're picking a reliable contractor. If they don't, solving any issues that may arise with the work is their problem, too, state officials say.

In 2015, the Delaware Department of Justice Consumer Protection Unit received about 375 complaints about home improvement work, said DOJ spokesman Carl Kanefsky. Most of the complaints were about the quality of work rather than a home improvement fraud or scam, he said.

In a fraud case, a consumer pays for work that is not started at all or started but not completed, indicating a contractor was acting with fraudulent or bad intent, Kanefsky said.

“Those are the kinds of situations in which there could be a civil or criminal violation,” he said. Kanefsky said the state's record-keeping system does not allow him to search for how many of the 375 complaints resulted in criminal investigations.

Two contractors later and double the cost

One complaint that has not resulted in criminal prosecution involves Lewes residents Gerald Baldi and Garin Hart, who said they have paid more than $70,000 in out-of-pocket costs for choosing the wrong contractors.

Hart had received a $93,000 Federal Housing Administration 203k loan for renovations that included a 900-square-foot extension on his Heron Bay home, as well as a new deck and a two-car garage. The work was supposed to take two to four months, Baldi said. Fast-forward a year later, and there's still more work to be done.

“We just got screwed left and right,” he said. “And the AG's office just turned the other way. It was like one evil hand after another evil hand, and it caused us great financial damage.”

The broker who handled the loan suggested a local man after loan underwriters denied the bid from a different contractor chosen by Hart, Hart said. But when the recommended contractor, who seemed reputable, started asking for money for permits more than a month after he was hired, Baldi and Hart realized they may have more problems.

The man they hired eventually walked off the job and was fired, but not after failing to pay his subcontractors for the little work he did and causing about $25,000 in damages to their electric system, sump pump and driveway.

“Almost all of the work he did had to be redone,” Hart said.

An independent structural report confirmed the shoddy work, and Hart chose a contractor whom his friend, Baldi, had met during a business transaction. The new contractor seemed like she knew what she was doing: She completed nearly all the work and fixed a lot of problems, but she also racked up $50,000 on Baldi's Home Depot credit card that she has yet to repay, and she failed to complete the deck. Baldi said he is pursuing legal action against her for fraudulent credit card charges.

“If Gerald wasn't around, and I went through this by myself, I would have either committed suicide or walked away from this house,” Hart said. “It was the most horrible thing. We've all been through bad things, but this was the most horrible thing, other than losing a family member, that I've been through myself. People shouldn't have to go through this. This has got to stop. Someone needs to vet them.”

Hart's calculations found that the $93,000 job will end up costing him about $167,000. Hart said he has filed two complaints with the U.S. Department of Housing and Urban Development, which oversees the construction loan he used, has filed a complaint with the Delaware Attorney General's Office and has made multiple calls to local legislators. So far, he said, he's no closer to a solution. He will most likely consider other legal action, he said.

Criminal charges are hard to get

Kanefsky said Hart's case did not warrant a criminal fraud investigation, based on the Consumer Protection Unit's records of Hart's complaints.

But a different case involving a Rehoboth Beach homeowner did.

In 2014, Kevin Danahy reported to state police a home-improvement fraud that involved a contractor hired for a major first-floor renovation on his Rehoboth Beach home. The contractor received money from Danahy for materials, but failed to actually buy them, show up to the site or pay his subcontractors.

After months of investigation, police arrested John Condron Jr. and a criminal case ensued. But it took more than one call to police to make it happen, Danahy said.

"The first judge found no criminal activity and said it was a civil matter," Danahy said. "I really had to go out of my way to make sure this got criminal charges. You really have to put a lot of energy in it to see something accomplished."

Home improvement fraud is considered a class G felony in Delaware, explained then Deputy Attorney General Adam Gelof. If convicted, the charge is punishable by up to 2 years, but the presumptive sentence is 12 months of level 2 probation, he said, the second-to-lowest level of punishment in Delaware.

“Sentencing guidelines [generally] don't call for jail time,” Gelof said. In this case, Condron had a clean record – no previous convictions of any kind. Instead of taking the case to trial, Condron's charge was reduced to a misdemeanor, and he agreed to pay Danahy about $11,000, $6,500 of which had to be paid upfront.

The case took longer than usual, Gelof said, noting that the investigation began in December 2014 and was resolved in March 2016. Months later, Danahy said he was still waiting for the court to release Condron's first restitution payment.

“The goal in these nonviolent criminal prosecutions is to try to make the victim as whole as possible,” Gelof said. “By negotiating the settlement, Mr. Danahy likely got much more upfront than he would have gotten even if the case went to trial, and we were successful. It's not just about the financial reimbursement; there's also a mental component. You try to get closure for people so they can move on.”

With a building boom in Sussex County still exploding, it's difficult to say how many people deal with scams or fraud, Gelof said, but unfortunately, it is common.

“Home improvement fraud is probably an every other week occurrence,” he said. But pursuing criminal charges requires proving criminal intent, a daunting task that requires a higher standard of proof than a civil case.

“We don't seek criminal prosecution in every case we're asked to review,” Gelof said. “The actual trial process is adversarial. It's not what you see on TV. People may envision it to be some type of payback, but the reality is you have a defense attorney, and they're going to make claims and counterclaims that may not be valid. It's a painful process.”

When investigators are unable to find enough evidence to prove criminal intent and decide that a criminal prosecution is not an option, homeowners can still pursue the case civilly, Gelof said.

“Not pursuing criminal charges doesn’t mean the homeowner has no other options,” Gelof said. “And people should not hesitate to seek out an opinion on whether or not they’ve been a victim of a crime.”